TaxTMI 
TaxTMI 
2026 (9) TMI 1739
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....son is a manufacturer and exporter of mild steel billets, which primarily require iron ore and scrap steel, along with coal and limestone, as raw materials for production. The respondent has extensive business operations covering both domestic and international markets. Being an exporter to the international market, the respondent duly furnished a Letter of Undertaking (LUT) to the Government for export of goods without payment of GST. (II) The raw materials, primarily coal, purchased for the production of steel billets attract Compensation Cess, whereas the final product, i.e., steel billets, is not subjected to Compensation Cess. This resulted in accumulation of unutilized Cess credit in the electronic credit ledger. Being an exporter, the respondent filed a refund claim for the unutilized Cess in Form GST RFD-01, in terms of Rule 89(1) of the CGST Rules, on 07.06.2024 vide Reference No. AA200624002367Q, in respect of exports made during the period from July 2022 to March 2023. The adjudicating authority, after issuing a Show Cause Notice in FORM-GST-RFD-08 vide Reference No. ZD200624003707S dated 19.06.2024 and by considering the reply submitted by the respondent in Form GST ....
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....possibly relate to ITC availed during the relevant period or to zero-rated supplies forming the basis of the present refund claim. Further, it is clearly evidenced from the electronic credit ledger wherein the ITC of Cess amounting to Rs. 2,19,41,356/- has been credited dining the refund period. The said credited amount of ITC reflected in the electronic credit ledger after adjusting the reversal amount of ITC made in the relevant GSTR-3B. That means, the credited amount reflected in the electronic credit ledger is the Net ITC amount availed by the respondent. Hence, in view of the facts, I find that the Net ITC of Cess in the instant case is Rs. 2,19,41,356/- which has been availed by the respondent through GSTR-3B during the tax period from July 2022 to March 2023..... 14. It is observed from the above discussion that the facts and circumstances was correct in sanctioning the refund claim to the tune of refund of Rs. 35,84,057/- (Cess: Rs. 35,84,057 (Rupees Thirty-five lath eighty-four thousand fifty-seven only). Therefore, I do not see any reason to differ the view from the adjudicating authority for the instant refund. 3. Being aggrieved by the order of the First Ap....
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....uring the relevant refund period. The Rule is deliberately precise, it speaks solely of "ITC availed" and makes no reference whatsoever to "ITC reversed," much less to reversals pertaining to periods outside the refund window. The omission is intentional and reflects the legislative design that the refund formula must be confined strictly to credits availed within the relevant period and nothing beyond. Any reversal-whether voluntary, mandatory, or compliance-driven-falls outside the scope of the formula unless such reversal pertains to the same period and directly affects the quantum of ITC availed therein. Reversals made for earlier periods, or reversals undertaken subsequently as part of post-refund accounting adjustments, cannot by any stretch be imported into the computation of NET ITC for the relevant period. To interpret the Rule otherwise would amount to rewriting the statutory formula by introducing elements that the Rule consciously excludes. 9. The Respondent/registered person respectfully submitted that the Appellant has completely failed to appreciate the foundational fact that the ITC reversed in September 2022 pertains exclusively to earlier tax periods and has no....
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....T Act and the Rules framed thereunder, and therefore cannot be relied upon to curtail the Respondent's statutory entitlement. Thus, the clarification contained in Para 43(c) of the Circular dated 18.11.2019 is not only non-binding on the Respondent but is also legally unsustainable to the extent it seeks to impose conditions not found in the parent statute. The Appellant's reliance on such an over-extended interpretation is therefore wholly misplaced and deserves to be rejected. 12. The respondent averred that Appellant's contention that the reversed ITC has been treated as a cost for income-tax purposes and therefore cannot simultaneously be refunded in proportion to export turnover-is wholly misconceived, factually incorrect, and legally untenable. The Appellant proceeds on the erroneous assumption that the entire CESS reversal was booked as a cost, thereby reducing the income-tax liability of the Respondent. This assumption is fundamentally flawed. The Respondent clarifies that the CESS amount for which refund was denied pertains exclusively to domestic turnover and not to zero-rated supplies. Only that portion of the CESS reversal which related to domestic transa....
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....ess amounting to Rs. 8,52,706/- [July 2022: Rs. 60,760/-, September 2022: Rs. 7,38,610/- & October 2022: Rs. 53,336/-). Accordingly, the Net ITC of Cess availed during the relevant period stood at Rs. 2,19,41,356/-. In contrast, the larger reversal of Cess amounting to Rs. 2,00,00,000/-also made during the refund period, was found to pertain entirely to earlier tax periods and to have no nexus whatsoever with the refund period. This conclusion is supported by the undisputed fact that the total ITC / Cess availed during the refund period (July 2022 to March 2023) was only Rs. 65,07,662/-. It is therefore mathematically impossible for a reversal of ITC Rs. 2,00,00,000/-availed during the relevant period or to the zero-rated supplies forming the basis of the refund claim. 15. The electronic credit ledger further corroborates the above position. The ledger reflects a credited ITC balance of Rs. 2,19,41,356/- during the refund period tallied with the reversal made in the corresponding GSTR-3B. This credited amount is, therefore, the true and correct NET ITC availed by the Respondent for the relevant period in terms of Rule 89(4). On this basis, the Appellate Authority has rightly con....
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....of tax under bond or Letter of Undertaking in accordance with the provisions of sub-section (3) of Section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula: Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC / Adjusted Total Turnover Where- (A) "Refund amount" means the maximum refund that is admissible; (B) "Net ITC" means input tax credit availed on inputs and input services during the relevant period; ******** (F) "Relevant period" means the period for which the claim has been filed." ******** 20. The present case, it is relevant to understand the legislative intent; therefore, the statutory test is not merely whether an amount is credited or debited in the electronic credit ledger during the relevant period. The primary question is whether the ITC in question was actually availed during the relevant period for the purpose of determining the refund in terms of Rule 89(4) of the CGST Rules. 21. The expression "input tax credit availed" under Rule 89(4)(B) of the ....
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....e relevant refund period. Therefore, the appellant's allegation that an amount of 2,00,00,000/- was considered as ITC pertaining to the refund period without any basis or nexus and is without substance. Accordingly, the said ground of appeal is devoid of merit. Moreover, the appellant (Revenue) contended that the respondent had reversed Rs.2,00,00,000/- during the period, this contention could not be accepted because, for the tax period from July 2022 to March 2023, the total ITC of Cess availed was only 65,07,662/- Therefore, the reversal of Rs. Rs. 2,00,00,000/- could not logically be attributed to the ITC availed during the relevant period. Hence, the averment asserted by Appellant is baseless because the provision of refund is clear and admits no ambiguity. 23. The record discloses that reversal in the present case represented the unutilized credit remaining in the electronic credit ledger after sanction of the refund claim for the previous tax period, which could neither be adjusted against output tax liability nor claimed as a refund. Hence, the appellant has, in our considered view, misinterpreted Rule 89(4) vis-à-vis the clarification contained in the Circular and....
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....rt observed as under :- 6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the Clarifications / circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. The Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory ....
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....y that "NET ITC" shall mean the ITC availed during the relevant period minus every ITC reversal made during that period. It specifically refers to ITC availed during the relevant period. Further the circular expressly clarifies that: "ITC which is reversed cannot be held to have been 'availed' in the relevant period." The Circular further provides that where the reversed amount is subsequently availed in a later tax period, subject to Section 16(4), it may be considered for refund in that later tax period. The above clarification is significant. The expression "availed" and the expression "reversed" cannot be treated as interchangeable. Availment creates the credit for purposes of the statutory scheme; reversal neutralises or reduces the credit to the extent reversed. However, paragraph 43(c) cannot be read as laying down a scheme that every reversal made during the relevant refund period must necessarily be treated as a reduction of the ITC availed during that very period, irrespective of the period to which the underlying credit relates. Such an interpretation would effectively add words to Rule 89(4) of the CGST Rule. The Rule does not say that "NET ITC" shall mea....