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2020 (10) TMI 946 - Commissioner - GSTRefund of accumulated credit - Inverted Duty Rate structure - the adjudicating authority has held that the Tax Structure on major Input used and Final Product manufactured is same @ 5% (except some consumables items), therefore, the accumulated input tax credit appeared not to be on account of Inverted tax structure and dis-allowed the refund - HELD THAT - Refund of unutilized ITC in case of inverted tax structure, as provided in Section 54(3) of the CGST Act, 2017 is available where ITC remains unutilized even after setting off of available ITC for the payment of output tax liability. Where there are multiple inputs attracting different rate of tax, in the formula provided in Rule 89(5) of the CGST Rules, the term Net ITC cover the ITC availed on all inputs in the relevant period, irrespective of their rate of tax - Further, Para -14 of Circular No.79/53/2018-GST dated 31.12.2018 clarified that both the law and the related rules clearly prevent the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inverted duty structure. Since the appellant has taken Input Tax Credit on the Input, namely Vanaspati and Cooking Oils, Packing material, Input Services related to job work and Capital Goods etc., which attracts different rates of GST Further - as per CGST Act and Rules clearly prohibit the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inverted duty structure. There are no force in the contention of the appellant and the reliance placed by the appellant in their defence is not applicable in this case. The adjudicating authority has rightly passed the order and appellant is not entitled for refund of unutilized input tax credit. Therefore, the appeal is rejected to that extent. Re-credit of the amount of ₹ 1,07,18,285/- in Electronic Credit Ledger of the appellant - Rule 93 of the CGST Rules. 2017 - HELD THAT - The appellant may approach the adjudicating authority and follow the procedure as laid down under Rule 93 of CGST Rules. 2017. Appeal disposed off.
Issues:
1. Refund application for unutilized Input Tax Credit on account of Inverted Tax Structure. 2. Grounds of appeal against the rejection of the refund application. 3. Interpretation of Section 54(3) of the CGST Act. 4. Application of Rule 89(5) of CGST Rules for refund on account of inverted duty structure. 5. Consideration of Circular No. 79/53/2018-GST. 6. Definition of "inputs" under the CGST Act. 7. Decision on the re-credit of the amount in the Electronic Credit Ledger. Analysis: 1. The appellant, engaged in manufacturing and marketing of Vanaspati and Cooking Oils, filed a refund application for unutilized Input Tax Credit of ?1,07,18285/- due to Inverted Tax Structure. The adjudicating authority rejected the application based on the tax structure similarity between major inputs and final products. The appellant appealed against this decision. 2. The appellant's grounds of appeal included arguments that all conditions under Section 54(3) for refund were fulfilled, the adjudicating authority erred in relying on amended definitions, and Circular No. 79/53/2018-GST was misapplied. The appellant contended that the rate disparity between inputs and output supplies satisfied Section 54(3)(ii) conditions. 3. Section 54(3) of the CGST Act allows refund of unutilized input tax credit if the rate of tax on inputs is higher than output supplies, subject to specific conditions. The appellant argued that the rate difference between inputs like packaging material (taxed at 18%) and output supplies (taxed at 5%) met the criteria under Section 54(3)(ii). 4. Rule 89(5) of CGST Rules outlines the formula for refund in case of inverted duty structure. It considers turnover of inverted rated supplies and Net ITC. The appellant's claim for refund was assessed based on this rule. 5. Circular No. 79/53/2018-GST clarifies that refund under Section 54(3) does not include tax on input services or capital goods. This circular was referenced in the judgment to support the decision on the refund application. 6. The judgment discussed the definition of "inputs" under the CGST Act, emphasizing that inputs do not include services or capital goods for refund purposes. The appellant's argument regarding the broad interpretation of "inputs" was dismissed. 7. The judgment concluded that the appellant was not entitled to the refund of unutilized input tax credit. However, the issue of re-crediting the amount in the Electronic Credit Ledger was addressed under Rule 93 of CGST Rules, advising the appellant to follow the procedure for re-credit. This detailed analysis covers the key issues and arguments presented in the judgment regarding the refund application and related legal provisions.
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