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2021 (6) TMI 43 - Commissioner - GSTRefund of unutilized input tax credit - inverted duty structure - principle of natural justice - period of June 2019 - HELD THAT - The adjudicating authority had issued Show Cause Notice in Form of RFD-08 to the appellant also provided opportunity for personal hearing with a direction to file reply. However the appellant has not endeavoured to attend the personal hearing though the appellant noticeably contacted to the Department to defer the personal hearing. It is found that the sufficient time was available with the appellant to file reply in the matter if he intended to do so. Therefore the adjudicating authority has passed the impugned order after providing opportune time to file reply. Admissibility of refund claim - HELD THAT - The adjudication authority has rejected the refund for the tax period from June 2019. In this regard the appellant has pleaded that the input tax credit is accumulated on account of inverted duty structure. The refund of the same is claimed under the clause (ii) of the proviso to Section 54 of the Act and also submitted that the formula given under Rule 89(5) of the CGST Rules 2017 is inconsistent with Section 54 of the Act and hence is ultra vires. It is also found that refund of input services is not includible in the Net ITC as explained in the clause under Rule 89(5) of the CGST Rules as amended. Further as the appellant has not submitted any segregated documents relating to input to the proper officer in spite of providing sufficient opportunities to come forthwith for evidencing stake of inputs for impugned refund claim - there are no infirmity in rejection of the refund - appeal dismissed.
Issues Involved:
1. Whether the principle of natural justice has been followed. 2. Whether the application for refund of unutilized input tax credit on account of inverted duty structure is admissible. Issue-wise Detailed Analysis: 1. Principle of Natural Justice: The appellant argued that the adjudicating authority violated the principle of natural justice by issuing an ex parte rejection order without providing a fair opportunity to respond. The adjudicating authority had issued a Show Cause Notice (SCN) in Form GST RFD-08 and provided an opportunity for a personal hearing. However, the appellant contended that the personal hearing was scheduled on a government holiday, and despite requesting an adjournment, no response was received from the department. The rejection order was issued before the appellant could submit their reply. Upon review, it was found that the appellant had sufficient time to file a reply but did not attend the personal hearing. The adjudicating authority provided adequate opportunity to the appellant, and thus, the principle of natural justice was deemed to have been followed. The appellant's contention lacked merit as the adjudicating authority acted within the bounds of procedural fairness. 2. Admissibility of Refund: The appellant sought a refund of unutilized Input Tax Credit (ITC) for June 2019 due to an inverted duty structure. The adjudicating authority rejected the refund claim, stating that ITC on input services and capital goods should not be included in 'Net ITC' for refund purposes as per Rule 89(5) of the CGST Rules, 2017, amended by Notification No. 26/2018-C.T., dated 13-6-2018. The appellant argued that this rule was inconsistent with Section 54 of the CGST Act, 2017, and thus ultra vires. The relevant statutory provisions were examined, including Section 54(3) of the CGST Act and Rule 89(5) of the CGST Rules. Section 54(3) allows for a refund of unutilized ITC under specific conditions, while Rule 89(5) defines the formula for calculating the refund, explicitly excluding ITC on input services and capital goods. The Central Government, empowered by Section 164 of the CGST Act, amended the rules to provide clarity on refund calculations. Judicial precedents, including the Madras High Court's judgment in M/s. Tvl. Transtonnelstroy Afcons v. Union of India, upheld the validity of these provisions, confirming that the exclusion of input services from 'Net ITC' is a valid legislative exercise. The appellant's reliance on the VKC Footsteps India Pvt. Ltd. case was addressed, noting that the Madras High Court had already considered and distinguished this case in its judgment. The adjudicating authority's rejection of the refund claim was consistent with the amended rules and statutory provisions. Conclusion: The appeal was rejected, affirming that the principle of natural justice was followed, and the refund claim was inadmissible based on the applicable legal provisions. The adjudicating authority's order was upheld as proper and justified.
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