2021 (6) TMI 960 - Commissioner - GST

Refund of unutilized Input Tax Credit accumulated due to Export of Goods and Service - reversal of supply of exempted supply - zero rated supply - personal hearing was not granted to the Appellant - principles of natural justice - sub Section 3(a) of Section 16 of IGST Act,2017 read with Rule 89 of CGST Rules, 2017 - HELD THAT - The appellant has argued that during the month of August 2018, the Appellant had transferred MEIS Scrips/Licence on receipt of consideration charges amounting to ₹ 8,69,740/- which is reflected in Para 3.1(c) of the Form GSTR-B for August 2018 as with effect from 13-10-2017, Duty Credit Scrips MEIS etc. falling under Heading 4907 have been exempted from levy of Goods and Service Tax by Notification No. 35/2017-C.T. (Rate), dated 13-10-2017.I find that the appellant has further submitted that for the supply of MEIS Licence, the Appellant had availed Input Tax Credit of ₹ 14,362/- on Consultancy Services used exclusively for exempted supply of MEIS Licence and also availed Input Tax Credit of ₹ 50,438/- in respect of Telephone services, Courier Service, Computer Repairing Services, Internet Services, Rental Services and purchase of Stationary items used for taxable supplies including Zero-rated supplies as well as exempted supply of MEIS Licence. Rule 42(1) provides the manner of determination of the amount of input tax credit to be reversed in terms of Section 17 (2) of CGST Act, 2017.I observe that the appellant has produced a chart showing details of availment of Input Tax Credit of ₹ 14,362/- in respect of Input Service used exclusively for exempted supply of MEIS Licence and ₹ 50,438/- in respect of Input and Input Services used for taxable supplies including Zero-rated supplies as well as exempted supply of MEIS Licence - he amount of input tax credit attributable to supply of exempted supply in terms of Rule 42 of the CGST Rules, 2017 during the month of August 2018 comes to ₹ 16,313/-(₹ 14362/- in respect of consultancy service used exclusively for supply of exempted service and ₹ 1951/- being common input tax credit) - It is observed that the appellant has paid the excess credit amounting to ₹ 16,313/- vide entry numbers DC0806200082724 dated 20-06-2020 in electronic ledger account /Form GSTR-3Band has furnished Form GST DRC-03. The appeal filed by the appellant is allowed upto the extent of excluding the value of exempt supplies other than zerorated supplies in the Adjusted Total Turnover - appeal disposed off.

Summary

Issues Involved:
1. Rejection of refund claim for the amount of ?1,37,750/-.
2. Wrong availment of Input Tax Credit (ITC) amounting to ?31,067/-.
3. Non-reversal of proportionate ITC on exempted sales for the month of August 2018.

Issue-wise Detailed Analysis:

1. Rejection of Refund Claim for ?1,37,750/-:
The appellant, M/s Aakriti Manufacturing Private Limited, filed for a refund of unutilized Input Tax Credit (ITC) accumulated due to the export of goods and services without payment of tax. The adjudicating authority rejected the refund claim of ?1,37,750/- (?1,27,694/- as tax and ?10,056/- as interest) on the grounds that the appellant did not reverse proportionate ITC on exempted sales for August 2018, as required under Section 17(2) of the CGST Act, 2017.

The appellant argued that the adjudicating authority did not provide any reason for disallowing the refund and failed to consider their detailed submissions. The appellant also contended that the exempt supplies (MEIS Scrips/Licence) were not required to be included in the Adjusted Total Turnover for calculating the refund amount. They had availed ITC on consultancy services used exclusively for exempted supplies and other services used for both taxable and exempt supplies. The appellant recalculated the ITC attributable to exempt supplies and reversed the excess credit amounting to ?16,313/-.

2. Wrong Availment of Input Tax Credit (ITC) Amounting to ?31,067/-:
The appellant accepted the wrong availment of ITC amounting to ?31,067/- due to ITC not being reflected in GSTR 2A. They withdrew this claim vide a letter dated 01.06.2020. The adjudicating authority, in its order, acknowledged the appellant’s acceptance of the wrong ITC claim and withdrawal of the same.

3. Non-reversal of Proportionate ITC on Exempted Sales for August 2018:
The adjudicating authority calculated the proportionate ITC to be reversed on exempted sales using the formula: ?1,27,694/- = ?8,69,740/- / ?22,91,2407 x ?33,63,958/-. The appellant argued that the exempt supply value of ?8,69,740/- (MEIS Scrips/Licence) should not be included in the Adjusted Total Turnover for calculating the refund. They provided a detailed calculation of the ITC attributable to exempt supplies and reversed the excess credit of ?16,313/-.

The appellate authority reviewed the legal provisions under Section 17(2) and Rule 42 of the CGST Act and Rules, respectively. It was found that the appellant’s calculation of ITC attributable to exempt supplies was correct. The Net ITC for August 2018 should have been ?34,14,938/- (?34,31,251 - ?16,313), and the refund amount should have been ?33,47,964/- instead of ?33,63,958/-. The excess refund of ?15,993/- was already deposited by the appellant with interest.

Conclusion:
The appeal was allowed to the extent of excluding the value of exempt supplies other than zero-rated supplies in the Adjusted Total Turnover. The rejection of the refund claim for ?1,37,750/- was set aside, and the appellant’s recalculated refund claim was accepted. The appeal was disposed of accordingly.