2022 (10) TMI 1129 - HC - GST

Refund of ITC accumulated due to inverted Tax Structure - Section 54 of CGST Act - HELD THAT - As rightly contended by the learned counsel for the petitioner, in addition to the fact that the Circular dated 31.03.2020 does not come in the way of the petitioner claiming refund under Section 54(3)(ii) of the CGST Act, 2017, as held by the Gauhati High Court in BMG s case 2021 (9) TMI 472 - GAUHATI HIGH COURT , the said position has been reiterated and clarified by the respondents themselves by issuing the Circular dated 06.07.2022, which is sufficient to show that the petitioner is entitled to seek refund of the said amount paid by him. The petitioner would be entitled to refund of the said amount and the impugned order rejecting the refund deserves to be quashed and the respondents are to be directed to take necessary steps to consider the claim of the petitioner in accordance with law - Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Petition for setting aside refund rejection orders for specific periods.
2. Claim for refund of Input Tax Credit (ITC) due to inverted Tax Structure.
3. Interpretation of Circulars dated 31.03.2020 and 06.07.2022.
4. Maintainability of the writ petition due to alternative remedy of appeal.
5. Entitlement to refund under Section 54(3)(ii) of the CGST Act, 2017.

Analysis:
1. The petitioner sought writs to set aside refund rejection orders for two periods. The counsel argued that the rejection was contrary to the material on record and the Circular dated 31.03.2020 did not prohibit the refund. Reference was made to a judgment of the Gauhati High Court clarifying a similar issue. The petitioner requested the court to quash the rejection orders and direct the refund of GST paid.

2. The respondents acknowledged the issuance of a clarifying Circular dated 06.07.2022 but contended that the petition lacked merit and should be dismissed. They argued that the petitioner had an alternative remedy through an appeal against the rejection order. The respondents opposed the maintainability of the writ petition.

3. The court noted that the Circular dated 31.03.2020 did not hinder the petitioner's claim for refund under Section 54(3)(ii) of the CGST Act, as per the Gauhati High Court's judgment. The subsequent Circular dated 06.07.2022 reiterated this position. Considering the circumstances and the latest Circular, the court opined that the petitioner was entitled to a refund. The court emphasized the petitioner's right to seek a refund despite the availability of an appeal.

4. Despite the existence of an appeal remedy, the court, based on the material on record and the legal precedents, allowed the petition. The court quashed the refund rejection orders for the specified periods and directed the respondents to reconsider the petitioner's refund claim promptly. The court instructed the respondents to review the claim within two months, considering the observations in the order and the relevant Circulars and judgments.