2024 (7) TMI 1160 - HC - GST

Refund of GST claim under Inverted Duty Structure - applicability of CBEC Circular No.135/05/2020-GST - HELD THAT - The provisions of the GST enactments being applicable pan India, the Department cannot take a different stand and such stand would be contrary to the ratio of the Hon ble Supreme Court in KUSUM INGOTS ALLOYS LTD. VERSUS UNION OF INDIA 2004 (4) TMI 342 - SUPREME COURT . Therefore, the impugned order denying the benefit of the refund on account of the Inverted Duty Structure to the petitioner is unsustainable. The impugned order is set aside and the case is remitted back to the respondent to pass a fresh order in the light of the above mentioned orders santioning for the refund to the petitioner. This exercise shall be completed within a period of three months from the date of receipt of a copy of this order. Petition allowed by way of remand.

Summary

Issues:
1. Rejection of GST refund claim under Inverted Duty Structure based on Circular No.135/05/2020-GST.
2. Applicability of Circular despite being struck down by other High Courts.
3. Contrary stand taken by the Department regarding refund claim.
4. Previous orders issued for refund application periods.

Analysis:

1. The petitioner, a manufacturer of cotton yarn, filed a refund claim under Section 54(3) of GST enactments due to an Inverted Duty Structure. The claim was rejected by the respondent citing Circular No.135/05/2020-GST, which states that refund is not applicable when input and output supplies are the same.

2. The respondent rejected the claim as the rate of tax on input raw cotton (used in production) and output goods (100% Cotton yarn) was the same. The Circular was applied despite being struck down by High Courts in Gauhati, Calcutta, Rajasthan, and Delhi. The decisions against the Circular have not been reversed.

3. The High Court emphasized that the Department cannot take a different stand on the Circular's applicability, as GST laws apply uniformly across India. Refunds were previously sanctioned to the petitioner for different periods, indicating inconsistency in the Department's approach towards refund claims.

4. Considering the previous sanctioned refund orders, the Court set aside the impugned order and directed the respondent to reevaluate the refund claim within three months. The Writ Petition was allowed with directions, and no costs were imposed. The case was remitted back to the respondent for a fresh order based on the previous refund orders issued to the petitioner.