2024 (12) TMI 1120 - HC - GST

Refund of unutilized input tax credit (ITC) - input tax credit accumulated in the electronic credit ledger for the said period could not be utilized - rejection of refund on the ground that as per Circular No. 125/44/2019-GST dated 18.11.2019, there is no provision for refund of unblocked ITC, as such the refund claim is inadmissible - HELD THAT - It is not a case that petitioner has debited the tax dues for March, 2021 both through electronic credit ledger which was lying blocked during that period, and through electronic cash ledger through which he had actually paid. Therefore, there was no duplication or twice payment of the tax for the said tax period. The blocking and unblocking of ITC by the SGST authorities between 20.03.2021 and 07.07.2021 were not subject matter of any litigation where the issue of legality or correctness of such blocking was determined. Petitioner by making payment of tax dues through electronic cash ledger for the tax period March, 2021 had duly discharged his output tax liability as the input tax had already been deposited by his purchaser. The accumulated ITC in his electronic credit ledger in lieu thereof could well be utilized for future tax liability. However petitioner has not been undertaking business since March, 2021 as stated by learned counsel for the petitioner. The accumulated ITC remains in his electronic credit ledger. In that case, the claim for refund is not made out in terms of Section 54 (3) of the CGST Act as none of the enumerated conditions are made out. Petitioner under a misconception of law has sought refund of the accumulated ITC in its electronic credit ledger when there has been no duplication of payment of tax for any tax period. It is up to the petitioner to utilize the unutilized ITC for future tax liabilities. There are no illegality in the impugned order calling for interference in exercise of writ jurisdiction. Accordingly, the instant petition is dismissed.

Summary

Issues:
1. Refund of unutilized input tax credit (ITC) under the Goods & Services Tax (GST) law.

Analysis:
The petitioner, a registered taxpayer under the GST Department, had his electronic credit ledger blocked by the State Goods and Services Tax (SGST) authorities during March 2021. Subsequently, the petitioner sought a refund of the input tax credit accumulated in the blocked ledger. The petitioner contended that the blocking of credit led to the payment of excess cash through the electronic cash ledger for discharging the GST liability for March 2021. The refund claim was made under the category of "refund of excess payment of tax" as per the circular dated 18.11.2019. However, the claim for refund was rejected by the authorities citing the absence of a provision for refunding unblocked ITC, as per Circular No. 125/44/2019-GST. The petitioner filed an appeal for the refund, which was subsequently rejected by the Additional Commissioner (Appeals), CGST. The petitioner approached the court seeking a direction for the refund of the amount along with interest.

In response, the respondents argued that the petitioner's claim for refund was inadmissible under Section 54 of the CGST Act, 2017, as the conditions for refund specified in the Act were not met. The respondents contended that the petitioner had not discharged tax in excess of the liabilities self-declared, and therefore, the claim was rightly rejected. The authorities also highlighted that the ITC was available to the petitioner for future use in discharging further liability. The respondents emphasized that the petitioner's representation for blocking and unblocking of ITC was made with the SGST authorities, and no violation of tax retention laws could be established. The respondents further supported their stance by referring to the circular dated 18.11.2019, which did not provide for refunding ITC if paid in excess in cash.

During the proceedings, the petitioner reiterated the claim for refund, stating that the unutilized ITC remained in the electronic credit ledger since March 2021. The petitioner argued that as there were no output tax liabilities against him, the amount should be refunded with interest. However, after considering the submissions of both parties, the court found that the petitioner did not meet the conditions specified in Section 54 of the CGST Act for claiming a refund of unutilized ITC. The court noted that the petitioner had discharged the output tax liability by paying through the electronic cash ledger and that the accumulated ITC could be used for future tax liabilities. As the petitioner had not been undertaking business since March 2021, the court concluded that the claim for refund was not justified under the law. Consequently, the court dismissed the petition, finding no illegality in the authorities' decision regarding the refund claim.

In conclusion, the court upheld the rejection of the petitioner's claim for refund of unutilized input tax credit, emphasizing that the petitioner did not fulfill the necessary conditions under the GST law for such a refund.