Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies

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Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies

				By: CA Bimal Jain
				March 5, 2024
All Articles by: CA Bimal Jain View Profile

Contents

The Hon’ble Kerala High Court in the case of M/S. MALABAR FUEL CORPORATION, VERSUS THE ASSISTANT COMMISSIONER CENTRAL TAX AND CENTRAL EXCISE, KANNUR, THE JOINT COMMISSIONER (APPEALS) KOCHI, UNION OF INDIA, STATE OF KERALA, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS - 2024 (1) TMI 1203 - KERALA HIGH COURT allowed the writ petition and held that, Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies.

Facts:

M/s. Malabar Fuel Corporation (“the Petitioner”) is engaged in the business of bottling Liquified Petroleum Gas (“LPG”) in cylinders for both domestic and commercial use. On the bulk supply of LPG received by the Petitioner from various refineries, the Petitioner is required to pay GST @ 18 %. However, after bottling, GST is charged on the value of cylinder supplied to domestic and commercial customers at the rate of 5% and 18% respectively. Thus, there was difference in Input Tax Credit (“ITC”) being higher than the tax on output in respect of the domestic supplies effected by the Supplier after bottling of the LPG in cylinders.

Thereafter, the Petitioner filed an application for refund under Section 54 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for refund of accumulated ITC. However, the application/claim was rejected vide Appellate Order dated June 08, 2023 (“the Impugned Order”) on the basis of Circular No. 135/05/2020 dated March 31, 2020 (“the Circular”).

Aggrieved by the Impugned Order passed against the Petitioner, the Petitioner filed a writ petition before the Hon’ble High Court.

Issue:

Whether Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies?

Held:

Observed that, as per clause (ii) of Section 54(3) of the CGST Act, the Assessee is permitted to claim refund of tax, in case where the credit is accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies, or supplies of goods or services or both as notified by the Central Government on the basis of recommendation of GST Council.
Noted that, as per Section 54 of the CGST Act, the refund of ITC should not be denied when the supplies do not fall within the purview of exceptional clause and credit has accumulated on account of rate of tax on input being higher than rate of tax on output supplies.
Relying upon the judgement of Hon’ble Gauhati High Court in the case of BMG INFORMATICS PVT. LTD., VERSUS THE UNION OF INDIA AND 3 ORS., THE COMMISSIONER CENTRAL GOODS AND SERVICE TAX GUWAHATI, THE JOINT COMMISSIONER (APPEALS) CGST CENTRAL EXCISE AND CUSTOMS GUWAHATI, THE ASSISTANT COMMISSIONER CGST AND CENTRAL EXCISE DIVISION II - 2021 (9) TMI 472 - GAUHATI HIGH COURT, Hon’ble Calcutta High Court in the case of M/S. SHIVACO ASSOCIATES & ANR. VERSUS JOINT COMMISSIONER OF STATE TAX, DIRECTORATE OF COMMERCIAL TAXES & ORS. - 2022 (4) TMI 118 - CALCUTTA HIGH COURT and Hon’ble Delhi High Court in the case of INDIAN OIL CORPORATION LIMITED VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX & ORS. - 2023 (12) TMI 361 - DELHI HIGH COURT opined that, the condition laid down in the Circular pertaining to denial of refund of credit accumulated to a dealer in case when the tax on input is higher than the input supplies, in case where the input and output supplies are same, should not be taken into consideration.
Held that, the Petitioner is entitled to refund of the ITC accumulated. Hence, the writ petition is allowed.
Directed that, the matter be remanded back to the assessing authority for calculation of refund.