2020 (12) TMI 356 - Commissioner - GST

Rejection of Refund claim - Inverted duty structure - Trading of goods - Purchase @18% of GST and supply @5% to Public Funded Research Institutes - appellant has procured the Scientific and Technical Instruments, Apparatus, Equipment etc., from various suppliers on payment of 18% tax and supplies the same as such even without change of its packing to various research institutes on the payment of 5% tax by availing exemption N/N. 47/2017-IGST(rate) dated 14.11.2017 and 45/2017-CGST(rate) dated 14.11.2017 and part supplies were also made to other purchasers on full rate of tax i.e. 18% - whether the goods on which credit is accumulated and refund is claimed can be treated, as 'Input and falls under the purview of inverted duty structure or otherwise'? HELD THAT - The appellant is engaged in the trading activities and supplied the goods i.e. Scientific and Technical Instruments, Apparatus, Equipment etc., as such to Public Funded Research Institutes at 5% rate of GST by availing benefit under Notification No.47/2017-IGST(rate) dated 14.11.2017 and 45/2017-CGST(rate) dated 14.11.2017. The same goods were also supplied by the appellant at the rate of 18% GST to other purchasers. The appellant also did not carryout any further processes i.e. checking of goods, testing, inspection etc., and supplied the goods as such, it is also found that no value addition has been done by the appellant. The goods procured are attracting the same rate as the appellant has also supplied the goods at the rate of 18% GST to other purchaser without availing the benefit of notification, therefore such goods can not be treated as Inputs and does not qualify the criteria prescribed under Inverted rated duty structure as provided under Section 54 (3) (ii) of CGST Act, 2017. Appeal dismissed.

Issues Involved:
1. Applicability of the definition of "inputs" under Section 2(59) of the CGST Act, 2017.
2. Eligibility for refund under Section 54(3)(ii) of the CGST Act, 2017 due to inverted duty structure.
3. Interpretation of trading activities in the context of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Applicability of the definition of "inputs" under Section 2(59) of the CGST Act, 2017:

The appellant argued that the goods in question, i.e., Scientific and Technical Instruments, Apparatus, Equipment, should be classified as "inputs" as per Section 2(59) of the CGST Act, 2017. The definition of "input" includes any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. The appellant contended that these goods are used in the course of their business and thus fall under the definition of "inputs."

However, the adjudicating authority rejected this claim, stating that the goods were supplied as such without any repacking or further processing, thereby not qualifying as "inputs" for the purpose of refund under the inverted duty structure. The adjudicating authority emphasized that the goods were supplied directly to Public Funded Research Institutes at a reduced rate of 5% GST, which led to the accumulation of ITC.

2. Eligibility for refund under Section 54(3)(ii) of the CGST Act, 2017 due to inverted duty structure:

The appellant filed refund claims under Section 54(3)(ii) of the CGST Act, 2017, for the periods April to September 2019 and October to December 2019, citing the inverted duty structure. The adjudicating authority rejected the refund claims, arguing that the goods supplied at a reduced rate of 5% GST did not qualify for refund under the inverted duty structure because they were not considered "inputs" as per the CGST Act.

The appellant argued that Section 54(3) does not bar refunds for trading concerns and that the only limitations specified are related to goods exported out of India subject to export duty or where drawback is availed. The appellant also cited case law to support their claim, but the adjudicating authority found that the cited case law was not applicable to the present case.

3. Interpretation of trading activities in the context of the CGST Act, 2017:

The appellant contended that their trading activities, including the procurement and supply of goods without repacking, should be considered as activities carried out in the course or furtherance of business. They argued that the term "business" under Section 2(17) of the CGST Act includes trading activities, and thus their activities should qualify for refunds under the inverted duty structure.

The adjudicating authority, however, held that since the appellant did not perform any value addition, such as checking, testing, or inspection of the goods, and supplied them as procured, the goods could not be treated as "inputs." Consequently, the goods did not meet the criteria for refund under the inverted duty structure as provided under Section 54(3)(ii) of the CGST Act, 2017.

Conclusion:

The adjudicating authority concluded that the goods supplied by the appellant did not qualify as "inputs" under Section 2(59) of the CGST Act, 2017, and thus were not eligible for refunds under the inverted duty structure as per Section 54(3)(ii) of the CGST Act, 2017. The appeals filed by the appellant were rejected, and the impugned order was upheld.

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