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2021 (6) TMI 41 - Commissioner - GSTRejection of refund claim - rejection of refund of appellant mainly on the ground that Since the refund of ITC on input service and capital goods have been included in net ITC for the purpose of refund by the assessee, they, as per sub-Rule (5) of Rule 89 of the CGST Rules, 2017 as amended vide Board s Notification No. 26/2018-C.T., dated 13-6-2018 are not entitled to claim refund of ITC - HELD THAT - The Central Government, in contemplation of the powers conferred by Section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017), has amended the Central Goods and Services Tax Rules, 2017 by issuing the Notification No. 26/2013-Central Tax, dated 13-6-2018 - the subject matter has also been under consideration at various judicial quasi judicial authorities and the recent progression in the matter is prominent to deliberate cautiously hereunder, which isn t only a obiter dicta but also laid the foundation for formulation of the principles of law for the purpose of deciding the present problem before us on this issue - The amendment by the Notification No. 26/2018-Central Tax, dated 13-6-2018 is intra vires to the Section 54(3) of the CGST Act, 2017 provisions. Further, the Rule 89(5) is not contrary to the provisions of Section 54(3) of the CGST Act, 2017 as amended albeit it, as a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). The lexes of the amendments are amply justified. Further, as the appellant has not provided any documents relating to input in spite of providing sufficient opportunities to come forthwith for evidencing stake of inputs for impugned refund claims - Appeal dismissed.
Issues Involved:
1. Refund of Input Tax Credit (ITC) under the inverted duty structure. 2. Interpretation and application of Rule 89(5) of the CGST Rules, 2017. 3. Validity of Notification No. 26/2018-C.T., dated 13-6-2018. 4. Compliance with Section 54(3) of the CGST Act, 2017. 5. Judicial precedents on the issue. Detailed Analysis: 1. Refund of Input Tax Credit (ITC) under the Inverted Duty Structure: The appellant, engaged in mining and selling soapstone and soapstone powder, claimed refunds of ITC accumulated due to the inverted duty structure under Section 54 of the CGST Act, 2017. The adjudicating authority rejected these claims, stating that ITC on input services and capital goods is not included in the 'Net ITC' for refund purposes as per Rule 89(5) of the CGST Rules, 2017, amended by Notification No. 26/2018-C.T., dated 13-6-2018. 2. Interpretation and Application of Rule 89(5) of the CGST Rules, 2017: The appellant argued that the amended definition of 'Net ITC' under Rule 89(5) is not aligned with Section 54(3) and should not restrict their refund claims. They contended that the formula under Rule 89(5) is arbitrary and ultra vires to the CGST Act, 2017. The adjudicating authority, however, upheld the rejection of the refund claims based on the amended Rule 89(5), which excludes ITC on input services and capital goods from the 'Net ITC' for refund purposes. 3. Validity of Notification No. 26/2018-C.T., dated 13-6-2018: The appellant challenged the validity of Notification No. 26/2018-C.T., arguing that it retrospectively amends Rule 89(5) to exclude ITC on input services and capital goods from refund claims, which they claimed was contrary to the legislative intent of Section 54(3). The adjudicating authority, referring to the powers conferred by Section 164 of the CGST Act, 2017, found the notification valid and intra vires to the Act. 4. Compliance with Section 54(3) of the CGST Act, 2017: The appellant's primary contention was that Section 54(3) allows for a refund of any unutilised ITC, including that on input services and capital goods, under the inverted duty structure. They cited various judicial precedents supporting their claim that the exclusion of ITC on input services and capital goods from refund claims was not intended by the legislature. The adjudicating authority, however, found that Section 54(3)(ii) specifically curtails refund claims to ITC on inputs, aligning with the amended Rule 89(5). 5. Judicial Precedents on the Issue: The appellant relied on several judicial decisions, including those of the Gujarat High Court in VKC Footsteps India Pvt. Ltd. and other cases, which supported the inclusion of ITC on input services in refund claims under the inverted duty structure. The adjudicating authority, however, referred to the Madras High Court's decision in M/s. Tvl. Transtonnelstroy Afcons v. Union of India, which upheld the validity of Section 54(3)(ii) and the amended Rule 89(5), excluding ITC on input services from refund claims. Conclusion: The adjudicating authority concluded that the amended Rule 89(5) of the CGST Rules, 2017, as per Notification No. 26/2018-C.T., dated 13-6-2018, is valid and in conformity with Section 54(3)(ii) of the CGST Act, 2017. The exclusion of ITC on input services and capital goods from the 'Net ITC' for refund purposes was upheld, and the appellant's refund claims were rightly rejected. The authority found no infirmity in the impugned orders and dismissed all nine appeals filed by the appellant.
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