2024 (1) TMI 924 - HC - GST

Refund of unutilized Input Tax Credit (ITC) - zero rated supplies or inverted duty structure - debit entries of the refund claim were not made - non submission of supporting documents. Zero rated supplies - HELD THAT - Under Section 54 of the GST Act, refund may be claimed either for unutilized ITC on account of an inverted duty structure or in respect of zero rated exports. Therefore, the refund claim for zero rated exports does not disentitle the petitioner from claiming a refund for unutilized ITC. Consequently, the first reason for rejection is untenable. Debit entries of the refund claim were not made - HELD THAT - When the statute provides for a refund subject to fulfillment of conditions, as long as such conditions are fulfilled, a refund claim cannot be rejected on the ground that debit entries were not made. Non submission of supporting documents - HELD THAT - The petitioner has set out the supporting documents that were taken into account by the refund processing officer. It is possible that ITC may accumulate both in respect of input goods that are not affected by an inverted duty structure and by the purchase of input goods that are so affected. Therefore, it is necessary for the petitioner to submit all necessary documents to establish that its claim for refund is confined to input goods that are affected by an inverted duty structure. The impugned deficiency memos are quashed. As a corollary, the matter is remanded for re-consideration.

Summary

Issues involved:
The judgment deals with three writ petitions challenging deficiency memos issued by the respondent regarding unutilized Input Tax Credit (ITC) arising from an inverted duty structure and refund of IGST on zero-rated exports.

Issue 1: Unutilized ITC due to inverted duty structure
The petitioner, a textile manufacturing company, claimed unutilized ITC due to the inverted duty structure where the tax on raw material (12%) exceeded the tax on the final product (5%). The petitioner also undertook export sales and received IGST refunds for zero-rated exports. However, the refund application for unutilized ITC was rejected based on deficiency memos citing reasons related to previous refunds and lack of debit entries.

Issue 2: Rejection of refund application
The deficiency memos specified reasons for rejecting the refund claim, including the petitioner's previous receipt of refunds for zero-rated exports and the absence of debit entries for the refund claim. The respondent argued that the petitioner could file a fresh refund application after rectifying the deficiencies.

Judgment:
The court quashed the deficiency memos and remanded the matter for re-consideration. It was clarified that receiving refunds for zero-rated exports does not prevent the petitioner from claiming a refund for unutilized ITC under Section 54 of the GST Act. The court also emphasized the importance of submitting all necessary supporting documents to establish the claim for refund related to input goods affected by an inverted duty structure. The respondent was directed to consider any further supporting documents provided by the petitioner within two weeks and dispose of the refund applications within four weeks thereafter.

Conclusion:
The writ petitions were disposed of with no costs, and the associated miscellaneous petitions were closed as per the terms outlined in the judgment.