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TMI Blog2021 (2) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of excavation/production of sand stone/sand stone powder, the appellant has used capital goods and input services, but the input is nothing in this case except sand stone. The input services and capital goods used in the production and supply of the goods in the course of business by the appellant, attracts higher rate of tax than the rate of tax on their output supplies which resulted accumulation of input tax credit for which the appellant has filed refund in respect of input tax credit of Rs. 28,19,021/- (CGST Rs. 6,38,981/- + SGST Rs. 6,38,981/- + IGST Rs. 15,41,059/-) for the months of August, 2017 to March, 2018 accumulated on account of Inverted Tax Structure. 2.2 On scrutiny of refund application, submitted by the appellant the adjudicating authority noticed some deficiencies for which deficiency memo dated 13-8-2018 under GST RFD-03 was issued to the appellant in the matter and the same was replied along with the copies of demanded documents by the appellant which was received on 17-5-2019. On further scrutiny of the records and invoices on the strength of which the appellant has claimed input tax credit, it has been found that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of unutilized input tax credit shall be allowed in cases other than - (i) ------------ (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council : * that further it may be noted that Rule 89(5) of the CGST Rules, prescribed methodology for computing the refund claim. Relevant paras of Rule 89(5) is excerpted below for your easy reference : (5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula :- Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC. / Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services. Explanation. - For the purposes of this sub-rule, the expressions - (a) "Net" ITC" shall mean input tax credit availed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/- (IGST Rs. 17,54,255/-, CGST Rs. 4,03,722/- and SGST Rs. 4,03,722/-). Month-wise recomputed refund claim has been tabulated below : S. No. Month Refund IGST CGST SGST Total 1. Jul., 17 - - - 2. Aug., 17 1,60,057 21,958 21,958 3. Sep., 17 2,87,716 19,017 19,017 4. Oct., 17 0 53,688 53,688 5. Nov., 17 3,10,870 34,149 34,149 6. Dec., 17 28,330 21,053 21,053 7. Jan., 18 3,94,488 39,919 39,919 8. Feb., 18 3,64,402 74,349 74,349 9. Mar., 18 2,08,392 1,39,589 1,39,589 Total 17,54,255 4,03,722 4,03,722 25,61,699 * that the Department in its impugned order has alleged that no document/invoices relating to inputs has been found in the application, whereas all invoices are relating to either capital goods or input services. * that the Appellant submits that the Department has erred in analyzing the invoices which are related to inputs and not capital goods or input services. The Appellant submits that considering the nature of business i.e. mining and selling of silica sand, various tools and parts/spares of the machinery requires replacements on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of Section 2(19) of CGST Act and hence would be considered as 'inputs' in terms of Section 2(59) of CGST Act. * that in this regard, the Appellant submits that the Government has also clarified the issue of interpretation/treatment of term 'inputs' in the context of refund claims, vide Circular No. 79/53/2018-GST, dated December 31, 2018 wherein under para 12 and para 13, it has been explicitly clarified that any expenditure on which has been charged as a revenue expense in the books of account, cannot be held to be capital goods. Relevant part of paras 12 and 13 of the said Circular has been excerpted below for the easy reference : Misinterpretation of the meaning of the term "inputs"; 12 ..... ..... There are also instances where stores and spares charged to revenue are considered as capital goods and therefore the ITC availed on them is not included in Net ITC, even though the value of these goods has not been capitalized in his books of account by the claimant. 13. In relation to the above, it is clarified that the input tax credit of the GST paid on inputs shall be available to a registered person as long as he/she uses or intends to use such inputs f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voices/documents/account-ing treatment of the expenses and hence could not be able to establish the fact that the invoices were actually pertains to input and not capital goods or input services. The Appellant vehemently submits that the impugned order is liable to be set aside on this ground alone without even going into the merits. * that impugned order is arbitrary/without basis and in complete violation of the principles of natural justice. The appellant has also placed reliance on the following decisions :- M/s. Inbios Petroleum Limited v. CTO, Kerala [2012-ST2-GJX-556-MAD] M/s. Prism Metal Corporate v. State of Maharashtra [2014-ST1-GJX-0352-STMAH], M/s. Bharat Construction Company v. Commr. of Commercial Tax, [2013-ST2-GJX-1046-MP], Unit Construction Company v. Commissioner of Commercial Taxes [2014-ST-2GJX-1296-ORI] M/s. Kediya Industries v. Commr. of C.Ex., Ahmedabad, 2010 (254) E.LT. 121 (Tri. - Ahmd.). 4. Personal hearing in the case was held on 21-8-2020 at 1330 Hrs. through video conference, wherein, Shri Vishal Jain, Chartered Accountant on behalf of the appellant, appeared for personal hearing through video conference and explained the case in detail a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has not been claimed in their revised computation whereas, the adjudicating authority has treated the items as capital goods and rejected the claim. 7. Section 54(3) of the CGST Act, 2017 reads as under : (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period : Provided that no refund of unutilized input tax credit shall be allowed in cases other than - (i) zero-rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council : Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty : Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both claims refund of the integrated tax paid on such supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to a registered person as long as he/she uses or intends to use such inputs for the purposes of his/her business and there is no specific restriction on the availment of such ITC anywhere else in the GST Act. The GST paid on inward supplies of stores and spares, packing materials etc., shall be available as ITC as long as these inputs are used for the purpose of the business and/or for effecting taxable supplies, including zero-rated supplies, and the ITC for such inputs is not restricted under Section 17(5) of the CGST Act. Further, capital goods have been clearly defined in Section 2(19) of the CGST Act as goods whose value has been capitalized in the books of accounts and which are used or intended to be used in the course or furtherance of business. Stores and spares, the expenditure which has been charged as a revenue expense in the books of accounts, cannot be held to be capital goods". 12. The said clarification was reiterated vide Para 62 of the Circular No. 125/44/2019-GST, dated 18-11-2019. "It has been represented that on certain occasions, departmental officers do not consider ITC on stores and spares, packing materials, materials purchased for machin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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