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TMI Blog2023 (12) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... te of tax on certain inputs being higher than the rate of tax, chargeable on bottled Liquid Petroleum Gas (hereafter 'LPG') - the petitioner's output supply. Thus, according to the petitioner, refund of unutilized ITC is not proscribed in terms of the proviso to Section 54(3) of the CGST Act. QUESTION TO BE ADDRESSED 3. The principal question that arises for consideration is whether in the given facts refund of accumulated ITC is proscribed by virtue of Clause (ii) of the proviso to Section 54(3) of the CGST Act. BRIEF FACTS 4. The petitioner, is a public sector undertaking and is, inter alia, engaged in the business of bottling and distributing LPG for domestic as well as industrial use. 5. The principal source of LPG is oil refineries processing crude oil. LPG vapour is produced in the oil refineries during the refining process. It is stated that LPG consists of various hydrocarbons such as propylene, butane and butylene. The said hydrocarbons are liquefied on compression. LPG is transported in bulk through road and rail to the petitioner's bottling plant. It is unloaded and compressed into liquid form and the same is refilled and bottled in cylinders. The cylinders are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner's claims were not accepted. The Adjudicating Authority rejected the applications filed by the petitioner for various tax periods by respective Orders-in-Original. A tabular statement indicating the details of the Orders-in-Original (five in number) denying refund for the respective tax-periods is set out below: "S.No. Date of Order-in-Original Tax Period Refund Amount (in Rs.) 1 11.08.2022 October, 2018 to December, 2019 8,63,48,590.00 2 11.08.2022 January, 2020 2,03,31,308.00 3 11.08.2022 February, 2020 2,21,91,912.00 4 24.08.2022 July, 2020 58,46,517.00 5 24.08.2022 August, 2020 1,22,98,882.00" 11. The petitioner filed separate appeals against the respective Orders-in-Original passed by the Adjudicating Authority before the Appellate Authority. However, the said appeals were rejected by a common Order-in-Appeal No. 19-23/2023-24 dated 21.04.2023 (hereafter the 'impugned order') which is assailed in the present petition. REASONS AND CONCLUSION 12. At the outset, it is material to note that in terms of Section 112 of the CGST Act, the petitioner has a remedy of appealing the impugned order before the Appellate Tribunal. However, the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases where the input and the output supplies are the same." 6.1 In this context, the appellant submitted that the above clarification is not applicable in their case as it is applicable only in the cases where there is accumulation of ITC due to reduction in tax rate by the Government i.e. same goods were procured at different tax rates at two different points of time which resulted in accumulation of ITC to the recipient of such goods. 6.2 On going through the relevant portion of Circular No. 135/05/2020-GST dated 31.03.2020, I find that though, there is force in the submission made by the appellant that the clarification is applicable in those cases where accumulation of ITC was due to reduction in tax rate by the Government yet these clarifications applicable upon them which is evident from the last sentence of para 3.2 of the above Circular which clearly clarifies that refund of accumulated ITC under clause (ii) of subsection (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same. In the appellant's case, the adjudicating authority observed that the major input used by the appellant in LPG (HSN 2711) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued under Section 168(1) of the CGST Act. 18. The question whether IOCL's claim for refund for accumulated unutilised ITC is admissible, has to be determined with reference to the express provisions of Section 54 of the CGST Act. In terms of Section 54(1) of the CGST Act, any person claiming refund of tax and interest paid on such tax or any amount paid by him, is entitled to make an application for refund before expiry of two years from the relevant date, which is defined under Explanation (2) to Section 54 of the CGST Act. Sub-section (3) of Section 54 of the CGST Act provides that subject to provisions of Sub-section (10) of Section 54 of the CGST Act, a person may claim refund of unutilised ITC at the end of any tax period. However, the proviso to Sub-section (3) to Section 54 of the CGST Act restricts the entitlement to refund of unutilised ITC. It expressly provides that no refund of unutilised ITC would be allowed except in cases covered under Clauses (i) and (ii) of the proviso to Section 54(3) of the CGST Act. Under Clause (i) of the proviso to Section 54(3) of the CGST Act, refund of ITC is available in cases of zero rated supplies made without payment of tax. In terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clauses (i) and (ii). The intent of Parliament is evident by the use of a double - negative format by employing the expression "no refund" as well as the expression "in cases other than." In other words, a refund is contemplated in the situations provided in clauses (i) and (ii) and no other. To put it differently, the first proviso can be recast, without altering its meaning to read that a refund of unutilised ITC shall be allowed only in the cases governed by clauses (i) and (ii). ..." 20. The petitioner's claim for refund is founded on Clause (ii) of the proviso to Section 54(3) of the CGST Act. According to the petitioner, the rate of tax on certain inputs is higher than the tax paid on outputs (bottled LPG). Resultantly, the petitioner has been unable to fully utilise the ITC on its inputs. 21. There is no controversy or dispute that the petitioner uses various items in production of bottled LPG, which include accessories required for the purposes of safety. Undisputedly, the items and accessories as specified are essential for production of the bottled LPG and making it suitable for retailing. The said items are chargeable to varying rates of GST. A tabular statement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on main input is higher than the rate of tax on the principal output. 25. It is necessary to bear in mind that one of the principal objects of enacting the CGST Act was to address the cascading effect of taxes as the taxes levied by the Central Government and State Governments were not available for being set off for payment of other taxes. It is clear that the legislative intent behind grant of refund of unutilised ITC that has accumulated on account of inverted tax structure is to confine the tax to the tax on the output supplies at the rate so fixed. In view of the plain language of proviso to Sub-section (3) of Section 54 of the CGST Act, the Revenue's contention that the petitioner is not entitled to refund of unutilised ITC as the rate of bulk LPG and bottled LPG is the same, is unsustainable. It is impermissible to disregard the rate of tax on other inputs. 26. As stated at the outset, a taxpayer's claim for refund, which is admissible under Section 54 of the CGST Act, cannot be denied on account of a Circular issued by CBIC under Section 168(1) of the CGST Act. Plainly, if the Circular No. 135/05/2020 is read in the manner as contended by the Revenue, it would be in confl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine whether such clarification falls foul of Section 54(3) of the CGST Act as it is apparent that the same is inapplicable in the facts of the present case. The clarification seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time. It does not seek to address any issue where the principal input and output is the same. In terms of the Circular 135/5/2020, if the rate of tax on input and output is the same and ITC is accumulated on account of different rates being applicable at different points of time, the case would not fall under Clause (ii) of the proviso to Sub-section (3) of Section 54 of the CGST Act. The use of the words, the input and output being the same, is essentially in the context of the rate on input and output being the same. 28. Circular No. 135/05/2020 has no application where ITC, refund of which is sought, has accumulated on account of rate of taxes on certain inputs being higher than tax chargeable on the output supply, notwithstanding that the one of the main input and output is chargeable at the same rate of tax. 29. There may be myriad of circumstances where the ITC accumulates not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be instances where the input and output supplies are the same. On the contrary, it can be said that the legislature consciously did not create any distinction for allowing refund in all cases where the input tax is more than the output tax. The said benefit is applicable to all similar cases." 32. In Baker Hughes Asia Pacific Limited v. Union of India 2022 SCC OnLine Raj 1061, the Hon'ble Rajasthan High Court held that in cases where the refund of accumulated ITC arises on account of the inverted duty structure, the same could not be denied on the ground that the input and output supplies were the same. 33. In BMG Informatics (P.) Ltd. v. The Union of India and Ors. 2021 SCC OnLine Gau 2570, the Hon'ble Gauhati High Court held that Circular No. 135/05/2020 is unsustainable and is liable to be ignored. 34. Mr Tripathi, learned counsel appearing for Revenue had sought to distinguish the aforesaid decision on the ground that in the said cases, there was a difference in the rate of tax chargeable on input and output even though the input and output supplies were the same. He contended that therefore, in such circumstances, refund would be admissible under Clause (ii) to proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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