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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
R. RAGHUNANDAN RAO, MAHESWARA RAO KUNCHEAM, JJ.
M/s. Priyanka Refineries Private Limited - Petitioner
Versus
Deputy Commissioner St and Others – Respondents
Writ Petition Nos. 5253 Of 2023, 12485, 12487 & 12488 Of 2024
Decided On : 29-01-2025
(A) Central Goods and Services Tax Act, 2017 - Section 54 - Input tax credit - Petitioners engaged in manufacturing edible oils challenged rejection of refund applications based on Circular No.181/13/2022-GST - Court held that input tax credit accrued prior to 18.07.2022 can be claimed despite subsequent restrictions - Circular struck down for imposing blanket prohibition on applications post-18.07.2022. (Paras 3, 20, 21)
(B) Inverted Duty Structure - The court recognized the principle that when the tax rate on inputs exceeds that on outputs, a refund of input tax credit is permissible under Section 54, provided the claim is made within two years. (Paras 4, 14)
Facts of the case:
The petitioners, engaged in manufacturing edible oils, sought refunds for input tax credits on raw materials taxed at higher rates than their final products, which were rejected based on a circular prohibiting such claims after 18.07.2022.
Findings of Court:
The court found that the circular's restriction was illogical and not supported by law, allowing claims for input tax credits accrued before the notification's effective date.
Issues: The main issues were whether the circular unlawfully restricted refund applications and the interpretation of the notifications regarding eligibility for refunds.
Ratio Decidendi: The court ruled that the notification's prospective application does not bar claims for input tax credits accrued prior to its effective date, emphasizing the need for logical consistency in tax law interpretation.
Result: Writ Petitions allowed.
Order :
As all the four Writ Petitions relate to the same issues, they are being disposed of, by way of a common order.
2. The petitioners are engaged in the business of manufacturing, distributing and branding of edible oils and specialty fats in India. In the process of the manufacture of these products, the petitioners had sourced various raw materials on which GST had already been paid. It so transpired that the rate of GST payable on edible oils and specialty fats was lower than the rate of tax levied on the inputs or raw materials sourced by the petitioner.
3. Section 5 (3) of the CGST Act provides for a situation where the input tax credit available in the ledger of a registered person can be refunded, if the rate of tax on the final product is lower than the rate of tax payable on the inputs used for manufacture of such a final product. This system is popularly known as ‘inverted duty structure’.
4. The petitioners, on the ground that their products fall into the category of inverted duty structure, had filed applications for refund of the input tax credit, under Section 54 of the CGST Act, for the periods prior to 18.07.2022. These applications were rejected by the 1st respondent, in the respective writ petitions, by way of various orders. The details are given below.
| Sl. No | W.P.No. | Refund Applications details | Period | Impugned Order | Amount |
| 1. | 12485/2024 | ARN.No. AA3701240229 62F dated 23.01.2024 | August 2020 | Order No.GEXCOM/RFD/G ST/3307/2024-ADMN- CGST-DIV-NLR- COMMRTE-GUNTUR dated 22.03.2024 | Rs.79,68,094/- |
| 2. | 12487/2024 | ARN No.AA37012402 2458E Dated 23.01.2024 | June 2020 | Order No.GEXCOM/RFD/G ST/3307/2024-ADMN- CGST-DIV-NLR- COMMRTE-GUNTUR dated 22.03.2024 | Rs.6,48,05,706/- |
| 3. | 12488/2024 | ARN No.AA37022402 5178D Dated 21.02.2024 | December, 2020 | Deficiency Memo dated 06.03.2024 | Rs.9,91,69,602/- |
| 4 | 5253/2023 | AA3701230302 42X dated 20.01.2023 | January- February, 2021 | Deficiency Memo dated 02.02.2023 | Rs. 64, 868/- |
| AA3701230302 80X dated 20.01.2023 | May-June, 2021 | Deficiency Memo dated 02.02.2023 | Rs. 7,75,206/- | ||
| AA3701230303 26P dated 20.01.2023 | July,2021 | Deficiency Memo dated 02.02.2023 | Rs. 5,01,542/- | ||
| AA3701230303 41X dated 20.01.2023 | August,20 21 | Deficiency Memo dated 02.02.2023 | Rs. 3,33,538/- | ||
| AA3701230303 61V dated 20.01.2023 | September ,2021 | Deficiency Memo dated 02.02.2023 | Rs. 1,21,419/- | ||
| AA3701230303 87H dated 20.01.2023 | October,2 021 | Deficiency Memo dated 02.02.2023 | Rs. 4,86,540/- | ||
| AA3701230304 13U dated 20.01.2023 | November, 2021 | Deficiency Memo dated 02.02.2023 | Rs. 6,22,609/- | ||
| AA3701230304 36M dated 20.01.2023 | December, 2021 | Deficiency Memo dated 02.02.2023 | Rs. 4,43,280/- | ||
| AA3701230304 71S dated 20.01.2023 | January, 2022 | Deficiency Memo dated 02.02.2023 | Rs. 4,09,289/- | ||
| AA3701230305 28H dated 20.01.2023 | February,2 022 | Deficiency Memo dated 02.02.2023 | Rs. 4,43,401/- | ||
| AA3701230305 28H dated 20.01.2023 | March,202 2 | Deficiency Memo dated 02.02.2023 | Rs. 4,49,230/- | ||
| AA3701230305 76G dated 20.01.2023 | April,2022 | Deficiency Memo dated 02.02.2023 | Rs. 6,07,552/- | ||
| AA3701230306 16K dated 20.01.2023 | May,2022 | Deficiency Memo dated 02.02.2023 | Rs. 3,36,538/- | ||
| AA3701230307 93G dated 20.01.2023 | June,2022 | Deficiency Memo dated 02.02.2023 | Rs. 3,04,488/- | ||
| AA3701230308 21P dated 20.01.2023 | July,2022 | Deficiency Memo dated 02.02.2023 | Rs. 7,06,377/- |
5. In all the rejection orders, the ground of rejection was that Circular No.181/13/2022-GST, dated 10.11.2022 had clarified that no application for refund, under Section 54 of the CGST Act, would be permissible, after 18.07.2022, in relation to the products of the petitioners. The petitioners have approached this Court, challenging the aforesaid orders of rejection as well as Circular No.181/13/2022-GST, dated 10.11.2022, apart from No.9/22-Central Tax (Rate), dated 13.07.2022.
6. Before going into the issues raised by the Petitioners, it would be necessary to set out some facts. Though, the general scheme of Section 54, provided for refund of such input tax credit, in cash, certain products were deemed ineligible for such benefit being given. The Central Government, from time to time, has been issuing noti
Input tax credits accrued before the effective date of a notification can be claimed despite subsequent restrictions, as clarified by the court.
The restrictions on refund of accumulated input tax credit under Notification No. 9/2022 apply prospectively only, allowing claims for periods prior to the notification while filed within the statuto....
Taxpayers are eligible for refunds of accumulated input tax credit even when input and output supplies are identical, as clarified through legislative amendments.
The main legal point established is that the statutory scheme of refund under Section 54(3) of the CGST Act, 2017 applies to cases of accumulation of unutilised input tax credit due to an inverted du....
The court affirmed that the right to claim Input Tax Credit refunds is unambiguous and cannot be restricted arbitrarily by circulars or notifications that infringe upon statutory rights.
The amendment to Rule 89(5) of the GST Rules is curative and clarificatory, applicable retrospectively to refund applications filed within two years under Section 54(1) of the GST Act.
The court ruled that the denial of a tax refund on grounds of limitation was wrong, emphasizing the principle of unjust enrichment, and clarified that the time limit of two years for refund applicati....
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