Taxpayers are entitled to refunds of unutilized input tax credits, including compensation cess, for zero-rated supplies under the GST framework when exported goods do not incur Cess.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. Abhay Y. Desai for the petitioners and learned advocate Ms. Hetvi H. Sancheti for respondents.

2. Since all these petitions pertain to refund claim of the same petitioner for different periods, they have been heard together and would be disposed of by this common judgment.

3. Rule returnable forthwith. Learned advocate Ms. Hetvi Sancheti waives service of notice of rule on behalf of the respondents.

4. For the sake of convenience facts are recorded from Special Civil Application No.9876 of 2025.

5. Brief facts of the case are that the petitioner no.1 company is engaged in the manufacture and sale of various chemical products including the supply of the said products to SEZ units as well as exports outside India. The petitioner is registered under the provisions of the Central/State Gods and Service Tax Act, 2017 (for short ‘the GST Act’) in the State of Gujarat.

6. In order to manufacture the finished products, the petitioner requires power in the form of electricity. Therefore, in October, 2020 the petitioner purchased coal from the market to generate its own captive power via the captive power plant for use in the manufacturing activity.

7. It is the case of the petitioner that section 8 of the Goods and Service Tax (Compensation to States) Act, 2017 (For short “the Cess Act”) provides for levy of Cess on the supply of coal at the rate of Rs.400/- per ton and therefore, the vendors supplying the coal to the petitioner charged the said levy and collected the Cess from the petitioner.

8. The petitioner company, therefore, availed the tax credit of the Cess charged on the inward supplies of coal and filed the refund claim of the accumulated Cess credit in respect of the zero-rated supplies made with payment of Integrated Goods and Service Tax (for short ‘IGST’). The petitioner availed the Cess credit amounting to Rs. 69,13,084/- on the inward supplies of coal in the GSTR-3B return filed for the month of October, 2020. The petitioner accordingly filed a refund application on 25.12.2021 under section 11 of the Cess Act, 2017 read with Section 16(3) of the IGST Act, 2017 as well as Section 54(3) of the GST Act along with Rule 89(4) of the CGST Rules, 2017 in FORM RFD 01 seeking the refund of the accumulated Cess credit amounting to Rs. 2,30,206/- which according to the petitioner is proportionate to the zero- rated supplies made with payment of IGST but without payment of Cess since the Cess is not leviable on the finished goods in question.

9. Respondent no.1 Additional Commissioner CGST & Central Excise Appeals, Surat issued a show cause notice in FORM RFD 08 dated 10.01.2022 seeking to reject the refund claim on the ground that the refund of the accumulated Cess credit can be claimed only in respect of zero- rated supplies made without payment of IGST and since the zero-rated supplies have been made with payment of IGST, the refund of the accumulated Cess credit would not be admissible.

10. The petitioner company responded against the impugned show cause notice stating that the zero-rated supplies made with payment of IGST but without payment of Cess as Cess is not leviable on the finished products, the same is required to be considered to be zero- rated supplies made without payment of Cess as far as the refund of the accumulated Cess credit is concerned and hence prayed to allow the refund claim.

11. Respondent no.1 passed the order in FORM RFD 06 dated 08.02.2022, rejecting the refund claim of the petitioner.

12. The petitioner company thereafter filed the appeal against the impugned refund rejection order before the respondent no.2 in accordance with Section 107(1) of the GST Act which came to be rejected vide order dated 28.02.2023, relying on the impugned circular No.45/19/2018-GST dated 30.05.2018 and Circular No.125/44/2019-GST dated 18.11.2019.

13. Petitioner company being aggrieved with the impugned orders have preferred the present petitions.

14. The issue involved in al