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.

ORDER :

Dinesh Mehta, J. 

1. By way of the writ petition in hands, the petitioner has challenged the action of the respondents who have not decided its application for refund of the tax paid under State Goods and Service Tax (hereinafter referred to as ‘the SGST’), on raw materials such as Mustard Oil etc, purchased upto 18.07.2022.

2. The petitioner-firm is engaged in manufacture of edible oil purchased mustard oil etc., falling under HSN Code 1514 on payment of applicable GST.

3. A Notification No. 09/2022-Central Tax (Rate) dated 13^th July, 2022 was issued providing that accumulated Input Tax Credit shall not be allowed in relation to various items including HSN Entry No. 1514 which was made enforceable from prospective date i.e. 18.07.2022.

4. On the ground that its products fall into the category of inverted duty structure, the petitioner has filed application(s) for refund of the Input Tax Credit as per section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act of 2017’) for the period(s) prior to 18.07.2022.

5. Mr. Sanjeev Johari, learned Senior Counsel appearing for the petitioner submitted that since the notification dated 13^th July, 2022 was brought into effect from 18.07.2022, all the assessees including the petitioner were entitled for claiming refund of Input Tax Credit on the goods purchased upto 18.07.2022 and yet, the respondents have not decided petitioner’s applications for claim of refund, which were filed on 04.01.2023.

6. He argued that indisputably, the limitation for filing the application for refund is two years and, hence, any application filed after 18.07.2022 subject to outer limit provided in section 54 of the Act of 2017 deserves to be allowed, subject ofcourse on fulfillment of the requisite conditions or verification.

7. Learned Senior Counsel further submitted that the respondents have been sitting tight over the matter and they have neither accepted the petitioner’s application for refund nor have they rejected the same, perhaps in light of the Circular No. 181/13/2022-GST dated 10.11.2022, which Circular itself is illegal, as held by Andhra Pradesh High Court.

8. Mr. Rajat Arora, learned counsel appearing for the Central Goods and Service Tax Department having filed the reply, submitted that by virtue of clarificatory Circular dated 10.11.2022 issued by the Central Board of Indirect Taxes and Customs (hereinafter referred to as ‘the CBITC’), the petitioner is not entitled for the refund as claimed.

9. Mr. Mahaveer Bishnoi, learned Additional Advocate General appearing for the State also adopted the argument advanced by Mr. Rajat Arora.

10. Heard learned counsel for the parties.

11. Section 5(3) of the Act of 2017 provides for a situation where the Input Tax Credit available in the electronic cash 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 final product. This system is popularly known as “inverted duty structure”.

12. It is not in dispute that by way of Notification dated 13.07.2022, the goods purchased by the petitioner were placed in the negative list for claiming Input Tax Credit on account of inverted duty structure and the said notification came into force from 18.07.2022.

13. Since, the notification has been made enforceable on 18.07.2022, the manufacturers including the petitioner cannot be treated disentitled from claiming refund of the Input Tax Credit of the tax, which they have paid up to 18.07.2022.

14. It is only on account of the Circular dated 10.11.2022, the respondents have taken a stance that the petitioner can claim refund only if the application had been filed prior to 18.07.2022. It will not be out of place to reproduce the relevant part of the Circular dated 10.11.2022 issued by the CBITC, which reads as under:-