The judicial interpretations invalidating circulars that contradict statutory provisions emphasize the need for uniform GST application across jurisdictions.

ORDER

Heard learned counsel for the petitioner and learned Senior Penal Counsel for the respondent.

2. The petitioner is a manufacturer of cotton yarn, blended cotton yarn, etc., The petitioner had filed refund claim in Application Reference No.AA330124003736P dated 02.01.2024 under Section 54 (3) of the respective GST enactments read with Rule 89(1) of the GST Rules, 2017.

3. Since the petitioner was under Inverted Duty Structure, the refund claim of the petitioner has been rejected by the respondent by placing reliance on para 3.2 of CBEC Circular No.135/05/2020-GST bearing reference CBEC-20/01/06/2019-GST. Para 3.2 of the above Circular reads as under:

“3.2 It may be noted that the refund of accumulated ITC in terms clause (ii) of sub-section (3) of section 54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of sub-section (3) of section 54 of the CGST Act. It is hereby clarified that refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same.”

4. By the impugned order, the respondent has rejected the claim by the petitioner with the following observation:

“9. Further as per Circular No.135/05/2020 GST Dated the

31st March, 2020 in Para No.3.2 of 3 stipulated that refund of accumulated ITC in terms clause (ii) of sub-section (3) of section 54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of sub-section (3) of section 54 of the CGST Act. It is hereby clarified that refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same.

10. Whereas it appeared that the tax payer are manufacturing of 100% Cotton yarn, the input raw cotton is used. The rate of tax on input raw cotton which is used in the production of 100% Cotton yarn is 5% IGST or 2.5% CGST and 2.5% SGST and whereas the rate of tax on output goods 100% Cotton yarn is also 5% IGST or 2.5% CGST and 2.5% SGST. Hence it appeared that the output goods 100% cotton yarn does not fall under the Category of inverted duty structure for the purpose of claiming refund. Hence, GST refund of Rs.1,97,62,459/- filed, under the category of "Inverted Duty Structure" for the month of November, 2023 is liable to be rejected.

11. Taxpayer quoted only orders of High Court of other states in their written reply, not even mentioned a single order of High Court of Madras. Hence the matter is not come under the category of Res judicata. Accordingly, I pass the following order.

ORDER

I hereby reject the GST refund of Rs.1,97,62,459/- filed under the category of "Inverted Duty Structure" for the month of November, 2023, online through RFD- 01 vide ARN NO.AA330124003736P dated 02.01.2024 under Section 54 of Central Goods and Services Tax Act, 2017 read with Rule 89 of Central Goods and Services Tax Rules, 2017.”

5. The aforesaid Circular has already been struck down as ultravires of the provisions of the Act by the following Courts: