Kerala HC allows Refund of ITC Accumulated on Account of Payment of Higher Rate of Tax on Input Supplies received for Bottling of LPG for Domestic Supply [Read Order]

The Kerala High Court allowed refund of input tax credit ( ITC ) accumulated on account of payment of higher rate of tax on input supplies received for bottling of LPG.

The same petitioner has filed these writ petitions impugning the orders rejecting the claims of the petitioner for refund of accumulated input tax credit under Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and also Circular No.135/05/2020-GST dated 31.3.2020 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs, Ext.P7 in WP(C) No.26112/2023.

The petitioner moved applications under Section 54 of the CGST Act for refund of the accumulated ITC in respect of the LPG supplies to domestic customers after bottling in cylinders. However, the said applications/claims of the petitioner were rejected on the basis of Circular No.135/05/2020-GST dated 31.3.2020.

The counsel for the petitioner submitted that the aforesaid Circular, which negates the claim for refund of accumulated ITC under Section 54(3)(ii) of the CGST Act on the ground that though the tax on the outgoing supplies is less than the tax on the input supplies, both the input and output supplies are one and the same, has come up for consideration before different High Courts, including the High Courts of Gauhati, Calcutta, Rajasthan and Delhi.

A Single Bench of Justice Dinesh Kumar Singh observed that “The present writ petitions are allowed and the petitioner is held to be entitled for refund of the credit accumulated on account of payment of higher rate of tax, i.e. @ 18%, on input supplies received by him for bottling of LPG for domestic supply, when the rate of tax is only @ 5%.”

“The matter is remanded back to the assessing authority to calculate the refund amount of accumulated ITC admissible to the petitioner for the aforesaid periods on account of higher rate of tax having been paid by the petitioner on input supplies of LPG for bottling and supplying in the domestic market” the Court noted.

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