The Rajasthan High Court comprising Justice Sandeep Mehta and Justice Vinod Kumar Bharwani has held that the GST Circular regarding the refund of accumulated ITC under section 54(3)(ii) would not be applicable in cases where the input and the output supplies are the same, is contrary to the provisions of the Central GST Act.
The petitioners, M/s Baker Hughes Asia Pacific Limited approached the High Court challenging the order denying refund to them by the GST department.
Noting that Section 54(3)(ii) of the CGST Act is absolutely unambiguous and does not carve out any exception that Input Tax Credit under the Inverted Tax Structure would not be applicable where the input and the output goods are the same, the division bench ruled that “for the purpose of clarification, the Government of India, Ministry of Finance, Central Board of Indirect Taxes and Customs issued a notification dated 18.11.2019 para No.59 whereof reproduced infra, which makes it clear that the supplier who supplies goods at a concessional rate to companies involved in specified projects is entitled to refund under the inverted tax structure as per Clause (ii) of first proviso to Sub-section (3) of Section 54 of the CGST Act. The circular dated 31.03.2020 (Annexure-2) on the strength whereof the petitioner’s claim for ITC refund has been rejected, clarifies 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 output supplies are the same.”
“Clause (ii) of Sub-Section (3) of Section 54 of the CGST Act does not indicate that ITC would be admissible only if the goods supplied had been subjected to some process. The provision allows refund of credit accumulated on account of supplies and does not mention that the credit could be claimed only if the supplier has made any value addition/ enhancement to the goods supplied. The very purpose of fixing the rate of GST at 2.5% each towards CGST/RGST on goods supplied for execution of petroleum projects was introduced with the object of promoting the oil and gas exploration activities. The Central Government Notification dated 28.06.2017, in unambiguous terms stipulates that upon being satisfied that it is necessary in the public interest to do so, on the recommendations of the council, intra State supply of goods, was being exempted/taxed at lower tax rates,” the High Court said.
While concluding, the High Court held that the circular dated 31.03.2020, being a subordinate legislation, is repugnant and conflicting to the parent legislation i.e. Section 54(3)(ii) of the CGST Act and hence, the same cannot be applied to oust the legitimate claim for accumulated ITC refund filed by the petitioner. Otherwise also, the claim for refund of ITC filed by the petitioner was for a period prior to issuance of the circular dated 31.03.2020.Subscribe Taxscan Premium to view the Judgment
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