GST ITC Refund Claim on Inputs of Electric Vehicle Manufacturing: Orissa HC directs Refund of Balance Claim Amount [Read Order]

The Orissa High Court, has recently, in a writ petition filed before it, with regard to Goods and Services Tax (GST) Input Tax Credit (ITC) refund claim on inputs of electric vehicle manufacturing, directed the refund of balance claim amount.

The aforesaid observation was made by the Orissa High Court, when a writ petition was filed before it by the petitioner, seeking to quash the order dated 02.08.2022, by which the Deputy Commissioner of State Tax, CT & GST Circle, Bhubaneswar, had rejected the refund application of the petitioner in Form GST-RFD-06 under Annexure-10, as well as the refund rejection order dated 02.08.2022 for the period from December, 2021 to January, 2022 in Annexure-11.

With the petitioner having prayed before the High Court, to issue direction to the opposite party no.1 to grant refund, as per refund application in Form GST-RFD-01 under Annexure-2, on account of Input Tax Credit accumulated due to Inverted Tax Structure and further to issue direction to opposite party no.1 to pay interest on the refundable amount, the factual matrix of the case, in brief, was that the petitioner, a holder of Goods and Services Tax Registration Number 21AACCO7477Q1ZU under the CGST/OGST Act, was engaged in the business of manufacture of e-vehicles in various processes including chassis punching, colouring, wiring etc., and subsequent supply thereof.

The petitioner procured domestically and imports various items with different HSN, which were integral part and parcel of manufacturing of e- vehicles, among which the inputs (goods) for manufacturing of e-vehicles were procured at various rates, such as, 5%, 12%, 18% and 28% with separate HSN, whereas the outward supply was of the new product, namely, ‘e-vehicles’, with different HSN on which GST is leviable at 5%.

As a result of such reduced rate of the GST on outward supply of goods, i.e., e-vehicles, the Input Tax Credit ITC) got accumulated in the hands of the petitioner, which was legally and statutorily termed as ‘Inverted Duty Structure’. Further, the petitioner also procured and supplied spare parts chargeable to GST at 18% and 28%, to its channel partners (dealers), as they were required to provide warranty of their products.

As the input and output rate of GST on spare parts were the same, no ITC got accumulated in respect of the spare parts, and hence, the supply of spare parts was not treated as inverted sales.

During the tax period from December 2021 to January 2022, the petitioner had filed return in GSTR-1 in respect of details of outward supplies of goods or services and also, the return in Form GSTR3B, in respect of details outward supplies and inward supplies of goods or services.

In accordance with the regular practices followed by the petitioner for the previous tax periods, i.e., filing of periodic refund application, it filed refund application on 02.06.2022, in respect of accumulated unutilised ITC of the input goods in Form GST-RFD-01 to the tune of Rs.1,57,92,298.00 for the period December 2021 to January 2022, and it was issued with receipt of refund application, i.e., Refund ARN Receipts.

On 22.06.2022, the petitioner submitted all the relevant documents in support of its refund application, claiming a refund of Rs.1,57,92,298.00 for the period December 2021 to January 2022, in strict adherence to column no.5 of CBIC Circular No.125/44/2019-GST, dated 18.11.2019 and in the manner as provided in Rule-89(5) of the CGST Rules.

Thereafter, the petitioner appeared before the opposite party no.1 on 22.06.2022 and submitted all the relevant documents. However, although the petitioner submitted all the documents and also made compliance of column no.5 under Annexure-A and B appended to the CBIC circular under Annexure-4, it was called upon to show cause for rejection of application for refund in Form-GST-RFD-08 dated 28.06.2022 in respect of refund application for the period December, 2021 to January, 2022, by calling upon the petitioner to submit the documents, as prescribed in column no.5 of the Circular No.125/44/2019-GST and the books of accounts for the respective tax periods ,physically by fixing the date to 13.07.2022.

On 06.07.2022, the petitioner appeared before opposite party no.1 and filed Form-GST-RFD-09, in respect of refund application for the period December, 2021 to January, 2022, along with all the requisite/supporting documents, with a show cause reply praying therein for necessary order granting of refund on account of ITC accumulated due to Inverted Tax Structure.

However, though the petitioner submitted all the documents in physical mode before issuance of show cause notice in RFD-08, which were uploaded along with Form-GST-RFD-09, it was caused appearance along with its books of account before opposite party no.1 on 13.07.2022. These books of account were examined in detail and the petitioner’s authorized person explained the books of account in terms of column no.5 of the CBIC Circular bearing No. 125/44/2019-GST in connection with Section- 54 (3) read with Rule-89 (5) appertaining to refund on account of inverted duty structure.

On 28.07.2022, the authorised person of the petitioner's company received a call from opposite party no.2 for submission of soft copies of data, which were uploaded and submitted as per column no.5 of the CBIC circular and accordingly, on the very same day, the petitioner submitted all the soft copies of the data for verification of opposite party no.2.

Then, the opposite party no.2 called upon the petitioner on 29.07.2022 through e-mail, wherein the petitioner was asked to provide the documents within 2 days of the service of the letter, in connection with the refund application submitted under Section-54(3) of CGST/OGST Act, for the period from December, 2021 to January, 2022. And in compliance thereof, the petitioner filed its reply on 30.07.2022 to the questionnaire given by producing the books of account before opposite party no.2, who examined the same.

By so submitting, the petitioner prayed for the opposite party, for allowing the refund application, as early as possible, in the light of the statutory provision. But the petitioner was issued and served with FormGST-RFD-06 dated 02.08.2022, whereby its refund application dated 02.06.2022 for the period from December, 2021 to January, 2022 was rejected by opposite party no.1 on the ground that it had not submitted the entire books of account.

And it is in this situation that the petitioner has filed the instant writ petition before the Orissa High Court.

Hearing the opposing contentions of both sides as submitted by Mr. R.P. Kar, the counsel on behalf of the petitioner, and by Mr. Sunil Mishra, the Additional Standing Counsel appearing for CT & GST Department, the Bench of Justice Dr B.R Sarangi and Justice M.S Raman held:

“In view of facts and law, as discussed above, this Court directs the opposite parties to refund the balance amount, excluding Rs.5,18,230/- from out of total amount of Rs.2,22,97,228/-, to the petitioner pending final adjudication of the disputed amount in accordance with law.”

To Read the full text of the Order CLICK HERE

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