In a recent ruling, the Tripura High Court held that a refund for unutilized Input Tax Credit ( ITC ) can only be claimed under specific circumstances prescribed under Section 54 of the Central Goods and Service Tax ( CGST ) Act, 2017.
Sterlite Power Transmission Ltd., the petitioner engaged in the business of erecting transmission lines, filed a writ petition challenging the rejection of a refund claim of Rs. 78,20,202. The petitioner’s electronic credit ledger was blocked by the SGST authorities on March 20, 2021, citing discrepancies in tax returns.
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The blockage was lifted on July 7, 2021. The petitioner sought a refund for the cash ledger payment, applying under the “Others” category on July 14, 2021. The claim was rejected by the Assistant Commissioner of CGST stating that the law does not permit refunds of unutilized ITC under such circumstances as per Circular No. 125/44/2019-GST.
The petitioner submitted that the ITC blockage in March 2021 forced the payment of tax liabilities using the electronic cash ledger and the unblocking of ITC made the refund claim valid.
On appeal, the appellate authority upheld the rejection. The petitioner approached Tripura High Court arguing that the blocked ITC compelled an excess payment which should be refunded because they had no further business operations to utilize the ITC.
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The department argued that the refund did not satisfy the conditions under Section 54(3) of the CGST Act which permits refunds only for zero-rated supplies or accumulated ITC due to input-output tax rate differences. They also submitted that the petitioner could utilize the unblocked ITC for future liabilities.
The bench comprising Chief Justice Aparesh Kumar Singh and Justice Biswajit Palit observed that there was no duplication of tax payments, and the petitioner’s refund claim did not meet the statutory requirements. The court explained that the ITC remained available for future utilization and that the petitioner’s claim was based on a misconception of the law.
The court ruled that the petitioner’s claim for a refund was inadmissible and directed the petitioner to utilize the unutilized ITC for future tax obligations. The court dismissed the writ petition and upheld the appellate authority’s decision.
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