2022 (7) TMI 1023 - HC - GST

Constitutional Validity of para 3.2 of Circular No.135/05/2020-GST dated 31.03.2020 of the Central Board of Indirect Taxes and Customs - ultra vires Section 54(3)(ii) of the Central Goods and Services Tax Act 2017 or not - Refund of GST - HELD THAT - As per Circular No.173/05/2022-GST dated 06.07.2022 it has been clarified that in cases where the supplier is making supply of goods under a concessional notification and the rate of tax of output supply is less than the rate of tax on input supply (of the same goods) at the same point of time due to supply of goods by the supplier under such concessional notification refund of accumulated input tax credit on account of inverted structure as per clause (ii) of sub-section (3) of Section 54 of the CGST Act would be allowed in those cases where accumulation of input tax credit is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions. The respondent No.4 is directed to process the claim of refund of the petitioner in terms of Section 54 of the CGST Act. The said exercise shall be completed within a period of eight weeks from the date of receipt of a copy of this order - petition disposed off.

Summary

Issues:
Challenge to Circular No.135/05/2020-GST under Article 226 of the Constitution of India for being ultra vires Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017. Claim for refund of Rs.29,89,016.00 with interest under Section 54 of the CGST Act.

Analysis:
The petitioner filed a petition seeking a declaration that para 3.2 of Circular No.135/05/2020-GST is ultra vires Section 54(3)(ii) of the CGST Act and a direction for refund of a specific amount with interest. The respondents presented Circular No.173/05/2022-GST, dated 06.07.2022, clarifying refund provisions for accumulated input tax credit in cases of inverted tax structure due to concessional notifications. The circular allowed refunds where the rate of tax on output supplies is less than that on input supplies of the same goods, subject to certain conditions.

The new circular clarified that refunds for accumulated input tax credit are admissible in cases where the rate of tax on output supplies is lower than that on input supplies due to concessional notifications, provided that the goods or services are not excluded from refund eligibility. Respondents conceded that the petitioner would be eligible for a refund based on the new circular. Consequently, respondent No.4 was directed to process the petitioner's refund claim under Section 54 of the CGST Act within eight weeks from the date of the order.

The court disposed of the writ petition, and any pending miscellaneous applications were closed without any order as to costs. The judgment focused on the interpretation of provisions under the CGST Act and the validity of the circular in addressing refund claims related to inverted tax structures due to concessional notifications. The decision provided clarity on the eligibility criteria for refunds in such scenarios and directed the concerned authority to process the petitioner's refund claim accordingly.