9911796707
TMI Blog2025 (5) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of various petroleum products like petrol, diesel, LPG-Domestic and LPG (Non-Domestic), Furnace Oil, Lubes, Superior Kerosene Oil (SKO) - PDS and petrochemicals. Petitioner maintains terminals/depots for SKO, Bunker fuel and bottling plants for LPG products from where it is stored and then supplied to respective customers. It is stated that LPG consists of various hydrocarbons such as Butane and Propane, which are imported. LPG is transported in bulk through road and pipelines to the petitioner's bottling plant. It is unloaded and bottled in cylinders. The cylinders are thereafter sealed and safety valves are fixed. The said cylinders are then distributed to customers. 2.1 It is contended that the goods supplied by the petitioner attract multiple rates of GST. It supplies LPG-Domestic, Bunker Fuel (Furnace Oil), Superior Kerosene Oil (SKO)-PDS which attract GST @ 5% and LPG Non-Domestic, Auto LPG, Lubricants, Petrochemicals etc. which are chargeable to GST @ 18%. In supplying the products that attract GST @ 5%, certain inputs are used which attract GST @ 5% or more, as tabulated below: Outward Supplies Major Inputs Furnace Oil/Bunker Fuel - 5%, (HSN: 271019) Furnace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority, petitioner is before this Court by way of the present petitions. 3. Heard learned Senior counsel for the petitioner and learned counsel for the respondent-revenue and perused the material on record. 4. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner would elaborate his submissions as under; * Section 54(3)(ii) of the CGST Act does not proscribe/forbid the grant of refund where the input and the output are the same. It is submitted that clause (ii) of proviso to sub-section (3) of Section 54 of the CGST Act does not contemplate comparing rate of tax on the principal input with the rate of tax chargeable on the principal output supply. There is neither any reason nor any scope to further confine the refund of unutilised ITC only to the cases where the rate on main input is higher than the rate of tax on the principal output as held by the Delhi High Court in the petitioner's own case in Indian Oil Corporation Ltd., vs. Commissioner of CGST - 2023(13) Centax 228 (Del). * It is submitted that where there are multiple inputs attracting different rates of tax as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequential interest on refund in terms of Section 56 of CGST Act, 2017 in that payment of interest under Section 56 of the CGST Act being statutory in nature is automatically payable in favour of the petitioner in case refund is not made within 60 days from the date of receipt of application. 4.1 In support of his submissions, learned Senior counsel placed reliance upon the following decisions: i) Indian Oil Corporation Ltd vs Commissioner of CGST - 2023(13) Centax 228 (Del); ii) Suchitra Components Ltd vs CCE, Guntur 2006(12) SCC 452; iii) K.P. Varghese Vs Income Tax Officers (1981) 131 ITR 597 (SC); iv) Baker Hughes Asia Pacific Ltd vs UOI 2022 (140) Taxmann.com 326 (Raj); v) Shivaco Associates vs Joint Commissioner of State Tax, Directorate of Commercial Taxes 2022 (59) GSTL 389 (Cal)(Para 16,17,26); vi) BMG Informatics (P) Ltd vs UOI 2021 (130) Taxmann.com 182 (Gau); vii) Malabar Fuel Corporation vs ACCT & CE 2024 (15) Centax 153 (Ker); viii) MO Industries vs UOI 2024-TIOL 1245 HC RAJ GST ; ix) Eveready Spinning Mills P Ltd vs ACCT 2024 TIOL 1207 HC MAD GST; x) Ranbaxy Laboratories Ltd vs UOI 2012 (27) STR 193 (SC); xi) Raghav Ventures vs Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r claims refund of the integrated tax paid on such supplies. (4) The application shall be accompanied by- (a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and (b) such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person: Provided that where the amount claimed as refund is less than two lakh rupees, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person. (5) If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may- (a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be; (b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law. Explanation.--For the purposes of this sub-section, the expression "specified date" shall mean the last date for filing an appeal under this Act. (11) Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine. (12) Where a refund is withheld under sub-section (11), the taxable person shall, notwithstanding anything contained in section 56, be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of-- (i) receipt of payment in convertible foreign exchange "or in Indian rupees wherever permitted by the Reserve Bank of India", where the supply of services had been completed prior to the receipt of such payment; or (ii) issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice; (d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction; "(e) in the case of refund of un utilized input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises;" (f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof; (g) in the case of a person, other than the supplier, the date of receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for their exclusion from refund of accumulated ITC under the said clause." 9. As rightly contended by the learned Senior counsel for petitioner, the Circular No.135/05/2020-GST dated 31.03.2020 was issued with two restrictions viz., the input and output being the same in such cases, though attracting different tax rates at different points in time, would not be covered under 54(3)(ii) of CGST Act, 2017 and accumulated ITC under Section 54(3)(ii) of the CGST Act would not be applicable in cases where the input and the output supplies are the same. However, by way of substitution vide Circular No. 173/05/2022-GST dated 06-07-2022, the restriction that refund of accumulated credit on account of inverted duty structure, in case where input and output supplies are the same has been deleted. It is therefore clear that the petitioner is eligible to claim refund of inverted duty structure, even when input and output are same and consequently, the impugned orders passed by the respondent refusing to grant refund in favour of the petitioner deserves to be set aside and directions are to be issued to the respondent to grant refund in favour of the petitioner. 10. It is also significant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply. Thus, according to the petitioner, refund of unutilized ITC is not proscribed in terms of the proviso to Section 54(3) of the CGST Act. QUESTION TO BE ADDRESSED 3. The principal question that arises for consideration is whether in the given facts refund of accumulated ITC is proscribed by virtue of Clause (ii) of the proviso to Section 54(3) of the CGST Act. BRIEF FACTS 4. The petitioner, is a public sector undertaking and is, inter alia, engaged in the business of bottling and distributing LPG for domestic as well as industrial use. 5. The principal source of LPG is oil refineries processing crude oil. LPG vapour is produced in the oil refineries during the refining process. It is stated that LPG consists of various hydrocarbons such as propylene, butane and butylene. The said hydrocarbons are liquefied on compression. LPG is transported in bulk through road and rail to the petitioner's bottling plant. It is unloaded and compressed into liquid form and the same is refilled and bottled in cylinders. The cylinders are thereafter sealed and safety valves are fixed. The said cylinders are then distributed to customers. 6. Once the seals of the cylinder are opene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplications filed by the petitioner for various tax periods by respective Orders-in- Original. A tabular statement indicating the details of the Orders-in-Original (five in number) denying refund for the respective tax-periods is set out below: Sl. No. Date of Order-in- Original Tax Period Refund Amount ( in. Rs. ) 1. 11-8-2022 October, 2018 to December, 2019 8,63,48,590.00 2. 11-8-2022 January, 2020 2,03,31,308.00 3. 11-8-2022 February, 2020 2,21,91,912.00 4. 24-8-2022 July, 2020 58,46,517.00 5. 24-8-2022 August, 2020 1,22,98,882.00 11. The petitioner filed separate appeals against the respective Orders-in-Original passed by the Adjudicating Authority before the Appellate Authority. However, the said appeals were rejected by a common Order-in-Appeal No.19- 23/2023-24 dated 21.04.2023 (hereafter the 'impugned order') which is assailed in the present petition. REASONS AND CONCLUSION 12. At the outset, it is material to note that in terms of Section 112 of the CGST Act, the petitioner has a remedy of appealing the impugned order before the Appellate Tribunal. However, the petitioner is unable to avail of the said remedy as the Tribunal is not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the same." 6.1 In this context, the appellant submitted that the above clarification is not applicable in their case as it is applicable only in the cases where there is accumulation of ITC due to reduction in tax rate by the Government i.e. same goods were procured at different tax rates at two different points of time which resulted in accumulation of ITC to the recipient of such goods. 6.2 On going through the relevant portion of Circular No.135/05/2020-GST dated 31.03.2020, I find that though, there is force in the submission made by the appellant that the clarification is applicable in those cases where accumulation of ITC was due to reduction in tax rate by the Government yet these clarifications applicable upon them which is evident from the last sentence of para 3.2 of the above Circular which clearly 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 the output supplies are the same. In the appellant's case, the adjudicating authority observed that the major input used by the appellant in LPG (HSN 2711) which was procured in bulk quantity from refiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 18. The question whether IOCL's claim for refund for accumulated unutilised ITC is admissible, has to be determined with reference to the express provisions of Section 54 of the CGST Act. In terms of Section 54(1) of the CGST Act, any person claiming refund of tax and interest paid on such tax or any amount paid by him, is entitled to make an application for refund before expiry of two years from the relevant date, which is defined under Explanation (2) to Section 54 of the CGST Act. Sub-section (3) of Section 54 of the CGST Act provides that subject to provisions of Sub-section (10) of Section 54 of the CGST Act, a person may claim refund of unutilised ITC at the end of any tax period. However, the proviso to Sub-section (3) to Section 54 of the CGST Act restricts the entitlement to refund of unutilised ITC. It expressly provides that no refund of unutilised ITC would be allowed except in cases covered under Clauses (i) and (ii) of the proviso to Section 54(3) of the CGST Act. Under Clause (i) of the proviso to Section 54(3) of the CGST Act, refund of ITC is available in cases of zero rated supplies made without payment of tax. In terms of Clause (ii) of the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ament is evident by the use of a double - negative format by employing the expression "no refund" as well as the expression "in cases other than." In other words, a refund is contemplated in the situations provided in clauses (i) and (ii) and no other. To put it differently, the first proviso can be recast, without altering its meaning to read that a refund of unutilised ITC shall be allowed only in the cases governed by clauses (i) and (ii) " 20. The petitioner's claim for refund is founded on Clause (ii) of the proviso to Section 54(3) of the CGST Act. According to the petitioner, the rate of tax on certain inputs is higher than the tax paid on outputs (bottled LPG). Resultantly, the petitioner has been unable to fully utilise the ITC on its inputs. 21. There is no controversy or dispute that the petitioner uses various items in production of bottled LPG, which include accessories required for the purposes of safety. Undisputedly, the items and accessories as specified are essential for production of the bottled LPG and making it suitable for retailing. The said items are chargeable to varying rates of GST. A tabular statement setting out the input supplies, their classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of tax on the principal output. 25. It is necessary to bear in mind that one of the principal objects of enacting the CGST Act was to address the cascading effect of taxes as the taxes levied by the Central Government and State Governments were not available for being set off for payment of other taxes. It is clear that the legislative intent behind grant of refund of unutilised ITC that has accumulated on account of inverted tax structure is to confine the tax to the tax on the output supplies at the rate so fixed. In view of the plain language of proviso to Sub-section (3) of Section 54 of the CGST Act, the Revenue's contention that the petitioner is not entitled to refund of unutilised ITC as the rate of bulk LPG and bottled LPG is the same, is unsustainable. It is impermissible to disregard the rate of tax on other inputs. 26. As stated at the outset, a taxpayer's claim for refund, which is admissible under Section 54 of the CGST Act, cannot be denied on account of a Circular issued by CBIC under Section 168(1) of the CGST Act. Plainly, if the Circular No.135/05/2020 is read in the manner as contended by the Revenue, it would be in conflict with the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification falls foul of Section 54(3) of the CGST Act as it is apparent that the same is inapplicable in the facts of the present case. The clarification seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time. It does not seek to address any issue where the principal input and output is the same. In terms of the Circular 135/5/2020, if the rate of tax on input and output is the same and ITC is accumulated on account of different rates being applicable at different points of time, the case would not fall under Clause (ii) of the proviso to Sub-section (3) of Section 54 of the CGST Act. The use of the words, the input and output being the same, is essentially in the context of the rate on input and output being the same. 28. Circular No.135/05/2020 has no application where ITC, refund of which is sought, has accumulated on account of rate of taxes on certain inputs being higher than tax chargeable on the output supply, notwithstanding that the one of the main input and output is chargeable at the same rate of tax. 29. There may be myriad of circumstances where the ITC accumulates notwithstanding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the input and output supplies are the same. On the contrary, it can be said that the legislature consciously did not create any distinction for allowing refund in all cases where the input tax is more than the output tax. The said benefit is applicable to all similar cases." 32. In Baker Hughes Asia Pacific Limited v. Union of India4, the Hon'ble Rajasthan High Court held that in cases where the refund of accumulated ITC arises on account of the inverted duty structure, the 2022 SCC OnLine Raj 1061 same could not be denied on the ground that the input and output supplies were the same. 33. In BMG Informatics (P.) Ltd. v. The Union of India and Ors.5, the Hon'ble Gauhati High Court held that Circular No. 135/05/2020 is unsustainable and is liable to be ignored. 34. Mr Tripathi, learned counsel appearing for Revenue had sought to distinguish the aforesaid decision on the ground that in the said cases, there was a difference in the rate of tax chargeable on input and output even though the input and output supplies were the same. He contended that therefore, in such circumstances, refund would be admissible under Clause (ii) to proviso to Sub-section (3) of Section 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the CGST Act does not proscribe/forbid the grant of refund where the input and the output are the same and that clause (ii) of proviso to sub- section (3) of Section 54 of the CGST Act does not contemplate comparing rate of tax on the principal input with the rate of tax chargeable on the principal output supply; further, there is neither any reason nor any scope to further confine the refund of unutilised ITC only to cases where the rate on main input is higher than the rate of tax on the principal output. 16. A perusal of the impugned orders will indicate that respondent has erroneously placed reliance upon Para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020 though the same has no application in the present case as the said Circular applies only to scenarios/situations where the ITC is accumulated on account of different rates being applicable at different points of time and merely seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time as held in the aforesaid judgments and the impugned orders deserve to be quashed and directions are to be issued to the respondent to refund the amount back to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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