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TMI Blog2025 (5) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2017 (GST Act) to the extent that they clarify that the refund of fund being utilized Input Tax Credit qua Cess will not be admissible if exports are made in payment of IGST. 3. It was therefore prayed by the petitioners that the petitioners are entitled to the Input Tax Credit on the Cess paid by the petitioner on inputs which are utilized for the purpose of goods manufactured for export. 4. As common issues are arising in all these petitions the same were heard analogously and are being disposed of by this common order. 5. For the sake of convenience, Special Civil Application No.20341 of 2022 is treated as a lead matter. 6. The petitioner is a public limited company engaged in the business of manufacture and sale of dyes, dye intermediates, chemicals etc. The petitioner purchased coal for use in its manufacturing process. The petitioner also paid Cess under the Cess Act in addition to the GST for purchase of the coal. It is the case of the petitioner that while coal purchased by the petitioner is liable to Cess, however, the finished goods manufactured by the petitioners are not liable to GST compensation Cess under the Cess Act. Therefore, when the finished goods manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority has held that the refund of fund being utilized Input Tax Credit attributable to Cess is admissible even though the goods are exported on payment of IGST. 10. Therefore, there are two contradictory orders so far as the petitioner of Special Civil Application No.26250 of 2022 is concerned as in the petition, the petitioner has challenged the show cause notice as well as the order dated 13/10/2022 rejecting the refund application preferred by the petitioner. However, the appellate authority while hearing the appeal against the rejection order dated 14/06/2023 passed in case of the petitioner of Special Civil Application No.26250 of 2022, allowed the appeal by setting aside the order rejecting the refund application by order dated 30/08/2023. 11. Learned advocate for the respective parties submitted that on perusal of the provisions of Section 54(3) of the GST Act, the petitioners are entitled to refund of the payment of tax of unutilized Input Tax Credit if the goods are exported. It was submitted that the petitioners have already received refund of the IGST paid on the goods exported from the Custom Department and the refund claims made by the petitioners pertains to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2019, for denial of refund of amount of Cess paid by the petitioner for purchase of the coal utilized for manufacture of the goods which are exported is also misplaced as the clarifications issued therein reiterates the applicability of Section 11(2) of the Cess Act viz-a-viz the refund of unutilized ITC under Section 54(3) on payment of IGST and does not refer to the amount of Cess which was not paid by the petitioner while exporting the goods and therefore such amount of Cess has remained in form of unutilized Input Tax Credit. It was therefore submitted that the respondent authorities may be directed to issue the refund of the amount of Cess which has remained unutilized Input Tax Credit upon the products which was utilized for the manufacture of the goods which are exported. 14. Per contra, learned advocate Mr. Maulin Yajnik for the respondents submitted that admittedly the petitioners have paid the IGST on the goods exported which is duly refunded by the Custom Authorities as per the provision of Section 54(3) of the GST Act and therefore the respondent authorities have rightly relied upon para-42 of the Circular No.125/44/2019 dated 18/11/2019 by interpreting the same to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess. The Petitioner should appreciate that the refund has to be claimed as per statutory provisions laid out by the law and not by twisted interpretation of facts and law for undue benefits. ..... 4.4. Refund in GST is governed by section 54 of the CGST Act, 2017. Sub-section (3) is of section 54 is reproduced below: (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than- (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Here, the words used are 'zero rated supplies made without payment of tax' and not 'zero rated supplies'. Moreover, third proviso to sub-section (3) of section 54 categorically stipulates that no refund of input tax credit shall be allowed, if the supplier of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) The petitioners have purchased the coal on payment of Cess and as such the petitioner is entitled to the Input Tax Credit on such Cess amount. The petitioner has utilized the coal purchased for manufacture of the goods which are exported. (2) The petitioner paid the IGST at the time of export of the goods which was refunded by the Custom Authorities as per the provision of Section 54(3) read with Section 16 of the IGST Act being a zero rated supply. (3) The petitioner therefore filed the refund claim application to claim the Input Tax Credit of the Cess amount which was paid by the petitioner while purchasing the coal and as such coal was utilized for manufacture of exported goods. 19. In view of the above, it would be germane to refer to the relevant provisions of the CGST Act and the IGST Act as well as the Cess Act. 19.1. Section 54(3) of the CGST Act reads as under: "Section 54 - Refund of tax- (1) ..... (2) ..... (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: PROVIDED that no refund of unutilised input tax credit shall be allowed in cases other than- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 54 of the Central Goods and Services Tax Act or the rules made thereunder]; (ii) a class of goods or services [or both, on zero rated supply of which, the supplier may pay integrated tax and claim the refund of tax so paid, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder].] [(5) Notwithstanding anything contained in sub-sections (3) and (4), no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods are subjected to export duty.] 19.3. Section 11(2) of the Cess Act reads as under: "Section 11 Other provisions relating to cess (1) ...... (2) The provisions of the Integrated Goods and Services Tax Act, and the rules made thereunder, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable under section 8 on the inter-State supply of goods and services, as they apply in relation to the levy and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input tax credit of cess, only for the payment of cess on the outward supplies. Accordingly, they cannot claim refund of compensation cess in case of zero-rated supply on payment of integrated tax." 20.2. Para-42 of Circular No.125/44/2019 dated 18/11/2019 reads as under: "Guidelines for claims of refund of Compensation Cess 42. Doubts have been raised whether a registered person is eligible to claim refund of unutilized input tax credit of compensation cess paid on inputs, where the zero-rated final product is not leviable to compensation cess. For instance, cess is levied on coal, which is an input for the manufacture of aluminium products, whereas cess is not levied on aluminium products. In this context, attention is invited to section 16(2) of the Integrated Goods and Services Tax Act, 2017 (hereafter referred to as the "IGST Act") which states that, subject to the provisions of section 17(5) of the CGST Act, credit of input tax may be availed for making zero rated supplies. Further, section 16 of the IGST Act has been mutatis mutandis made applicable to inter-State supplies under the Cess Act vide section 11(2) of the Cess Act. Thus, it implies that input tax credit of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of compensation cess paid on input, where the zero rated final product is not leviable with compensation cess. However, the circular refers to the provision of Section 16(2) of the IGST Act that the registered person making zero rated supply of aluminum products under bond or LUT may claim refund of unutilized credit including that of compensation cess paid on coal. The circular further clarifies that when the registered person make a zero rated supply of product on payment of integrated tax, they cannot utilize the credit of the compensation cess paid on coal for payment of Integrated tax in view of the proviso to Section 11(2) of the Cess Act, as the said proviso allows the utilization of the input tax credit of cess, only for the payment of cess on the outward supplies. However, when the petitioner has paid the IGST under Section 16(3) of the IGST Act on the zero rated supply and refund is claimed by the payment of such IGST, the petitioner admittedly would not be able to utilize input tax credit of cess as cess is not payable on the zero rated supply. Therefore, proviso to Section 11(2) of the Act would not be applicable in the facts of the case and the petitioner would be e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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