Case: Micro Systems and Services vs. Union of India
Order No. Writ Petition No. 37465 of 2021
Authority: Telangana High Court
Order passed on: 05.09.2022
In this case, the refund claim of the petitioner regarding unutilized ITC on account of inverted duty structure was rejected by the GST Department by relying on the Circular No. 135/05/2020-GST dated 31.03.2020, whereby in para 3.2 it was provided that no refund shall be allowed in case of inverted duty structure when the inputs and outputs are same.
Being aggrieved by this, the Petitioner appealed under Section 107 of the CGST Act. However, the Respondent by order dated April 9, 2021 (“the OIA” or “the Impugned order”), confirmed the rejection and dismissed the appeal.
Therefore, the Petitioner filed the present writ petition contending that Para 3.2 of the Circular No.135/05/2020, has been further clarified by the Circular No. 173/05/2022-GST dated July 06, 2022 (“Circular No. 173/05/2022-GST”) thus, Refund application should be allowed.
The Hon’ble Telangana HC noted that the Circular No. 173/05/2022-GST, clarified that it was not the intent of Para 3.2 of Circular No.135/2020-GST, to cover the cases where the supplier is making supply of goods under a concessional notification and the rate of tax on 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 a concessional notification. Therefore, clarified that in such cases, refund of accumulated ITC on account of IDS would be allowed.
In view of the above circumstances, the Hon’ble Telangana HC held that the nature of the Circular dated 06.07.2022 is clarificatory and hence, the same shall have retrospective effect i.e., with effect from 31.03.2020 when the Circular dated 31.03.2020 came into effect.
The case was remanded back to the assessing authority for reconsidering the refund claim of Petitioner noting that refund of accumulated Input Tax Credit (ITC) on account of inverted duty structure (IDS) is allowed where the goods have been supplied under concessional rate notification.
The complete order can be downloaded from this link: http://tshcstatus.nic.in/hcorders/2021/wp/wp_37465_2021.pdf
