Vide Circular Number 135/2020-GST dated 31.03.2020, it was clarified that where input and output supplies are same but rate of tax undergo change, the refund under inverted duty structure is not available. It is notable that section 168(1) strives to lay down that for the purpose of uniformity in the implementation of the Act, orders, instructions or directions may be issued. ‘Uniformity in implementation’ does not mean curbing benefits available in the Act by introducing new provisions. A circular cannot supplant or implant any provision which is not available in the Act. Therefore, circular dated 31.03.2020, imposing a restriction to release certain benefits which are provided under the Act has been rightly held as bad in law by Hon’ble Calcutta High Court.
Read about the case M/s Shivaco Associates & Anr Versus Joint Commissioner of State Tax reported as 2022 (4) TMI 118 (Cal.) below:
Fact of the case
1. The petitioners was engaged in the business of purchasing LPG gas in bulk through tanker and thereafter, bottling the same in bottles / cylinders of 4kgs, 6kgs, 14kgs, 17kgs and 21kgs and sell the same to commercial customers levying GST at the rate of 18% and to the domestic customers levying GST at the rate of 5%.
2. The petitioners claim refund of the unutilized ITC accumulated on account of inverted tax structure as the rate of tax on inputs is higher than the rate of tax on output supply.
3. The prayer of the petitioners for refund stood rejected by the adjudicating authority relying on a circular issued by the Central Board of Indirect Taxes and Customs (“CBIC”) being Circular No. 135/2020-GST dated 31.03.2020 wherein it has been mentioned that the tax-payers cannot claim refund in terms of clause (ii) of Section 54(3) of the CGST Act, 2017 in cases where the input and output supplies remain the same.
4. The petitioners filed the instant writ application praying for setting aside the impugned order dated 26.11.2020 passed by the adjudicating officer i.e., Assistant Commissioner, Siliguri and the impugned order dated 10.12.2021 passed by the appellate authority being the ld. Joint Commissioner, State Tax Siliguri rejecting the refund claim of the petitioners.
Issue before the Court
5. Whether the benefit which is available under the Act can be taken away and/or restricted by the Circular?
Submission by the Respondent and Petitioner
6. According to the respondents, as the input and output supply i.e., liquefied petroleum gas remains the same, accordingly, in view of the circular dated 31.03.2020 the prayer for refund of the accumulated tax cannot be granted.
7. The petitioners submit that the respondents cannot take advantage of the said circular as the Act permits such refund. The circular which has been issued as clarification cannot take away the right granted in their favour by the Act itself.
8. According to the petitioners, the gas which is purchased in bulk is not supplied to the consumers in the same manner and quantity, but bulk gas is refilled in small containers and thereafter, sold out to both commercial as well as domestic consumers. Hence, it cannot be said that the input and output supplies remain the same.
Decision of the Court
9. The Act does not mention about non-granting of the benefit of accumulated input tax credit where the input and output supplies are the same. The circular is trying to restrict the refund to a particular set of supplies. The circular is trying to create a class inside the class, which is impermissible.
10. According to the court, refund is permissible in respect of all classes where the input tax is higher than the output tax. By way of the circular, the Board is curtailing the said benefit and making refund permissible only if the input and output supplies are different. The same amounts to overreaching the provisions as laid down in the Act.
11. Court directed the respondent authority, not to reject the claim of the petitioners relying on the circular as the prayer made by the petitioners is permissible under the Act.
12. In view of the discussions made herein above, court directed that the impugned orders passed by the adjudicating authority and the appellate authority are liable to be set aside and quashed. It is held that the petitioners will be entitled to the refund as claimed.
Our Remarks
13. It has been rightly observed by the court that “any circular issued under Section 168(1) of the Act is only for the purpose of bringing uniformity in the implementation of the Act. The intention of the legislature as expressed in Section 54(3) of the Act is clear and unambiguous. The Section, in absolute uncertain terms, mentions that refund of any unutilized input tax credit may be claimed where credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.”