Rajasthan High Court Partly Quashes CBIC Circular Restricting ITC Refund For Inverted Duty Structure Up To 18.07.2022
The Rajasthan High Court has quashed Point No. 2 of the Circular No. 181/13/2022-GST dated 10.11.2022, restricting ITC claims on the inverted duty structure prior to 18.07.2022. The bench, consisting of Justices Dinesh Mehta and Sangeeta Sharma, stated that if the impugned clarification is tested on the anvil of reasonableness, it falls foul to Article 14 of the Constitution of...
The Rajasthan High Court has quashed Point No. 2 of the Circular No. 181/13/2022-GST dated 10.11.2022, restricting ITC claims on the inverted duty structure prior to 18.07.2022.
The bench, consisting of Justices Dinesh Mehta and Sangeeta Sharma, stated that if the impugned clarification is tested on the anvil of reasonableness, it falls foul to Article 14 of the Constitution of India, inasmuch as the right to claim refund of Input Tax Credit of the input tax on inverted duty structure has been denied with effect from 18.07.2022 only.
No assessee can be expected to file claim of refund of the tax for the period paid upto 18.07.2022 on 18.07.2022 itself, more particularly when he can apply for refund of tax within the permissible time limit of two years. Hence, curtailment of an assessee's right to claim refund upto 18.07.2022- the date of enforceability of the notification is illegal and contrary to section 54 of the Act of 2017, added the bench.
The assessee/petitioner-firm is engaged in the manufacture of edible oil purchased mustard oil etc., falling under HSN Code 1514 on payment of applicable GST.
A Notification No. 09/2022-Central Tax (Rate) dated 13th July, 2022 was issued providing that accumulated Input Tax Credit shall not be allowed in relation to various items, including HSN Entry No. 1514, which was made enforceable from the prospective date i.e. 18.07.2022.
On the ground that its products fall into the category of inverted duty structure, the assessee has filed application(s) for refund of the Input Tax Credit as per section 54 of the Central Goods and Services Tax Act, 2017, for the period(s) prior to 18.07.2022.
The assessee submitted that since the notification dated 13th July, 2022 was brought into effect from 18.07.2022, all the assessees, including the petitioner were entitled to claim refund of Input Tax Credit on the goods purchased upto 18.07.2022 and yet, the respondents have not decided the petitioner's applications for claim of refund, which were filed on 04.01.2023.
The bench noted that the restriction of refund claim qua the application filed upto 18.07.2022 creates two classes – one, the application for refund (for period 18.07.2022) filed up to 18.07.2022 and those filed after 18.07.2022. Denial of an assessee's right in relation to the application filed after 18.07.2022 amounts to apparent discrimination. Such classification is without any rationale and intelligible criteria.
The assessee's right to claim a refund cannot be restricted in the manner provided in the Circular impugned, as it would take away a substantial statutory right of the assessee, stated the bench.
The bench opined that Point No. 2 of the Circular No. 181/13/2022-GST dated 10.11.2022 issued by the CBITC is declared illegal and arbitrary, being violative of Article 14 of the Constitution of India and also contrary to the purport and import of the Notification dated 13.07.2022.
The bench quashed point no. 2 of the Circular to the extent of confining the refund of Input Tax to the application(s) filed upto 18.07.2022.
In view of the above, the bench allowed the petition and directed the department to consider the petitioner's application for a refund.
Case Title: Shree Arihant Oil and General Mills v. Union Of India
Case Number: D.B. Civil Writ Petition No. 2932/2023
Counsel for Petitioner/Assessee: Mr. Sanjeev Johari, Sr. Counsel assisted by Mr. Shubhankar Johari
Counsel for Respondent/Department: Mr. Mahaveer Bishnoi, AAG and Mr. Rajat Arora