No Refund Of Unutilised ITC On Closure Of Business U/S 54 CGST Act, Must Be Reversed U/S 29(5): Sikkim High Court

Section 54 of the CGST Act, 2017 deals with refund of tax, intertest, or any other amount paid under GST. The refund can be claimed in case of excess tax payment, zero-rated supplies, deemed exports, or unutilised ITC.

Section 29(5) of the CGST Act, 2017 provides that when the registration of a person is cancelled, that person is required to pay an amount by way of debit in the electronic credit ledger or electronic cash ledger.

Chief Justice Biswanath Somadder and Justice Bhaskar Raj Pradhan stated that the accumulated credit on closure of business must be reversed under section 29(5) and no refund can be granted under section 49(6) and section 54 of the CGST Act and the relevant rules.

In this case, SICPA was engaged in the business of manufacturing security inks and solutions. In the writ petition, SICPA contended that since January 2019 no operations had been carried out at their Sikkim registration due to absence of orders from the customer, viz., Reserve Bank of India and therefore, it decided to discontinue its operation in the State of Sikkim.

It was contended that due to closure of business operation, SICPA had accumulated balance of ITC for which refund was claimed in terms of section 49(6) of the CGST Act to be refunded in accordance with the provisions of section 54 of the Act.

The refund claim for unutilised ITC was made by filing FORM GST RFD-01 under the category 'any other'- ―under sub-section (6) of section 49 of the CGST Act for unutilised ITC balance lying in the electronic ledger upon discontinuance of business.

The Form, it is noticed, did not contain the self-declaration by SICPA under section 54(4) on its claim that it was not applicable.

The SICPA/ respondent India Private Ltd. insists that the unutilised Input Tax Credit is required to be refunded by the department/appellant under section 49(6) of the CGST Act.

The Assistant Commissioner rejected the refund application filed by SICPA under section 49(6) of the CGST Act claiming unutilised ITC lying in electronic credit ledger upon discontinuance of business.

The Appellate Authority upheld the order of the Assistant Commissioner rejecting the refund. The Single Judge allowed the petition preferred by SICPA/ respondent.

The bench observed that it is not the case of SICPA that the accumulated ITC is outside the provisions of 'Chapter X'. This means that the accumulation of ITC is through a legal statutory process. The refund envisaged by the Parliament on account of accumulated ITC is only in accordance with the provisions of section 54.

Section 54, however, does not envisage refund of unutilised ITC for closure of business. Thus, the rejection of the refund application is also within the parameters of section 54 and therefore, lawful, noted the bench.

The bench agreed with the department/appellant that the accumulated credit must be reversed under section 29(5) and no refund can be granted under section 49(6) and section 54 of the CGST Act and the relevant rules.

There has been no violation of any Constitutional or statutory right of SICPA for which a writ could lie, added the bench.

In view of the above, the bench allowed the appeal.

Case Title: Union of India v. The Commissioner of Central Goods and Services Tax & Central Excise

Case Number: W.A. No. 02 of 2025

Counsel for Appellant/Department: Ms Sangita Pradhan, Deputy Solicitor General of India with Ms Natasha Pradhan and Ms Sittal Balmiki

Counsel for Respondent/Assessee: Mr. Ankit Kanodia and Mr. Passang Tshering Bhutia

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