The Hon’ble High Court of Calcutta vide its order dated 11^th March 2022 in the matter of M/s Shivaco Associates & Anr.  Vs. Joint Commissioner of State Tax, Directorate of Commercial Taxes & Ors. in WPA No. 54 of 2022, held that a circular cannot supplant or implant any provision which is not available in the Act.  The circular No. 135/2020-GST dated 31.03.2020 relied on by the respondents, is restricting the claim of the petitioners which is otherwise admissible in the Act, thus allowed the refund of the unutilized ITC accumulated on account of inverted duty structure.

The Petitioners filed the present writ petition praying for setting aside the impugned order passed by the Assistant Commissioner, Siliguri dated 26.11.2020 and the impugned order passed by the appellate authority, the Joint Commissioner, State Tax Siliguri dated 10.12.2021 for the period 01.10.2018 to 31.12.2018.

Facts: –

• The petitioners are 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 on GST applicable at the rate of 18% and to the domestic customers at the rate of 5%.
• That prior to 01.2018, the input and output tax on liquefied Petroleum Gases to commercial and domestic consumers was 18%, however by notification dated 28.06.2018 the rate of output tax on domestic LPG was reduced from 18% to 5%.
• As the rate of tax on inputs as compared to output was higher, the petitioner filed a refund claim of unutilized ITC accumulated on account of inverted duty structure for the 10.2018 to 31.12.2018.
• The aforesaid refund claim of the petitioners was rejected by the adjudicating authority relying on circular No. 135/2020-GST dated 31.03.2020 and stated ‘taxpayers cannot claim refund in terms of clause (ii) of Section 54(3) of the CGST Act, 2017 in case where the input and output supplies remain the same’.
• The appeal preferred by the petitioners against the aforesaid adjudicating authority was also rejected by order dated 12.2021.

Petitioner’s Stand: –

• It was submitted on behalf of the petitioners that the Circular relied upon by the respondents is clarificatory in nature, the respondents cannot take advantage of the said circular as the Act permits such refund.
• It cannot be said that the input and output supplies remain the same as the bulk gas purchase is refilled in small containers and then sold to the commercial and domestic consumers.
• The petitioners in support of their stand relied on the decisions of Gujarat Authority for Advance Ruling in Advance Ruling No. GUJ/GAAR/R/2020/15 dated 19.05.2020 in re- M/s. Navbharat LPG Bottling Company, Guwahati High Court on 02.09.2021 in case No. WP(C)/3878/2021 in the matter of B.M.G Informatics Pvt. Ltd. V. Union of India and Ors. and on Delhi High Court on 31.05.2011 in WP(C)4452/2008 in M/s. Jindal Stainless Ltd. & Anr. V. Union of India and Ors.

 

On the other hand, the respondents relying on the decision of the Madhya Pradesh High Court in the matter of Eastern Air Products Pvt. Ltd. V. Commissioner of Sales Tax, Indore reported in 1994 SCC Online MP 89, submitted the gas purchased and sold to the consumers remains the same and the petitioners are liable to pay 18% tax in both input and output supplies, thus are not entitled to any refund on account of the inverted duty structure.

Held: –

• The Hon’ble High Court after considering the submissions from the both sides and the law applicable on the facts of the instant case, observed the claim of the refund has been filed under Section 54(3) by the petitioners for accumulated credit on account of rate of tax on input Supply (LPG in bulk) is higher i.e., 18% than the rate of tax on output supply (LPG in small containers for domestic consumers) i.e., 5%.
• The claim of the petitioner was rejected by the respondents relying on circular dated 03.2020 issued in exercise of powers conferred under Section 168(1) of the CGST Act, 2017.
• It was further observed that said circular relied upon by the respondents is restricting the claim of the petitioners which is otherwise admissible under the Act.
• The Hon’ble High Court taking note of the law stated in Section 168(1) observed that the circulars are issued for the purpose of bringing uniformity in the implementation of the Act and the intention of the legislature as expressed in Section 54(3) of the Act is clear and unambiguous. The Act does not restrict refund where input and output supplies are different.
• The ‘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.
• The Hon’ble High Court referring to the M/s Jindal Stainless Ltd. (supra), Dilip Kr. Ghosh Vs. Chairman – AIR 2005 SC 3485 and Additional District Magistrate (Rev.) Delhi Administration V. Shri Ram; AIR 2000 SC 2143, held that the Act does not mention about not granting the refund of accumulated input tax credit where input and output supplies are same. The circular is trying to restrict the refund and trying to create a class inside a class, which is not permissible.
• The legislature did not create any distinction for allowing the refund in all cases where the input tax is more than output tax. Thus, the refund is permissible in all cases where the input tax is more than the output tax.
• Lastly the Hon’ble High Court laying down that the petitioners are entitled for refund claim observed that the refund claim should not have rejected by the respondent authority relying on the said circular.

The Hon’ble High Court with above findings set aside and quashed the impugned orders.