Facts of the Case:

The respondent–assessee, SICPA India Pvt. Ltd., engaged in manufacture of security inks, had its Sikkim unit closed in 2019 after stoppage of supply orders from RBI. In the process of discontinuing business, the assessee sold its assets and claimed to have reversed the ITC accumulated in its books.

It thereafter filed a refund application in Form GST RFD-01 claiming refund of ₹4.37 crore of unutilised ITC under the category “Any Other – refund under Section 49(6) of CGST Act on discontinuance of business.”

The claim was rejected by the Adjudicating Authority and subsequently by the Appellate Authority on the ground that closure of business was not a permissible situation under Section 54(3) of the CGST Act.

SICPA filed a writ petition before the High Court. The learned Single Judge allowed the writ petition holding that there is no bar on refund of unutilised ITC on closure of business and that Section 49(6) read with Section 54 permits such refund. Reliance was placed on earlier judgments in Slovak India Trading Co. Pvt. Ltd. (Karnataka HC) and Jain Vanguard (Bombay HC).

Aggrieved, the Union of India filed the present writ appeal before the Division Bench.

Issue: Whether unutilised ITC lying in the electronic credit ledger upon discontinuance of business can be refunded under Section 49(6) read with Section 54(3) of the CGST Act, notwithstanding that closure of business is not specifically covered under Section 54(3).

Held that:

The Division Bench noted that the learned Single Judge had not considered the binding Supreme Court decision in Union of India v. VKC Footsteps (India) Pvt. Ltd. (2022) 2 SCC 603, which authoritatively interpreted Section 54(3), wherein it was held that Section 49(6) only permits refund of the balance in cash/credit ledger in accordance with Section 54; it does not independently confer a right to refund. Also, Refund is permissible only in circumstances specified under Section 54(3), such as zero-rated supplies or inverted duty structure.

The Court further stated that SICPA’s claim was not covered under Section 54(3) since it was not related to zero-rated supply or inverted duty accumulation.

The assessee did not furnish sufficient proof of reversal of ITC under Section 29(5), making the refund claim unsustainable.

The writ petition was held not maintainable, and the refund claim was rejected.

The Appeal allowed in favour of Revenue. The Judgment of the Single Judge Bench granting refund was set aside.

The Court clarified that Refund of unutilised ITC cannot be claimed directly under Section 49(6) of the CGST Act. The provision is only enabling in nature and operates subject to Section 54. Refund is permissible strictly within the confines of Section 54(3) and not in cases of business closure, where accumulated credit must instead be reversed under Section 29(5).

Case Name: Union of India, Through the Secretary, Department of Revenue, Ministry of Finance, New Delhi, The Commissioner of Central Goods and Services Tax & Central Excise, West Bengal, The Additional Commissioner of Central Goods and Services Tax & Central Excise, West Bengal, The Assistant Commissioner, Central Goods and Services Tax & Central Excise, Gangtok. Versus SICPA India Private Limited, Mr. Sachin Jindal – Finance Controller/Company Secretary, SICPA India Private Limited. Dated 05.09.2025

To read the complete judgement 2025 Taxo.online 2176