Refund of accumulated Input Tax Credit on account of Inverted tax structure lying as on 31st July 2018, will not lapse.
Facts: In this case. the Petitioner is engaged in manufacturing polyester texturized yarn falling under HSN Code: 5402 and also manufactures polyester woven fabrics and polyester knitted fabrics from polyester partially oriented yarn/polyester texturized yarn falling under HSN Code: 5402. According to the petitioners, Notification No. 20/2018 was issued to extends the restriction on the utilization of unutilized ITC for and up to the month of July 2018 and further states that on the inward supplies received up to July 31, 2018, shall lapse. Further, the power under Section 54(3)(ii) of the CGST Act is limited to notify the supplies not entitled to refund of ITC accumulated on account of the inverted rate structure. The impugned notifications have exceeded powers delegated under Section 54(3)(ii) of the CGST Act. It was further, contended that the impugned notification to the extend providing for the lapsing of ITC is discriminatory and the impugned notification is without application of mind inasmuch as the petitioner are losing huge amount of money paid towards ITC.
Held: The Hon’ble Gujarat High Court while striking down the second proviso (lapse of utilized credit) introduced vide Notification no. 20/2018 – C.T. (Rate) and holding it as ultra-vires to Section 54(3)(ii) observed that no inherent power can be inferred from Section 54(3)(ii) to issue notification providing for lapsing of credit as such Section nowhere expressly provides that. Further, Section 17(4) and 18(4) of CGST Act specifically provides for lapsing of credit and thus, where legislature wanted the ITC to lapse, it would have been provided in the Act itself.
Resultantly, all those assessees dealing in products which are covered under Notification no. 20/2018 – C.T. (Rate) dated 27 July 2018 will be entitled for unutilized accumulated credit in their account as on 31 July 2018 and the same shall not lapse. With respect to the credit accumulated under inverted rate structure after 31 July 2018, assessees will be entitled for refund of the same under Section 54(3)(ii) ibid.