Facts of the Case:

In this case, the petitioner is a manufacturer of e-rickshaws (commonly known as TOTO) and is registered under the CGST/WBGST Acts, 2017. In the course of its business, the petitioner procured stereo systems/loudspeakers, which were installed in the e-rickshaws manufactured and supplied by it. Due to an inverted duty structure, the petitioner filed a refund application under Section 54(3) of the CGST/WBGST Acts, claiming refund of unutilised Input Tax Credit (ITC) , contending that stereo systems constituted “inputs” used in the course or furtherance of business.

The adjudicating authority rejected the refund claim on the ground that stereo systems could not be treated as eligible inputs/raw materials for manufacture of e-rickshaws. Aggrieved, the petitioner preferred an appeal under Section 107, which was dismissed by the Appellate Authority thereby affirming the rejection of refund.

The petitioner approached the High Court by way of writ petition, challenging the appellate order.

Issue:

Whether stereo systems installed in e-rickshaws manufactured by the petitioner qualify as “inputs” under Section 2(59) of the CGST/WBGST Acts, thereby entitling the petitioner to refund of unutilised ITC under Section 54(3) in a case of inverted duty structure, and whether the appellate order rejecting such refund could be sustained.

Held that:

The High Court noted that the core dispute stood resolved by the Revenue itself, pursuant to detailed examination of the statutory provisions and internal deliberations. The Court took on record the categorical instructions issued by the Additional CCT (Law), wherein it was clarified that the definition of “input” under Section 2(59) is wide and includes any goods other than capital goods, used or intended to be used in the course or furtherance of business. The statute does not restrict “inputs” only to raw materials directly used in manufacturing. The concept of “business” under Section 2(17) is expansive, covering all activities connected, incidental, or ancillary to manufacturing.

For the purposes of refund under Section 54(3), the relevant test is use in the course or furtherance of business, and not whether the goods are strictly raw materials. Stereo systems installed in e-rickshaws form part of the outward supply and are therefore integrally connected with the petitioner’s business activity.

The Court observed that there had been divergent views taken by different appellate authorities in the petitioner’s own cases, which led to unnecessary litigation and uncertainty.

Accordingly, the Court set aside the impugned appellate order.

This judgment reinforces that, for refund under Section 54(3) in inverted duty cases, the expression “inputs” must be interpreted from a business perspective and not narrowly from a manufacturing-process lens, and it also highlights the need for consistency in departmental adjudication and appellate practice.

Case Name: Hooghly Motors Pvt. Ltd. Versus The State of West Bengal & Ors. dated 22.12.2025

To read the complete judgement 2025 Taxo.online 3422