ITC Transfer From One State To Another Is Not An Inward Supply: Orissa High Court

The Orissa High Court bench of Justice Jaswant Singh and Justice M.S. Raman ruled in the case of M/s. JSW Steel Ltd. v. Union of India (W.P. (C) No. 10052 of 2022),  that an input service distributor (ISD) can only claim ITC in the case of an inward supply and that an ITC transfer from one state to another is not an inward supply.

Brief Facts Of The Case: JSW Steel is the petitioner and assessee, which is a public limited corporation. The assessee manufactures and sells hot- and cold-rolled coils and sheets, as well as galvanised coils and sheets and plates. In the states of Maharashtra and Odisha, the assessee has each received a GSTIN. According to the petitioner, JSW Steel (Mumbai) took part in the tendering process that the Government of Odisha asked them to. A lease for JSW Steel (Mumbai) to carry out iron ore mining activities in the state of Odisha has been obtained. A firm in the state of Odisha has been given access to the Jajang Block, Ganua Block, Narayan Poshi Block, and Nuagaon Block. The petitioner said that JSW Steel (Odisha) either supplied the JSW Plants with the iron ore mined from the iron ore blocks via stock transfer or, to the degree permitted, transferred it to other parties. It claims to have paid the relevant GST and to have issued tax invoices for the supplies as well.

After carefully reviewing the forms submitted for the relevant tax years, it was discovered that JSW Steel (Odisha) had utilised the reverse charge technique to pay SGST and CGST on bid premiums, royalties, DMF, NMET, NPV, etc. The ruling stated that the petitioner-company in Odisha had transferred to JSW Steel in Maharashtra after using a portion of the tax paid on RCM. JSW Steel in Maharashtra was designated as an IGST-ISD under the guise of providing JSW Steel with external facilitation services (ISD).

Judgement: The Revenue objected to the method of claiming adjustment of unused input tax credit. The legislative requirement is violated by any method used by JSW Steel operations situated in other states to claim input tax credits due to the State of Odisha. As a result, the requirements for starting legal action under Section 74 were met. A notification from the Deputy Commissioner of State Tax resulted in a 901.48 crore rupee demand.

The transactions in issue appear to merit initiating a procedure under Section 74 of the OGST/CGST Act since they at least appear to amount to syphoning of tax amounts, the judge stated. The court rejected the request for a restraining order prohibiting the department from carrying out recovery of the demand while listing the case on August 12th, 2022.



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