In the case of Baker Hughes Asia Pacific Limited vs Union of India (D.B. Civil Writ Petition No. 5714/2021) The division bench of Justice Sandeep Mehta and Justice Vinod Kumar Bharwani has observed that the supplying dealer would be entitled to claim a refund of accumulated unutilized tax credit under Section 54 (3) (ii) of the CGST Act irrespective of the fact that the input and output supplies are the same by ignoring the circular dated 31.03.2020.
FACTS OF THE CASE:
The petitioner/assessee entered into a development contract with the company Vedanta Limited. In order to procure essential goods, materials, and equipment required for carrying out the petroleum exploration and production operations, Vedanta entered into a subcontract with the petitioner for the supply of the articles. The petitioner obtained registration under the CGST and RGST Acts and claims to have been regularly filing returns and paying tax to the Central or State Government. For the execution of the contract, the petitioner procured goods from authorised vendors at GST rates varying between 5% and 28%. The petitioner relied upon the Circular No. 125/44/2019-GST – CBEC-20/16/04/18-GST. As per the circular, a refund under the inverted duty structure, is to be allowed when the inputs are procured at the normal GST rate and the output supplies are made at a lower GST rate because of the lower rate notification in place. The petitioner contended that subordinate legislation in the form of a statutory circular cannot supersede or override the parent statute. The circular, to the extent it disallowed Input Tax Credit under the Inverted Duty Structure where input and output supplies are the same, is per se illegal and hence deserves to be struck down while accepting the writ petition.
The court said “The claim for refund of ITC filed by the petitioner was for a period prior to the issuance of the circular dated 31.03.2020. Consequently, rejection of the petitioner’s claim for accumulated input tax credit by the respondent, Deputy Commissioner, State Tax, Circle Barmer, with reference to para 3 of the Circular dated 31.03.2020, is invalid on the face of the record and cannot be sustained”. The court observed that Section 54(3)(ii) of the CGST Act is completely clear and does not make any exceptions that the Input Tax Credit under the Inverted Tax Structure would not be applicable where the input and output goods are identical.
JUDGEMENT REVIEWED BY ANAGHA K BHARADWAJ