SEZ unit can claim refund of ITC of GST distributed by ISD unit : Gujarat High Court
In the High court of Gujarat at Ahmadabad
Appeal: R/Special Civil Application No. 15473 of 2019
Case : Britannia Industries Limited Vs Union of India (Gujarat High Court)
Date of order - 11/03/2020
Britannia Industries Limited Vs Union of India (Gujarat High Court)
The petitioner, a limited company, situated in Special Economic Zone (for short “SEZ”) filed an application for refund in Form GST RFD-01A with regard to the credit of Integrated Goods and Services Tax (for short “IGST”) distributed by Input Service Distributor (for short “ISD”) for the services pertaining to the SEZ unit for an amount of Rs.99,05,156/-for the year 2018-2019.
Being a SEZ unit making zero rated supplies under the GST, the petitioner was not able to utilize the credit of the Input Tax Credit of IGST from its ISD and it was lying unutilized in the Electronic Credit Ledger of the petitioner. Thus the petitioner made an application for refund of such ITC.
Deputy Commissioner, Central GST Mundra Division, Gandhindham issued a show cause notice with a proposal of rejection of the claim of refund of the unutilized ITC, reason being the supply of Goods and/or Services to SEZ unit is Zero rated hence are not eligible for refund under Section 54 of CGST Act.
Also contended that SEZ unit is not supposed to pay any tax on output supply either under forward charge or reverse charge mechanism and hence no question of ITC and further, till date no circular, notification/ relevant guidelines have been issued by the board providing guideline to process GST refund claim application of units situated in SEZ in respect of tax paid an inward supplies.
The Petitioner filed the written submissions in personal, however an order dated 01.08.2019 was passed by the Respondent rejecting the refund.
Aggrieved by the order of the Respondent dated 01.08.2019, the Petitioner approached the High Court under Article 226 of the Constitution of India to issue a writ of mandamus to direct the Respondent to grant the said refund, set aside the order of rejection of refund.
Issue before the High Court
Whether the Petitioner, being an SEZ unit, can claim refund of unutilized IGST credit lying in Electronic Credit Ledger under section 54 of the CGST Act, 2017?
Conclusion by High court
ISD as defined under section 2(61) of the CGST Act is an office of the supplier of goods and services which receives tax invoices issued under section 31 of the CGST Act towards the receipt of input services and issues a prescribed document for the purpose of distributing the credit of CGST, SGST Or IGST paid on such goods or services.
Therefore, in facts of the case, it is not possible for a supplier of goods and services to file a refund application to claim the refund of the input tax credit distributed by ISD.
Therefore, HC held that
“the stance of the department that the petitioner is not entitled to seek the refund of the ITC paid in connection with goods or services supplied to SEZ unit is not tenable.”
The court also places reliance on notification no. 28/2012 dated 20th June,2012 related to distribution of ITC by ISD in case of service tax.
As per notification, service tax attributable to the services used in more than one unit to be distributed pro-rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units
Therefore, court further fortified that
“22……….similarly, in facts of the present case also, credit of service tax is distributed to all the units by the ISD and therefore, the claim of refund made by the SEZ unit of the petitioner is required to be granted.”
The Court also relied on the decision of M/s. Amit Cotton Industries(supra),and
Court further concluded that
“23. We are of the opinion that in view of the aforesaid decision in case of M/s. Amit Cotton Industries(supra), the petitioner is entitled to claim refund of the IGST lying in the Electronic Credit Ledger as there is no specific supplier who can claim the refund under the provisions of the CGST Act and the CGST Rules as input tax credit is distributed by the input service distributor.”
Therefore, the High Court allowed the writ petition and quashed the impugned order passed by the Respondent. Further, the Court ordered the Respondents to process the Petitioner’s claim within 3 months, for refund of unutilized IGST credit lying in Electronic Credit Ledger under Section 54 of the CGST Act.
Download full PDF (Go to Free download section)
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Rule returnable forthwith. Learned Standing Counsel Shri Ankit Shah waives service of rule on behalf of the respondents.
2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs :
A) That this Hon’ble court may be pleased to issue an appropriate a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing the respondents themselves, their officers and subordinates to act upon or grant the petitioner refund of unutilized IGST credit lying in Electronic Credit Ledger.
A1. That this Hon’ble Court may be pleased to issue an appropriate a Writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India to set aside the order of rejection of refund dated 01.08.2019 passed by the Deputy Commissioner, CGST, Mundra Division.
B. That this Hon’ble Court may be pleased to issue an appropriate a Writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the respondents that in case there is no rule for SEZ refund then rule(s) for granting refund of unutilized IGST credit lying in Electronic Credit Ledger be framed to bring parity in refund under section 54 for all inverted tax structure suppliers and to remov