Refund of Accumulated ITC is Admissible Even If Principal Input & Output Have Same GST But Other Inputs Have Different Rate | HC

Case Details: Indian Oil Corporation Ltd. v. Commissioner of Central Goods & Services Tax - [2023] 157 taxmann.com 431 (Delhi)

Judiciary and Counsel Details

• • Vibhu Bakhru & Amit Mahajan, JJ.
  • S. Ganesh, Senior Advocate with Mr Ashok K. Bhardwaj & Mr Manish Kumar Hirani, Advs. for the Petitioner.
  • Atul Tripathi, Senior Standing Counsel & V.K. Attri, Adv. for the Respondent.

Facts of the Case

In the present case, the assessee procured Liquified Petroleum Gas (LPG) in bulk and same was refilled and bottled in cylinders after being compressed into liquid and sold. It filed application for refund of accumulated ITC but the refund of accumulated ITC was denied on ground that input and output attract same rate of GST of 5%. It filed writ petition against the rejection of refund.

The department contended that the refund of accumulated ITC was rejected relying on CBIC Circular No.135/5/2020-GST dated 31-3-2020, which stated that refund of accumulated ITC under section 54(3)(ii) of CGST Act would not be applicable in cases where input and output supplies are same.

High Court Held

The Honorable High Court noted that various items were used for production including accessories required for safety and such goods were essential for production of bottled LPG and making it suitable for retail supply such as valves, nylon thread, clips and plastic seals which were chargeable to different rate of GST of 18%.

The word ‘inputs’ used in plural in provision indicated refund of accumulated ITC was not confined to ITC accumulated on a single input and the law did not require comparing tax rate of principal input with tax rate of principal output supply. The Court further noted that tax rate of other inputs could not be disregarded and there were no reason or scope for confining refund of unutilized ITC to cases where tax rate on main input was higher than tax rate of principal output.

Moreover, the aforementioned Circular was not applicable in the instant case as it was related to ITC accumulated on account of different rates applicable at different points of time. Thus, the Court directed GST authorities to process refund applications along with interest.