Order Date - 24 July 2025

Parties: Atul Limited & Anr. Vs Union of India & Ors.

Facts -

• The Petitioner, Atul Limited, is a public company engaged in manufacturing chemical products, supplying to SEZs and exporting outside India, claimed refund of unutilized input tax credit (ITC) of cess under Section 11 of the GST (Compensation to States) Act.
• Authorities rejected the refund citing Circular No. 45/19/2018-GST and Circular No. 125/44/2019-GST, on the ground that refund of cess is not allowed where export is with payment of IGST.

Issue -

• Whether refund of unutilized compensation cess credit on inputs (coal) is admissible under the GST framework when finished goods are exported with payment of IGST (zero-rated supply)?

Order -

• The Division Bench of Hon’ble high Court observed that it is not in dispute that this Hon’ble Court has categorically held in the case of Patson Papers that the respondent has rejected the refund claim in a wrong manner by misinterpreting the Circular No. 45/19/18 dated 30.05.2018 and Circular No. 125/44/19 dated 18.11.2019. It is further held that the petitioner in such cases can claim for purchase of coal used for manufacturing of goods exported being zero-rated supplies.  It was further held that the petitioner may have paid the IGST on the goods exported by it, however, the petitioner was not required to pay any compensation cess as the goods manufactured by the petitioner are exempted from the levy of tax.
• The facts of the present case and that being in the case of Patson Papers, are absolutely identical and the law envisaged therein would be squarely applicable to the facts of the present case. 
• In view of the decision and law laid down by this Court in the case of Patson Papers , the present petitions stands allowed. The respondent is directed to process refund application of the petitioner to sanction the refund of the CESS amount claimed on unutilized tax credit.