Order Date – 18 January 2024

Parties: M/s.VSM Weavess India Private Limited Vs The Assistant Commissioner (ST)

Facts –

• The Petitioner, M/s. VSM Weavess India Private Limited, is a textile manufacturing company, which uses viscose yarn as a raw material for the manufacturer of viscose fabrics. They also undertook export and availed refund of IGST paid.
• They applied for refund with regard to unutilized ITC arising from the inverted duty structure, the application was rejected alleging that the refund claim for zero rated exports disentitle from claiming a refund for unutilized ITC, debit entries of the refund claim were not made, and supporting documents are not submitted.

Issue –

• Whether the refund claim for zero rated exports disentitle from claiming a refund for unutilized  ITC?

Order –

• The Divisional Bench of Hon’ble High Court observed that under Section 54 of the GST Act, refund may be claimed either for unutilized ITC on account of an inverted duty structure or in respect of zero rated exports. Therefore, the refund claim for zero rated exports does not disentitle the petitioner from claiming a refund for unutilized ITC.
• When the statute provides for a refund subject to fulfillment of conditions, as long as such conditions are fulfilled, a refund claim cannot be rejected on the ground that debit entries were not made.
• It is possible that ITC may accumulate both in respect of input goods that are not affected by an inverted duty structure and by the purchase of input goods that are so affected. Therefore, it is necessary for the petitioner to submit all necessary documents to establish that its claim for refund is confined to input goods that are affected by an inverted duty structure.
• Thus the impugned deficiency memos are quashed. As a corollary, the matter is remanded for re-consideration.