Order Date – 05 December 2023

Parties: Indian Oil Corporation Limited Vs Commissioner of Central Goods and Services Tax & Ors.

Facts –

• The Petitioner, Indian Oil Corporation Limited, filed a refund claim of accumulated ITC and the same was denied on the ground that the rate of tax on input supply and output supply are the same. According to the Revenue, the refund is not permissible in view of Clause (ii) of the proviso to Section 54(3) of the Central Goods & Service Tax Act, 2017.
• The petitioner stated that it accumulates unutilized ITC on account of rate of tax on certain inputs being higher than the rate of tax, chargeable on bottled Liquid Petroleum Gas (hereafter ‘LPG’) – the petitioner’s output supply. Thus, according to the petitioner, refund of unutilized ITC is not proscribed in terms of the proviso to Section 54(3) of the CGST Act.

Issue –

• Whether the refund claim is proscribed in terms of the proviso to Section 54(3) of the CGST Act?

Order –

• The Divisional Bench of Hon’ble High Court observed that in case where the accumulation of ITC is attributable solely to the rate of tax on inputs exceeding the rate of tax on output supplies, the taxpayer’s claim for refund on accumulated unutilised ITC will squarely fall under Clause (ii) of proviso to sub-section (3) of Section 54 of the CGST Act. 
• It is important to note that Clause (ii) of Section 54(3) of the CGST Act does not proscribe the grant of refund where the input and the output are the same. Clause (ii) of proviso to sub-section (3) of Section 54 of the CGST Act merely restricts the refund of unutilised ITC to cases where there is accumulation of unutilised ITC on account of rate of tax on inputs being higher than the rate of tax on the output supplies.
• It is also relevant to note that the Appellate Authority had, inter alia, found that the petitioner’s claim for refund would not be admissible by virtue of the Circular No.135/05/2020 as in terms of the paragraph 3.2 of the said Circular refund of accumulated ITC was not available, where the input and output supplies were the same. It is implicit in the contentions advanced on behalf of the Revenue before us that, this ground stands virtually abandoned.
• The concerned authority is directed to process the petitioner’s applications for refund along with applicable interest in accordance with law. The Writ petition is allowed.