Order Date: 5 September 2022

Facts-

• The Petitioner, Micro Systems and Services, is a proprietary concern established in the year 2005 engaged in the business of assembling and supply of computers and computer parts. Petitioner is a registered supplier to all the Defence, Research & Development Organization Laboratories and affiliates across the country.
• On the materials supplied by it, petitioner added 5% GST as per the concessional rate fixed by the Government for supplies to DRDO. 
• Petitioner filed application on 02.12.2020 before Assistant commissioner of central tax claiming refund of Rs.77, 91,857/- under inverted tax structure in terms of Section 54 of the CGST Act. 
• While rejecting the refund application of the petitioner, Assistant commissioner of central tax relied upon a Circular No.135/05/2020-GST of the CBIC dated 31.03.2020.
• The Respondent adverted to the Board Circular dated 31.03.2020 more particularly to para 3.2 thereof as per which it was clarified that refund of accumulated Input Tax Credit (ITC) under clause (ii) of sub-section (3) of Section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same. 
• The main thrust of the above Board’s Circular was that the input and the output supplies should be invariably different. On the above basis, the refund claim of the petitioner was rejected. 
• The Respondents further submitted applicability of the Circular No.173/05/2022-GST dated 06.07.2022, cannot be applied retrospectively.
• Circular dated 06.07.2022 clarified that in cases, refund of accumulated input tax credit on account of inverted structure would be allowed on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions
• Aggrieved thereby, the present writ petition came to be filed.

Issue-

• Whether the refund application is rightly rejected?

Order-

• The Division Bench of Hon’ble High Court observed that Refund of accumulated input tax credit on account of inverted structure would be allowed in cases where accumulation of input tax credit is on account of rate of tax on output supply being less than the rate of tax on inputs (same goods) at the same point of time as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions.
• The Circular dated 06.07.2022 is clarificatory in nature whereby paragraph 3.2 of the Circular dated 31.03.2020 has been substituted. Being clarificatory, Circular dated 06.07.2022 inserting the above clarification would have the effect from the date when Circular dated 31.03.2020 came into effect - If this be the position, then the claim of the petitioner is liable to be re-considered on the basis of the Circular dated 31.03.2020 as clarified by the Circular dated 06.07.2022.
• The Court remanded the matter to Assistant commissioner of central tax for re-consideration in terms of the Circular dated 06.07.2022.
• Accordingly, the Writ Petition is allowed.