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GST - Interpretation of ‘Inverted duty structure’ - Section 54(3) of CGST Act, 2017 – Rule 89 of CGST Rules, 2017 – Eligibility to refund under inverted duty structure when GST rates on inputs are marginally higher than output supply – Rejection of claim for refund on the ground that the petitioner’s case does not fall in the category of inverted duty structure as inputs and outputs both were attracting same rate of GST – Revenue contention that the accumulation of input tax credit was not account of rate of tax of inputs being higher than the rate of tax on output supplies – HELD – in the present case, while rate of GST on many inputs and output supplies are the same, yet, rate of GST on various input-raw materials is higher than the rate of GST on output supplies – The comparative analysis shows that all the inputs taken together and utilised through the process of manufacturing, the output supplies would carry higher rate of GST as compared to the rate of GST on such inputs, either taken individually or collectively. The rate of tax on output is ranging from 0.1% to 5% or 12% whereas rate of tax applicable on some inputs may be 5% or 12%, but on remaining inputs, rate of GST is certainly higher than 5% or 12% - The provision contained in proviso (ii) to Section 54(3) of the CGST Act signifies the plurality of both inputs and output supplies. The statute purposely uses the words, “inputs” and “output supplies” - it is well settled that a taxing statute is to be strictly construed. Conscious use of the plural words, “inputs” and “output supplies” by the legislature has to be given full effect to. Use of the word, “inputs” signifies a situation where there may be more than one input and it is not possible to read “inputs” as “input” alone, so as to restrict its meaning - the scheme of refund of unutilised ITC which has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies cannot be restricted only to those cases where there is single input and single output supply. Taking into consideration the legislative intendment, objective of the scheme of refund, the literal interpretation has to be given full effect to, scheme of refund in case of inverted duty structure will continue to apply irrespective of the number of inputs and number of output supplies - the scheme of refund based on inverted duty structure cannot be held to be inapplicable merely because multiple inputs and multiple output supplies are involved - Once all the inputs and output supplies on comparative basis lead to a situation where the rate of tax on inputs is higher than the rate of tax on output supplies, the scheme of refund is required to be given full effect to and it cannot be denied on such considerations that rate of tax, on comparative analysis, is more or less the same - even if the overall rate of all inputs is marginally higher than rate of output supplies, the accumulation of unutilised input tax credit on such account will bring it within the net of inverted duty structure – the determining factor for applicability of Section 54(3) of the CGST Act read with Rule 89(5) of the CGST Rules is rate of tax and quantum of ITC content and not the quantum of individual inputs and the outputs. The stock based approach violates the statutory scheme of refund - where the rates of tax on some of the inputs are higher than the rates of tax on output supplies, where the outputs are more than one, the statutory scheme of refund based on inverted duty structure shall become applicable – the impugned orders are set aside and the writ petition is allowed by remand
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