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GST – Refund of accumulated input tax credit in case of inverted duty structure – Application of Circular No.135/05/2020 restricting refund applies when inputs attract higher GST rate than outputs – Respondent engaged in scouring, dyeing and washing of grey fabric on job-work basis. Inputs such as chemicals, dyes and consumables used in processing attract GST at 18% and 12%, whereas outward supply of processed fabrics attracts GST at 5% - Original authority rejected refund claims on basis of CBIC Circular No.135/05/2020-GST, para 3.2, contending that inverted duty structure refund is not available when input and output supplies are the same. First appellate authority allowed the refund claims and directed original adjudicating authority to review and recalculate the refund amount - Revenue appealed on ground that FAA exceeded its jurisdiction by remanding case to adjudicating authority under Section 107(11) of CGST Act – Whether Circular No.135/05/2020-GST applies to case of inverted duty structure where inputs attract higher GST rate than outputs – HELD - The Circular No.135/05/2020 applies only to cases where there is reduction in GST rate on the same goods at different points in time. The provisions of Circular specifically state that where input and output are the same goods though attracting different tax rates at different points in time, refund is not available under Section 54(3)(ii) - In present case, there is genuine inverted duty structure where inputs attract higher GST rate (18%/12%) than outputs (5%). This is different from rate reduction scenario covered by the circular - The final product when sold in open market attracts same rate of GST. There is no reduction in GST rate. As per Hon'ble High Court of Madras in M/s Vindhya Spinning Mills case, if there is higher rate of tax on inputs compared to outputs, the party is entitled to refund of unutilised input tax credit – Revenue appeal is dismissed - Power of FAA to remand the matter for recalculation or re-quantification of refund amount – HELD - Once first appellate authority decides major legal issue in appeal, directing recalculation or re-quantification of refund amount in accordance with appellate findings is not remand under Section 107(11). First appellate authority did not leave refund claim open for fresh adjudication but directed ministerial re-computation to give effect to its findings. Such consequential direction cannot be equated with prohibited remand. The fact that refund was subsequently re-worked and already sanctioned and paid demonstrates that appellate order was workable and capable of implementation. Thus, the contention of the Revenue regarding remand of the case is not correct.
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