2026-VIL-120-GSTAT-RNC
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SGST Tribunal

GST - Refund of unutilized Input Tax Credit of Compensation Cess accumulated on account of zero-rated supplies - Computation of Net ITC under Rule 89(4) of CGST Rules, 2017 read with paragraph 43(c) of CBIC Circular No. 125/44/2019-GST - Respondent filed a refund claim for unutilized Cess credit accumulated on raw materials attracting Compensation Cess while the final product did not attract such Cess - The adjudicating authority sanctioned the refund and the First Appellate Authority upheld the sanction - Revenue appealed contending that any ITC reversed in the return during the refund period, irrespective of the period to which it related, must be deducted from Net ITC - Whether the adjudicating authority was justified in sanctioning the refund of unutilized ITC of Cess under Section 54(3) of the CGST Act read with Rule 89(4) of the CGST Rules, where the ITC in question was reversed during the relevant period but related to an earlier period - HELD - The statutory test under Rule 89(4)(B) for determining Net ITC is whether the credit was actually availed during the relevant refund period, and not merely whether an amount was debited or credited in the electronic credit ledger during that period - The reversal in question pertained to an earlier tax period and was made only after the refund of the proportionate eligible ITC had already been sanctioned, and could not therefore reduce the Net ITC for the refund period under consideration, particularly since the total ITC of Cess availed during the relevant period was itself less than the reversed amount - Circulars issued by the Board are binding on the departmental authorities but cannot override or add words to a statutory rule, and cannot bind the courts or curtail substantive rights where they run contrary to the statute - Paragraph 43(c) of the Circular cannot be read as laying down that every reversal made during the refund period must be treated as a reduction of ITC availed during that period, irrespective of the period to which the underlying credit relates, since Rule 89(4) refers specifically to ITC availed during the relevant period and does not equate reversal with non-availment for all purposes - Where entitlement to refund is not disputed and the conditions of Section 54(3) of the Act and Rule 89(4) of the Rules are satisfied, a clarification in a circular cannot prevail over the statutory prescription - The impugned order is upheld and the appeal filed by the Revenue is dismissed
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