2026-VIL-198-GSTAT-KLK
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SGST Tribunal

GST - Refund of accumulated Input Tax Credit under inverted tax structure where principal input and output fall under same HSN - Respondent was engaged in manufacture of crushed stone and stone aggregates from boulders and river bed material, and both the principal input and the final output fell under the same HSN attracting the same rate of tax - Respondent also used other inputs such as screening plant spare parts, crusher plant spare parts, vehicle parts, tyres and lubricants, which attracted higher rates of tax. The original authority sanctioned the refund under Section 54(3)(ii) of the CGST Act and the first Appellate Authority rejected the Revenue's appeal - Whether the Respondent is entitled to refund of accumulated ITC under Section 54(3)(ii) of the CGST Act when the principal input and the output are classified under the same HSN and attract the same rate of tax - HELD - Section 54(3)(ii) permits refund where credit has accumulated because the rate of tax on inputs is higher than the rate of tax on output supplies. The legislature consciously used the expression 'inputs' in plural and made no distinction between principal input and ancillary inputs, so reading such a restriction into the statute would not meet the ends of justice - The term 'input' under Section 2(59) has a broad meaning and includes all goods, other than capital goods, used in the course or furtherance of business. The principal input and the output may appear similar, but they are fundamentally different in nature as the final product undergoes a complex transformation involving several stages, processes and resources. Since the Respondent also utilised various other inputs attracting a higher rate of tax than the output, the principal input cannot be compared with the principal output alone - The Revenue's argument that input and output are the same has no force, the Respondent is eligible for refund under inverted tax structure – The Revenue's appeal is dismissedrnrn rnrnIssue 2: Applicability of CBIC Circulars on refund of accumulated ITC where input and output are the same - Refund of accumulated ITC under inverted tax structure was sanctioned to the Respondent, and the Revenue (Appellant) relied on para 3.2 of the Circular dated 31.03.2020 and on the later Circular clarifying it, to contend that refund is barred where input and output supplies are the same - Whether the said Circulars are applicable to the facts of the case and can deny the refund under Section 54(3)(ii) of the CGST Act - HELD - Para 3 of the first Circular is headed 'Refund of accumulated input tax credit on account of reduction in GST Rate', and the words 'though attracting different tax rates at different points in time' show that it applies only where the same goods attract different rates of tax at different points of time - In the present case, the raw material and the processed product attract the same rate of tax, so the issue is entirely different and the Circular is not applicable. Further, the Board's power under Section 168(1) is confined to issuing directions for uniformity in implementation of the Act. The Board can neither add to the provisions of the Act nor curtail the import of any part of the enactment, and a refund admissible under the Act cannot be denied by virtue of a circular. The later Circular is clarificatory in nature and applies to supplies made under a concessional notification, so once the principal Circular is not applicable, the clarificatory Circular is also not applicable - The Revenue's reliance on the Circulars is incorrect, the order of the first Appellate Authority is not interfered - The appeal is dismissed
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