2026-VIL-210-GSTAT-VSK
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  2. 2026-VIL-210-GSTAT-VSK

SGST Tribunal

GST - Refund of unutilised ITC distributed through Input Service Distributor to SEZ unit making zero-rated exports – Appellant-SEZ unit exporting goods without payment of integrated tax, received ITC distributed through an Input Service Distributor which remained unutilised - Refund claims were rejected on the ground that, being the recipient of supplies to an SEZ unit, only the supplier could claim refund under Rule 89 of the CGST Rules - Whether an SEZ unit making zero-rated exports is entitled to refund of unutilised ITC distributed through an Input Service Distributor - HELD - The claim of the Appellant is not founded merely on its status as recipient of supplies to an SEZ unit but arises from unutilised ITC validly distributed through the Input Service Distributor and attributable to its own zero-rated exports. Section 16(1) of the IGST Act treats exports and supplies to an SEZ unit as distinct categories of zero-rated supply, and Section 54(3) of the CGST Act read with Rule 89(4) provides the framework for refund of unutilised ITC on zero-rated supplies made without payment of tax. The second proviso to Rule 89(1) addresses direct supplies to an SEZ unit or developer and cannot be extended to every claim of an SEZ unit, as a procedural rule cannot be applied mechanically to defeat substantive entitlement - The Revenue failed to show any provision extinguishing the entitlement or that the suppliers could claim refund of credit already distributed through the Input Service Distributor. The principle in Britannia Industries Ltd. v. Union of India, SE Forge Ltd. v. Union of India and Wipro Ltd. v. Assistant Commissioner applies squarely. The refund remains subject to verification of eligible ITC and statutory conditions - The impugned orders are set aside, the matters are remitted to the proper officer for quantifying and sanctioning the admissible refund - The appeals are allowed - GST - Rejection of refund on unsubstantiated allegation of prior refund to suppliers and violation of natural justice - First Appellate Authority observed, on the basis of departmental back-office records, that the suppliers had already received refund, though the allegation was not put to the Appellant and the Revenue admitted before the Tribunal that no evidence was available on record - Whether the finding can be sustained as a ground for rejecting the refund claims - HELD - A finding adverse to the entitlement of a taxpayer to refund must be founded on relevant material and reached after a reasonable opportunity to rebut. A reference to back-office records, without disclosure of the underlying material, cannot establish that a corresponding refund was sanctioned. The mere filing of a refund application by a supplier does not prove that the refund was sanctioned or related to the very credit in dispute. The possibility of double refund and proof of double refund are different matters, as the former may justify verification while the latter requires evidence - The doctrine of audi alteram partem requires notice with an opportunity of hearing and a reasoned order - The finding is unsustainable and cannot be a ground for rejection, though double refund is not permitted, and any proposed exclusion must be supported by cogent documentary evidence after giving the Appellant a reasonable opportunity to respond - The appeals are allowed.
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