The Rajasthan High Court has annulled Point No. 2 of Circular No. 181/13/2022-GST, issued on November 10, 2022. This specific point restricted the claims for Input Tax Credit (ITC) related to the inverted duty structure for transactions made before July 18, 2022.
A bench comprising Justices Dinesh Mehta and Sangeeta Sharma observed that the clarification in question, when evaluated for its reasonableness, violates Article 14 of the Constitution of India. This is evident from the fact that the right to claim a refund of Input Tax Credit related to input tax on inverted duty structures has been denied starting from July 18, 2022.
It cannot be expected that any taxpayer can claim the tax refund for the period paid up to 18.07.2022 on 18.07.2022 itself, more specifically, when he can apply for a tax refund within the allowable time limit of two years.
Therefore, curtailment of a taxpayer’s right to claim refund up to 18.07.2022- the date of enforceability of the notification is not legal and opposite to section 54 of the Act of 2017, the bench cited.
The firm of the taxpayer is in the manufacture of edible oil, purchasing mustard oil, etc., that comes under HSN Code 1514 on payment of applicable GST.
A Notification No. 09/2022-Central Tax (Rate) on 13th July, 2022 was issued, furnishing that collected ITC will not be permitted for various items, including HSN Entry No. 1514, which was made enforceable from the prospective date, i.e., 18.07.2022.
The taxpayer, based on the fact that its products come within the category of inverted duty structure, has submitted applications for the refund of the ITC u/s 54 of the CGST Act, 2017, for the period(s) before 18.07.2022.
The taxpayer, as per the notification dated July 13, 2022, came into force on July 18, 2022. All the taxpayers, along with the applicant, were qualified to claim the refund of the ITC on the goods purchased up to 18.07.2022. Yet, the respondents have not determined the applications of the applicant for a claim of refund, which were submitted on 04.01.2023.
As per the bench, the restriction of refund claim qua the application filed up to 18.07.2022 creates two classes: one, the application for refund (for period 18.07.2022) filed up to 18.07.2022, and those filed after 18.07.2022.
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For the submitted application, after 18.07.2022, the refusal of the taxpayer’s right amounts to apparent discrimination. This classification is without any rationale or intelligible criteria.
The right of the taxpayer to claim a refund could not be limited in the way specified in the circular impugned, as it would remove the legal right of the taxpayer, the bench cited.
According to the Bench Point No. 2 of the Circular No. 181/13/2022-GST dated 10.11.2022, issued by the CBITC, is declared illegal and arbitrary, being violative of Article 14 of the Constitution of India and opposite to the purport and import of the Notification on 13.07.2022.
Point no. 2 of the Circular has been quashed by the bench to the scope of validating the Input tax refund to the applications submitted up to 18.07.2022.
| Case Title | Shree Arihant Oil and General Mills vs. Union Of India |
| Case No. | No. 2932/2023 |
| Counsel for Petitioner | Mr Sanjeev Johari and Mr Shubhankar Johari |
| Counsel for Respondent | Mr Mahaveer Bishnoi and Mr Rajat Arora |
| Rajasthan High Court | Read Order |
