Dilip Babubhai Patel Vs State of Gujarat & Anr. (Gujarat High Court)
The petitioner sought a direction for refund of ₹18,74,676 along with interest and re-credit of the same amount to its Electronic Credit Ledger (ECL). The petitioner had accumulated Input Tax Credit (ITC) under the Gujarat VAT Act, which was carried forward into the GST regime through Form GST TRAN-1 under Section 140 of the GST Acts. The transitional credit was reflected in the ECL from July 2017. During the GST regime, the petitioner continued to accumulate ITC owing to an inverted duty structure and filed a refund application under Section 54(3) read with Rule 89 of the GST Rules for ₹23,50,000. The Department sanctioned ₹4,75,324 but rejected ₹18,74,676, treating it as transitional credit not eligible for refund.
The petitioner argued that once transitional credit was accepted under Section 140 and credited to the ECL, it became part of the ITC under the GST regime without any statutory distinction between transitional credit and GST-generated credit. It contended that Section 54(3) does not exclude transitional credit from refund, that Section 140 was enacted to preserve accumulated credit during the transition to GST, and that denial of refund would frustrate the legislative intent. The petitioner further submitted that the Department could not treat the same credit as ITC for utilization under Section 49(4) while denying its character as ITC for refund under Section 54(3). It also alleged violation of Rules 92 and 93 of the GST Rules for failure to issue a show cause notice and to re-credit the rejected amount to the ECL.
