Eveready Spinning Mills Private Limited Vs Assistant Commissioner (Madras High Court)
The Madras High Court in Eveready Spinning Mills Private Limited v. Assistant Commissioner (decided on 2025) set aside the rejection of the company’s Goods and Services Tax (GST) refund claim filed under the inverted duty structure. The Court held that the department had wrongly relied on a circular that has already been declared ultra vires (beyond statutory authority) by multiple High Courts across India. The matter was remitted back to the tax authority for reconsideration in light of those judicial precedents.
Background and Facts
Eveready Spinning Mills Private Limited, engaged in manufacturing cotton and blended yarn, filed a refund claim of ₹1.97 crore for November 2023 under Section 54(3) of the CGST Act, 2017 read with Rule 89(1) of the CGST Rules, 2017. The claim was made on the ground of accumulated Input Tax Credit (ITC) due to an inverted duty structure — a situation where the tax rate on inputs is higher than that on outputs.
The Assistant Commissioner of Central Tax rejected the refund by relying on Para 3.2 of CBIC Circular No.135/05/2020-GST dated 31.03.2020, which stated that refund under the inverted duty structure is not available where the input and output supplies are the same, even if taxed at different rates at different times. The authority held that since both the input (raw cotton) and the output (cotton yarn) attracted GST at 5%, no inverted duty existed.
