CHEC-TPL Line 4 Joint Venture Vs Union of India (Bombay High Court)
The Bombay High Court dealt with a writ petition challenging the rejection of refund claims arising from accumulated Input Tax Credit (ITC) due to an inverted tax structure.
The petitioner, an unincorporated joint venture engaged in metro rail construction work for a government authority, was registered under GST and paid tax at 12% on its outward supply of works contract services. However, it procured inputs and input services taxed at higher rates of 18% and 28%, resulting in accumulation of ITC. The petitioner claimed refunds under Section 54(3) of the CGST Act for multiple periods between 2018 and 2021.
Initially, refund claims were rejected by the authorities, and the appellate authority upheld the rejection. The petitioner relied on earlier judicial developments, including a Gujarat High Court decision that allowed inclusion of input services in refund computation, which was later reversed by the Supreme Court. Following this, the petitioner refiled refund claims using the revised formula, but these too were rejected.
A key issue before the Court was the applicability of Notification No. 14/2022 – Central Ta dated 05.07.2022, which amended Rule 89(5) of the CGST Rules to address anomalies in the refund formula. A subsequent circular clarified that the amendment would apply prospectively only to refund applications filed on or after 5 July 2022.
