Britannia Industries Limited Vs. Union of India (Gujarat High Court)
1. It is held by Honourable Gujrat High Court in Britania Industries Limited case that the SEZ unit can claim a refund of ITC distributed by Input Service Distributor (ISD).
2. Brief Facts of the Case: M/S Britania Industries, a limited Company filed the petition through its director. The petitioner is situated in Special Economic Zone (SEZ). Filed an application for refund in GST RFD-01 with regard to the IGST distributed by Input Service Distributor (ISD).
The petitioner, being an SEZ unit making Zero-rated supplies, was not able to utilize IGST Credit distributed by its ISD and an amount of Rs 99,05,156 /- was lying unutilized in the Electronic Credit Ledger. The petitioner, therefore, made an application to claim such a refund.
3. The claim was rejected by Dy. Commissioner, Central GST, Mundra Division, Gandhidham on the following grounds:-
(a) This office is unable to process the refund application as to date, no circular, notifications, relevant guidelines have been issued by the board to process GST refund claim application of units situated in SEZ in respect of tax paid on inward supplies.
(b) The refund filed by the petitioner cannot be processed under any category of refund specified under manual refund processing Circular No. 17/17/2017- GST and circular No. 24/24/2017-GST dated 21.12.2017.
(c ) SEZ unit is not supposed to pay any tax whether under forward charges or reverse charges mechanism for the supply received from outside SEZ and there is no tax treatment for supplies received within SEZ Unit. Thus, there would be no question of Input Tax Credit to the SEZ Unit.
(d) The Petitioner is situated in Adani Port & SEZ and as per the CGST Act ,the supply of Goods and/or Services to SEZ unit is Zero-rated hence are not eligible for a refund under Section 54 of the CGST Act
4. The Petitioner aggrieved by the decision filed the petition and submitted the following points:-
(a) The entire scheme of GST does not restrict any distribution of common Credit by an ISD to the SEZ Unit. On a conjoint reading of Sec 16 of the IGST Act and section 54 of the CGST Act, the petitioner is entitled to get the refund of unutilized ITC lying in the Electronic Credit Ledger.
(b) It was submitted that the sole intention of Sec 16 of the IGST Act which provides for Zero-rated supply is to avoid the cascading effect of taxation including the Zero Tax liability for exports and hence the supplies made to SEZ have been made as Zero-rated supplies.
(c) notification no. 28/2012 dated 20th June 2012 clarifying the procedure to distribute Input Tax Credit by ISD and SEZ Unit is not excluded in the said notification for distribution of ITC to all the units in the manner prescribed.
(d ) The learned advocate of the petitioner relied upon the circular No. 17 dated 15.11.2017 issued by the GST policy wing of CBIC to submit that unutilized ITC of IGST paid and distributed by ISD is required to be refunded after the application is filed by the petitioner in Form GST RFD 01.
(e) It was submitted that refund being inclusive in nature, the same is also required to be granted with regard to unutilised Input Tax Credit under Section 54 of the CGST Act.
5. The respondents vehemently opposed the petition. Mr. Shah, the learned Standing Counsel relying upon the averments made in affidavit in reply submitted the following points:
(a) The Government has offered various incentives and facilities to the Units in SEZs for attracting investments including foreign investments. The incentives include duty-free import/domestic procurement of goods for development, operation and maintenance of SEZ units, exemption from Central Sales Tax, and exemption from Service Tax and from State sales tax which has now been subsumed into GST and supplies to SEZs are zero-rated under IGST Act, 2017.
(b) The Central Government vide notification no.15/2017-IGST Rates dated 30.06.2017 exempts all the goods and/or services imported by the Unit or a developer in SEZ Unit from the whole of the IGST for authorized operations.
(c ) Further, as per the provisions of Section 16 (3) of Integrated Goods and Services Tax Act, 2017 only the supplies of goods or services or both to SEZ Developer or SEZ Units is eligible for claim of refund and there is no provision for granting of the refund to SEZ Unit in the IGST Act, 2017. Therefore, the claim of the petitioner holds no merits.
(d) As per Rule 89(1) of the CGST Rules, 2017 in case of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the supplier of the goods or services and not by the recipient/receiver of the goods or services. Thus, the petitioner being the receiver is not eligible for a refund of ITC and Deputy Commissioner has rightly rejected the refund claim of the petitioner.
(e) On collective reading of provisions of Section 54(3) of the CGST Act, Section 16 of the IGST Act together with Rule 89 (1) of the CGST Rules 2017, it is clear that when a supply is made to the SEZ unit or SEZ Developer it is the supplier and not the receiver who shall file the Refund application. The reason for the same is that in case of supply to an SEZ unit (which is considered as Interstate Supply) the liability to pay tax on such supplies is on the supplier. The receiver i.e. SEZ unit is not at all liable to pay any kind of tax on such supplies received by them. Thus, the petitioner was not at all liable to pay any tax on the supplies received by them and therefore is not liable to claim a refund as per the prevalent provisions.
6. The Honourable Court considered the following provisions of law relevant for the purpose of deciding whether the petitioner is entitled to refund of ITC distributed by ISD:-
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