Padmavati Ferrous Ltd. Vs Union of India And Others (Punjab and Haryana High Court)
Summary: The Punjab and Haryana High Court considered a writ petition filed by M/s Padmavati Ferrous Ltd. challenging the restriction on GST refunds imposed through Circular No. 135/05/2020-GST dated 31 March 2020. The petitioner contended that the restriction was inconsistent with Section 54(3) of the CGST Act, 2017, governing refunds of accumulated input tax credit under the inverted duty structure. During the proceedings, the petitioner relied on decisions of various High Courts concerning the applicability of the circular. The Revenue informed the Court that the judgments relied upon by the petitioner had not been challenged before the Supreme Court.
The High Court followed the Delhi High Court’s judgment in Indian Oil Corporation Ltd. v. Commissioner of Central Goods and Services Tax and Others, (2024) 122 GSTR 318. That decision distinguished accumulation of input tax credit arising from changes in GST rates at different points in time from accumulation caused by higher tax rates on certain inputs than on output supplies. The Delhi High Court had held that Circular No. 135/05/2020 did not prohibit refunds merely because a principal input and the output supply attracted the same tax rate, where other inputs were taxed at higher rates. The Punjab and Haryana High Court adopted that reasoning without independently declaring the circular unconstitutional.
Accordingly, the High Court allowed the writ petition and directed that the petitioner’s GST refund claim under Section 54(3) be considered and decided in accordance with the Delhi High Court’s observations within two months from filing an appropriate application. It further directed that the period spent pursuing the writ petition would be excluded while computing limitation for the refund application. The ruling provides procedural relief and requires reconsideration of the claim; it does not itself quantify or sanction the refund.
Cases Discussed
1. Indian Oil Corporation Ltd. v. Commissioner of Central Goods and Services Tax and Others — Delhi High Court; (2024) 122 GSTR 318; decided on 05.12.2023. The Delhi High Court held that Circular No. 135/05/2020 does not bar refund of accumulated ITC attributable to higher tax rates on certain inputs merely because the principal input and output attract the same GST rate. The Punjab and Haryana High Court expressly followed this decision.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
1. The petitioner is aggrieved by Circular dated 31.03.2020 issued by the Ministry of Finance, Government of India, to the extent that it restricts the claim of refund in terms of the notification.
2. The primary contention of the petitioner is that the restriction imposed by the circular is inconsistent with the provisions of Section 54(3) of the Goods and Services Tax Act, 2017 (hereinafter referred to as “the Act of 2017”).
3. While entertaining this writ petition, interim orders were passed on 03.10.2024:-
“Learned counsel has invited attention to the judgments passed by the Rajasthan High Court, Calcutta High Court, Guwahati High Court and Madras High Court wherein the circular has not been held applicable and has been held repugnant to section 54(3) (ii) of the CGST Act.
Notice of motion.
Mr. Ajay Kalra, Sr. Standing Counsel accepts notice on behalf of respondents/Revenue and seeks time to file reply. May do so, on or before the next date of hearing with a copy in advance to the counsel opposite.
List again on 05.02.2025.”
4. It is further pointed out that a similar view, as taken by the three High Courts, referred to in the aforesaid order dated 03.10.2024, has also been adopted by the Delhi High Court in Indian Oil Corporation Ltd. v. Commissioner of Central Goods and Services Tax and Others ; (2024) 122 GSTR 318.
5. Learned counsel for the respondents-Revenue, upon obtaining instructions, submits that none of the judgments, relied upon by the petitioner, have been challenged by the respondent-Department in Appeal before Hon’ble the Supreme Court.
6. In view of the admitted position, we are of the opinion that the present Writ Petition can also be disposed of in terms of the judgment of the Delhi High Court in Indian Oil Corporation Ltd. (Supra), wherein the Delhi High Court has held as under, in paragraphs 27 and 28:-
“27. It is clear from a plain reading of paragraph 3.2 of the Circular 135/5/2020 that it seeks to clarify that in cases where input and output is the same but the tax has accumulated on account of the different tax rates at different points of time, refund under Section 54 of the CGST Act is not admissible. It is not necessary for this Court to examine whether such clarification falls foul of Section 54(3) of the CGST Act as it is apparent that the same is inapplicable in the facts of the present case. The clarification seeks to address an issue where the ITC is accumulated on account of different rates being applicable at different points of time. It does not seek to address any issue where the principal input and output is the same. In terms of the Circular 135/5/2020, if the rate of tax on input and output is the same and ITC is accumulated on account of different rates being applicable at different points of time, the case would not fall under Clause (ii) of the proviso to Sub-section (3) of Section 54 of the CGST Act. The use of the words, the input and output being the same, is essentially in the context of the rate on input and output being the same.
28. Circular No.135/05/2020 has no application where ITC, refund of which is sought, has accumulated on account of rate of taxes on certain inputs being higher than tax chargeable on the output supply, notwithstanding that the one of the main input and output is chargeable at the same rate of tax.”
7. The Writ Petition before the Delhi High Court was ultimately allowed vide order dated 05.12.2023.
8. Following the reasons recorded in the judgment of the Delhi High Court in Indian Oil Corporation Ltd. (Supra), this Writ Petition also succeeds and is allowed. Consequently, the petitioner’s claim for refund shall be considered and decided under Section 54(3) of the Act of 2017, keeping in view the observations made in the judgment passed by the Delhi High Court in Indian Oil Corporation Ltd. (Supra), within a period of two months from the date of filing of an appropriate application in this regard.
9. It is clarified that the period spent in pursuing the present Writ Petition shall not be counted for the purposes of computing limitation for filing the application for refund.
10. Pending application(s), if any, shall stand disposed of accordingly.
