Pr. Commissioner Vs Tea Linker (GSTAT Kolkata)
Summary: The GST Appellate Tribunal, Kolkata Bench considered a Revenue appeal against the Order-in-Appeal dated 16.07.2025, by which the first Appellate Authority had upheld the refund sanctioned to M/s Tea Linkers under the inverted duty structure provisions of Section 54(3)(ii) of the CGST Act, 2017. The respondent had purchased bulk tea taxable at 5% and packing materials taxable at 12%, and supplied packaged tea at 5%. For the period 01.10.2021 to 31.03.2022, a refund claim of Rs.59,26,077/- was filed; the original authority sanctioned Rs.59,24,669/- after issuing a show cause notice. The Revenue challenged the refund principally on the ground that the input and output were both tea taxable at 5%, relying on Circular No. 135/5/2020-GST dated 31.03.2020 and Circular No. 173/05/2022-GST dated 06.07.2022.
The Revenue contended that the refund restriction applied where the input and output supplies were the same and argued that the decision of the Calcutta High Court in M/s. Shivaco Associates was distinguishable because the present case involved the same 5% rate on bulk tea and packaged tea. It also argued that the higher tax rate on packing materials could not, by itself, support an inverted-duty refund.
The respondent submitted that its inputs comprised bulk tea and packing materials, while the outward supply was packaged tea, with packaging being integral to the composite supply. It relied on Section 2(59) of the CGST Act and CBIC Circular No. 79/53/2018-GST dated 31.12.2018 to contend that packing materials are inputs eligible for ITC. It further submitted that Circular No. 135/5/2020-GST concerned accumulation arising from reduction in GST rates on the same goods, whereas there had been no change in the GST rate on tea in the present case. It also relied on the judicial reasoning that a circular issued under Section 168(1) cannot curtail a statutory refund entitlement.
