Pee Gee Fabrics Private Limited Vs Union of India (Gujarat High Court)
The Gujarat High Court, in the case of Pee Gee Fabrics Private Limited v. Union of India, has ruled in favor of the petitioner, quashing a pair of orders from tax authorities that had denied a Goods and Services Tax (GST) refund. The case centered on a dispute over a refund of Input Tax Credit (ITC) that accumulated due to an “inverted duty tax structure,” where the GST rate on inputs is higher than the rate on the final product. The court found that the tax authorities adopted a “pedantic approach” by rejecting a legitimate claim based on a technicality, directing them to sanction the refund.
Background of the Case
Pee Gee Fabrics, a textile manufacturer, is registered under the Central Goods and Service Tax Act, 2017. The company’s business involves manufacturing fabrics, which are subject to a 5% GST rate. However, the raw materials used in production, such as yarn, chemicals, and power, are taxed at a higher rate, ranging from 12% to 28%. This disparity created an inverted duty tax structure, entitling the company to a refund of accumulated ITC under Section 54(3)(ii) of the GST Act.
