Ajanta Pharma Limited Vs Union of India & Ors (Gujarat High Court)
Summary unit is eligible to claim a refund of unutilized Integrated Goods and Services Tax (IGST) credit distributed by an Input Service Distributor (ISD) under Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act).
Background and Petitioner’s Case
Ajanta Pharma Limited, an SEZ unit engaged in the manufacture and export of medicines, received input services proportionately distributed by its ISD under the provisions of the CGST Act. The ISD distributed IGST credit, but since the SEZ unit made zero-rated supplies, the accumulated input tax credit (ITC) remained unutilized in its electronic credit ledger. Consequently, Ajanta Pharma filed refund applications under Section 54(3) of the CGST Act and Rule 89(4) of the CGST Rules for different quarters of 2023, classifying them as “Export of Goods/Services without payment of tax.”
The Assistant Commissioner, CGST, Vadodara-II, sanctioned the refund claims through orders dated 5 October 2023, 11 December 2023, and 5 March 2024. Corrigenda were issued later in line with the Gujarat High Court’s earlier ruling in Britannia Industries Ltd vs Union of India (2020), which recognized similar refunds as valid.
Subsequently, the Commissioner directed the Adjudicating Authority to appeal against the sanction orders under Section 107(2) of the CGST Act, contending that the refunds were invalid under Section 16(3) of the IGST Act, Section 54(3) of the CGST Act, and Rule 89 of the CGST Rules. The Appellate Authority accepted the department’s appeal and set aside the refund orders on 18 February 2025. A show-cause notice was later issued to Ajanta Pharma under Section 73(1), demanding recovery of the refund on the basis that a review petition had been filed before the Supreme Court concerning the Britannia ruling.
