Augustan Textile Colours Vs Commissioner of State Tax (GSTAT Ernakulam)
Summary: The present appeal concerns rejection of an inverted duty structure refund of unutilized Input Tax Credit (ITC). The appellant, a private limited company engaged in manufacture of garments, had inputs taxable at 18% while its outward supplies were taxable at 5%, resulting in accumulation of ITC. For July 2019 to September 2019, it claimed refund of Rs. 18,41,280/- (IGST) under Section 54(3) of the CGST/KGST Act, 2017 read with Rule 89(5) of the CGST/KSGST Rules, 2017. The adjudicating authority rejected Rs. 9,72,027/- and sanctioned Rs. 8,69,253/-. The First Appellate Authority granted further relief of Rs. 2,64,860/- but sustained rejection of Rs. 7,07,173/-, leading to the present appeal.
The Tribunal considered, first, the appellant’s challenge to the show cause notice and orders. The notice merely alleged “wrong ITC claim” and stated the consolidated amount of Rs. 9,72,027/-, without invoice-wise particulars, the nature of ineligibility or the basis of rejection. The Tribunal held the SCN vague and lacking specificity, observing that the appellant was thereby deprived of a proper opportunity to meet the allegations. It rejected the Revenue’s contention that production of detailed invoice lists cured the defect, noting that the order-in-original contained no narration or findings establishing the alleged invoice-by-invoice verification. The Tribunal relied on the Supreme Court’s principle in Commissioner of Central Excise, Bangalore v. Brindavan Beverages (P) Ltd. that the show cause notice is the foundation of the departmental case and that vague allegations can deprive the noticee of a proper opportunity.
