Vindhya Spinning Mills Private Limited Vs Assistant Commissioner of CGST And Central Excise (Madras High Court)
The Madras High Court disposed of two writ petitions involving identical issues by a common order. The petitions challenged orders rejecting the petitioner’s refund claims of accumulated unutilised input tax credit (ITC) under Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner, engaged in the manufacture of combed cotton yarn, contended that while the principal input, raw cotton yarn, attracted GST at 5%, several other inputs such as chemicals, consumables and packing materials attracted GST at 12% and 18%, whereas the output product was taxable at 5%. According to the petitioner, this resulted in accumulation of unutilised ITC, entitling it to refund under Section 54(3). The refund claims for the tax periods January 2023 and March 2023 were rejected by separate orders, giving rise to the writ petitions.
The petitioner submitted that a refund claim for an earlier period, namely July 2022, had already been accepted and sanctioned by the authorities. It relied upon Section 54(3)(ii) of the CGST Act, contending that the provision expressly permits refund where input tax credit accumulates because the rate of tax on inputs exceeds the rate of tax on output supplies. The petitioner also relied upon paragraph 54(a) of the Circular dated 18.11.2019, which stated that where multiple inputs attract different rates of tax, the formula under Rule 89(5) of the CGST Rules should be applied irrespective of the tax rates applicable to individual inputs.
