Atul Limited & Anr. Vs Union of India & Ors. (Gujarat High Court)
Refund of Compensation-Cess on coal used for manufacturing of goods, exported on payment of IGST but, no cess charged on exported goods
The Gujarat High Court, in the case of Atul Limited & Anr. v. Union of India & Ors., has ruled that a company can claim a refund of unutilized compensation cess paid on coal, even when the final goods are exported with the payment of Integrated Goods and Services Tax (IGST). This decision clarifies the interpretation of GST laws and circulars regarding refunds for zero-rated supplies. The petitioner, Atul Limited, manufactures chemical products that are not subject to compensation cess but require coal for captive power generation, which is subject to the cess. The company’s refund application for the unutilized cess credit was denied by tax authorities, who cited circulars that they argued prohibited such refunds when exports were made with IGST payment. The company challenged this decision, leading to the High Court’s intervention.
The court examined the relevant legal provisions, including Sections 54 of the CGST Act, 16 of the IGST Act, and 11 of the Cess Act. It was established that the petitioner’s finished goods were exempt from the compensation cess, and the cess was only levied on the coal used as an input. The court concluded that the tax authorities had misinterpreted Circulars No. 45/19/2018 and No. 125/44/2019, which address the inability to use cess credit to pay IGST, but do not prohibit a refund of cess when it remains unutilized. By referencing a similar case, Patson Papers Pvt. Ltd. v. Union of India, the court reaffirmed that the legislative intent of the GST framework allows for refunds in cases of zero-rated supplies.
