SC Declines to Interfere with SEZ Unit’s Refund of Unutilised ITC under Rule 89

Union of India & Ors. Vs Messrs Meghmani Organochem Limited & Anr. (Supreme Court of India)

The Supreme Court, in Union of India & Ors. Vs Messrs Meghmani Organochem Limited & Anr., dismissed the revenue’s challenge against a High Court order that granted an Input Tax Credit (ITC) refund to an SEZ Unit. The High Court, relying on its decision in Britannia Industries Limited vs. Union of India, had accepted the SEZ Unit’s argument that it was entitled to claim the refund of unutilised ITC accumulated under Rule 89 of the CGST Rules, as exports were made without tax payment under a Letter of Undertaking (LUT).

The revenue argued that only the supplier could claim the refund, not the SEZ Unit itself. Despite the revenue’s submission and acknowledgment that a challenge to the Britannia case failed earlier on the ground of low tax effect, the Supreme Court stated it was not inclined to interfere with the impugned order, considering the “peculiar facts and circumstances” and the refund amount. The Special Leave Petition was dismissed, but the Supreme Court explicitly stated that the question of law is kept open.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

The High Court relying on its decision rendered in the case of “Britannia Industries Limited vs. Union of India” reported in 2020 (42) G.S.T.L. 3 (Guj) accepted the arguments canvassed on behalf of the respondent herein-original petitioner that an SEZ Unit is entitled in law to claim the refund of unutilised ITC accumulated under Rule 89 of CGST Rules on the ground that exports are made without payment of tax under LUT.

2. Mr. Chandrashekhara Bharathi, the learned counsel appearing for the revenue submitted that Britannia Industries Limited (supra) was challenged before this Court, however, the challenge failed on the ground of low tax effect. He would submit that it is only the supplier who could have preferred the application claiming a refund of the unutilised ITC accumulated under Rule 89 of the CGST Rules and not the SEZ Unit.

3. In the peculiar facts and circumstances of the case and having regard to the amount which has been ordered to be refunded, we are not inclined to interfere with the impugned order. However, the question of law is kept open.

4. The Special Leave Petition is, accordingly, dismissed.

5. Pending application(s), if any, stands disposed of.