Swastik Udyog vs. Union Of INDIA

Held

The Court held that the FAQ Annexure-7 dated 10.11.2022, to the extent it denied refund applications for ITC filed prior to 18.07.2022, was unsustainable. The Court affirmed the principle that Input Tax Credit is an indefeasible right of an assessee, accruing on the date of purchase of goods. The restriction imposed by the notification, effective from 18.07.2022, could not deny rights that had already accrued. The Court relied on its own coordinate bench's decision in Shree Arihant Oil and General Mills Vs. Union of India & Ors., and judgments from the Gujarat High Court in Patanjali Foods Ltd. vs. Union of India & Ors., and the Allahabad High Court in Vaibhav Edibles Pvt. Ltd. Vs. State of U.P. & Ors. The Court also noted the Supreme Court's rejection of an SLP in Gemini Edibles and Fats India Ltd. and anr. Vs. Assistant Commissioner of Central Taxes. The reasoning was that the notification's prospective operation from 18.07.2022 meant ITC accrued before that date could be recovered. The Court struck down the clarification in Circular No.181/13/22-GST, dated 10.11.2022, to the extent it restricted applications filed after 18.07.2022. Consequently, the impugned orders of refund rejection were set aside, and the respondents were directed to reconsider the applications without relying on the impugned circular.

Facts

The petitioners, including Swastik Oil Industries, Swastik Udyog, M/s Mother Dairy Fruit And Vegetable Pvt. Ltd., Vijay Solvex Limited, and M/s MO Industries, filed writ petitions before the Rajasthan High Court. The petitions challenged the denial of their refund applications for Input Tax Credit (ITC). The denial was based on FAQ Annexure-7 dated 10.11.2022, which stipulated that refund applications filed prior to 18.07.2022, concerning ITC, would be denied. The petitioners argued that their right to claim ITC had accrued before the effective date of the restriction. The respondents, including the Union of India and various GST authorities, contended that the FAQ and subsequent denial were in accordance with the law.

Key Issues

1. Whether the FAQ Annexure-7 dated 10.11.2022, which denies refund applications for ITC filed prior to 18.07.2022, is legally sustainable? (Question of law) Petitioner's arguments: The petitioners contended that Input Tax Credit is an indefeasible right that accrues to an assessee when goods are purchased. They argued that any ITC that accrued to them up to 18.07.2022, the date the relevant notification came into force, could not be denied. They relied on the Supreme Court judgment in Collector of Central Excise, Pune & Ors. vs. Dai Ichi Karkaria Ltd. & Ors., and similar views from the Gujarat High Court in Patanjali Foods Ltd. vs. Union of India & Ors., and the Andhra Pradesh High Court in Priyanka Refineries Pvt. Ltd. vs. Deputy Commissioner ST & Ors. and Gemini Edibles and Fats India Ltd. vs. Assistant Commissioner of Central Taxes, whose SLP was rejected by the Supreme Court. Respondents' arguments: The judgment does not explicitly record arguments made by the respondents, other than their stand leading to the denial of refunds.