Vijay Solvex Limited vs. Union Of INDIA

Held

The Court held that the FAQ Annexure-7 dated 10.11.2022, to the extent it denies refund applications for ITC filed prior to 18.07.2022, is unsustainable. The Court affirmed the view taken by a Co-ordinate Bench of the Rajasthan High Court in Shree Arihant Oil and General Mills Vs. Union of India & Ors., which had relied on judgments from the Gujarat High Court, Andhra Pradesh High Court, and the Supreme Court's dismissal of a Special Leave Petition in Gemini Edibles and Fats India Ltd. The reasoning was that Input Tax Credit is an indefeasible right that accrues when goods are bought. The restriction imposed by the notification, effective from 18.07.2022, cannot deny rights that had already accrued to the petitioner up to that date. The Court found the clarification in Circular No.181/13/2022-GST, dated 10.11.2022, to be neither logical nor in accordance with the understanding of law, as it attempted to restrict applications for ITC that arose before the notification's effective date. Consequently, the impugned orders of rejection of refund were set aside, and the respondents were directed to reconsider the applications without relying on the said circular. The Court also noted that the benefit of unutilised ITC in cases related to the inverted duty structure applied only after 18.07.2022, as laid down in Mafatlal Industries Ltd. and Ors. Vs. Union of India and Ors.

Facts

The petitioners, 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 challenging the denial of their refund applications for Input Tax Credit (ITC). The denial was based on FAQ Annexure-7 dated 10.11.2022, which clarified that refund applications filed prior to 18.07.2022, concerning ITC claims, would be denied. The petitioners argued that their right to claim ITC had accrued before the effective date of the restriction. The respondents are various authorities under the Union of India and the State of Rajasthan, including the Assistant Commissioner of Central Tax and the Deputy Commissioner, State Tax.

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, particularly in light of the accrual of ITC rights before this date? (Question of law) Petitioner's Arguments: - The petitioners contended that Input Tax Credit (ITC) is an indefeasible right that accrues to an assessee on the date of purchase of goods. They relied on the Supreme Court judgment in Collector of Central Excise, Pune & Ors. vs. Dai Ichi Karkaria Ltd. & Ors. and Gujarat High Court in Patanjali Foods Ltd. vs. Union of India & Ors., 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. - They argued that the denial of refund for ITC accrued prior to 18.07.2022 impinges upon their fundamental rights under Article 19(1)(g) and 300A of the Constitution of India. Respondents' Arguments: - The judgment does not explicitly record arguments made by the respondents. However, their action of denying refunds based on FAQ Annexure-7 implies a contention that the clarification and its retrospective application to pending applications were valid.