M/S Mo Industries vs. Union Of INDIA

Held

The Court held that the FAQ Annexure-7 dated 10.11.2022, to the extent it denied refund applications filed prior to 18.07.2022 for ITC claims related to the inverted duty structure, was unsustainable. The Court affirmed the view taken by a coordinate bench of the Rajasthan High Court in Shree Arihant Oil and General Mills Vs. Union of India, which had relied on judgments from the Gujarat High Court in Patanjali Foods Ltd. vs. Union of India and the Andhra Pradesh High Court in Priyanka Refineries Pvt. Ltd. vs. Deputy Commissioner ST and Gemini Edibles and Fats India Ltd. vs. Assistant Commissioner of Central Taxes. The Supreme Court's dismissal of the SLP in the Gemini Edibles case was also noted. The Court reasoned that Input Tax Credit is an indefeasible right that accrues to an assessee, and the right to claim ITC that arose before 18.07.2022 could not be denied. The restriction imposed by the notification was applicable only to ITC arising after 18.07.2022. Consequently, the impugned orders of rejection of refund were set aside, and the respondents were directed to reconsider the applications without relying on the clarification in Circular No.181/13/22-GST, dated 10.11.2022. The writ petitions were allowed.

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 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 stipulated that refund applications filed prior to 18.07.2022 for ITC claims related to the inverted duty structure 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 provided the correct interpretation of 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 concerning the inverted duty structure, is legally sustainable, particularly in light of Section 54 of the CGST Act? Petitioner's arguments: The petitioners contended that Input Tax Credit is an indefeasible right that accrues to an assessee when goods are bought. They argued that any right to claim ITC that accrued before 18.07.2022, when the relevant notification came into force, cannot be denied. They relied on judgments from the Rajasthan High Court in Shree Arihant Oil and General Mills Vs. Union of India, the Gujarat High Court in Patanjali Foods Ltd. vs. Union of India, and the Andhra Pradesh High Court in Priyanka Refineries Pvt. Ltd. vs. Deputy Commissioner ST and Gemini Edibles and Fats India Ltd. vs. Assistant Commissioner of Central Taxes. They also cited the Supreme Court's dismissal of a Special Leave Petition in the Gemini Edibles case. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or state. However, their stance was reflected in the FAQ Annexure-7 and the denial of refund applications.