M/S Mother Dairy Fruit And Vegitable PVT. LTD. 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 principle that Input Tax Credit (ITC) is an indefeasible right of an assessee, accruing at the time of purchase. The notification imposing restrictions came into effect from 18.07.2022, meaning that any ITC that accrued to the petitioner up to that date could not be denied. The Court found that the clarification in the impugned circular was neither logical nor in accordance with the understanding of the law. It relied on the judgments of the Rajasthan High Court in Shree Arihant Oil and General Mills, the Gujarat High Court in Patanjali Foods Ltd., the Andhra Pradesh High Court in Gemini Edibles and Fats India Ltd. (and the Supreme Court's dismissal of the SLP therein), and the Allahabad High Court in Vaibhav Edibles Pvt. Ltd. The Court concluded that the unutilised ITC in cases related to the inverted duty structure applied only after 18.07.2022, and the benefit passed on to working customers could only be after that 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 contested clarification.

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 concerning ITC claims would be denied. The petitioners argued that their right to claim ITC had accrued before the effective date of the notification. The respondents, including the Union of India and various GST authorities, contested this position.

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 (ITC) is an indefeasible right that accrues to an assessee when goods are bought. They argued that the right to claim ITC, which accrued to them up to 18.07.2022, cannot be denied by subsequent clarifications. 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 & Ors. 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. Respondents' arguments: The judgment does not explicitly record arguments made by the respondents.