M/S Padmavati Ferrous LTD vs. Union Of INDIA And Others

Held

The Court held that the present Writ Petition should be disposed of in terms of the judgment of the Delhi High Court in Indian Oil Corporation Ltd. (Supra). The Delhi High Court had clarified that Circular No. 135/05/2020 is not applicable where the Input Tax Credit (ITC) has accumulated on account of the rate of taxes on certain inputs being higher than the tax chargeable on the output supply, even if one of the main inputs and outputs is chargeable at the same rate of tax. The circular's clarification pertains to situations where ITC accumulates due to different tax rates at different points in time, not where the principal input and output are the same. The Court found that the admitted position, based on the non-challenge of previous High Court judgments by the Revenue, supported this view. Consequently, the petitioner's claim for refund is to be considered and decided under Section 54(3) of the Act of 2017, in line with the Delhi High Court's observations, within two months of filing an appropriate application. The period spent pursuing the writ petition will not be counted for limitation purposes.

Facts

The petitioner, M/s Padmavathi Ferrous Ltd., is aggrieved by Circular dated 31.03.2020 issued by the Ministry of Finance, Government of India. The petitioner contends that this circular restricts the claim of refund in a manner inconsistent with Section 54(3) of the Goods and Services Tax Act, 2017. The High Court had previously passed an interim order on 03.10.2024, noting that several other High Courts (Rajasthan, Calcutta, Guwahati, and Madras) had held the circular inapplicable and repugnant to Section 54(3)(ii) of the CGST Act. The respondents-Revenue acknowledged that these judgments had not been challenged before the Supreme Court.

Key Issues

1. Whether Circular dated 31.03.2020, issued by the Ministry of Finance, Government of India, is applicable and valid to restrict the claim of refund under Section 54(3) of the Goods and Services Tax Act, 2017, particularly in cases where input and output are the same but tax has accumulated due to different tax rates at different points of time? Petitioner's contention: The restriction imposed by the circular is inconsistent with and repugnant to the provisions of Section 54(3) of the Act of 2017. They rely on judgments from the Rajasthan, Calcutta, Guwahati, and Madras High Courts, as well as the Delhi High Court in Indian Oil Corporation Ltd. v. Commissioner of Central Goods and Services Tax and Others, which held the circular inapplicable. Revenue's contention: The respondents-Revenue acknowledged that the judgments relied upon by the petitioner have not been challenged in appeal before the Hon'ble Supreme Court.