M/S Super Spintex PVT LTD vs. Union Of INDIA

Held

The Court allowed the writ-application. It was held that the issue raised by the writ-applicants was squarely covered by the High Court's previous judgment in M/s. Prince Spintex Pvt. Ltd. vs. Union of India. Consequently, the Court directed the respondents to sanction and pay the refund of Rs. 4,47,43,681/- to the writ-applicants. This was to be done after first reversing the entries of utilization of the subject credit and subsequently debiting the said amount from the credit ledger available to the writ-applicant. The Court ordered this exercise to be undertaken within four weeks from the date of receipt of the order. The Court noted that amendments to Section 49 of the CGST Act and the insertion of Sections 49A and 49B, along with Rule 88A, had led to the automatic utilization of the IGST credit, resulting in a nil IGST balance and inflated CGST/SGST balances. The principle derived is that even if subsequent legal provisions lead to automatic utilization of credit, a refund legitimately due based on a prior court ruling must be facilitated by reversing such automatic utilization.

Facts

The writ-applicants, M/s Super Spintex Pvt Ltd, sought to quash Notification No. 26/2017-Custom, dated 29.06.2017, and Trade Notice 11/2018, dated 30.06.2017, to the extent they mandated payment of IGST by importers. They also prayed for a refund of Rs. 4,47,43,681/- with interest. The respondents conceded that the issue was covered by a previous judgment of the High Court in M/s. Prince Spintex Pvt. Ltd. vs. Union of India. However, subsequent amendments to Section 49 of the CGST Act and the insertion of Sections 49A and 49B, along with Rule 88A, effective from 01.02.2019 (with the GST portal functioning as per amended provisions from 01.06.2019), led to the automatic utilization of the accumulated IGST credit of Rs. 4,47,43,682/-. This utilization resulted in a nil IGST balance and an artificial inflation of CGST and SGST balances.

Key Issues

1. Whether Notification No. 26/2017-Custom, dated 29.06.2017, amending Notification No. 16/2015-Customs, and Trade Notice 11/2018, dated 30.06.2017, to the extent they require importers to pay IGST, are liable to be quashed and set aside, and if the petitioner is entitled to a refund of Rs. 4,47,43,681/- with interest. The petitioner argued that the issue is covered by the High Court's previous judgment in M/s. Prince Spintex Pvt. Ltd. vs. Union of India. The revenue conceded that the issue is squarely covered by the aforementioned judgment. 2. How to address the refund claim in light of subsequent amendments to Section 49 of the CGST Act and the insertion of Sections 49A and 49B, and Rule 88A, which led to the automatic utilization of the IGST credit. The petitioner contended that despite the automatic utilization, the refund should still be granted by reversing the entries of utilization. The revenue's stance on this specific issue is not explicitly recorded, but their concession on the first issue implies agreement with the principle of the Prince Spintex judgment.