M/s. Copmed Pharmaceuticals Pvt. Ltd., Industrial Area, Gondpur, Paonta Sahib, Distt. Sirmour (hereinafter referred to as ‘the Appellants’) are manufacturing Pharmaceutical products falling under HSN Code 3004. The Appellant has filed four appeals against four Refund Sanction Orders (RFD-06) (for brevity ‘the impugned orders’) passed by the Assistant Commissioner, Goods & Services Tax Division, Parwanoo (for brevity ‘the sanctioning authority’) rejecting appellants claims partly as per detail appended below. Since the issue involved in all the four appeal cases was common, the same are being taken up for decision under a single Order.

1. Brief facts of the case :

1.1 On 24-4-2018, the Appellants had manually filed four applications for refund claims in Form GST RFD-01A with the CGST Division Parwanoo, in terms of the procedures laid down in the Circular No. 24/24/2017-GST, dated 21-12-2017 through GST portal under Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Act) for claiming refund of unutilized input tax credit accumulated on account of inverted duty structure and debited in its electronic credit ledger equivalently.

1.2 The Sanctioning Authority in view of the definition of Net ITC amended vide Notification No. 21/2018-Central Tax, dated 18-4-2018 observed that for computation of net input tax credit (say ITC), credit taken on the Services was inadmissible and accordingly appellants were disallowed the refund claims to that extent, vide the impugned orders. He further observed that the turnover of inverted rated supply ought to be computed after deducting the turnover of sale of input as such and the Refund Claims were accordingly amended.

1.3 The Sanctioning Authority further computed the refund claims in terms of the methodology provided in sub-rule (5) of Rule 89 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred in as the “Rules”) and the lowest amount was calculated separately for each Tax Head of the input tax credit amount namely IGST, CGST and SGST by the Sanctioning Authority and accordingly reduced the refund claims vide the impugned orders.

1.4 Being aggrieved, with the impugned orders of the Sanctioning Authority, the Appellants have preferred the subject appeals on the grounds which inter alia are summarized as under :

(i)      That the Learned Adjudicating Authority had restricted the refund of input credit in each of the respective Heads of CGST, SGST and IGST instead of considering the consolidated amount of ITC, i.e. Central Tax + State Tax/Union Territory tax + Integrated Tax + Cess (wherever applicable).

(ii)    That refund claim should be considered in the light of clarification issued under C.B.I. & C. Circular No. 59/33/2018-GST, dated 4-9-2018 which provided for consideration of balance of consolidated credit of input tax credit.

(iii)   That ITC on input services denied in terms of Notification No. 21/2018-Central Tax, dated 18-4-2018 applied retrospectively was recommended to be set aside.

2. Personal hearing :

Personal hearing in the case was held on 7-1-2019 and Sh. Mukesh Pandey, Advocate & Sh. Pankaj Aggarwal, Advocate appeared on behalf of the Appellants and reiterated the written submissions made in their appeal as well as their earlier submissions dated 17th September, 2018. They had their claim on the basis of the Circular dated 4th September, 2018. However, all the four cases were decided before [issue of] Circular. Now their refund should be allowed on consolidated basis.

3. Discussion and findings :

3.1 I have gone through the Impugned Refund Sanction Orders passed by the Sanctioning Authority, the Grounds of Appeal and the submissions made by the appellants at the time of personal hearing. The main issue to be decided in the case is whether the Computation of refund in terms of Rule 89(5) of the Rules has to be done separately for each Head viz IGST, CGST and SGST or as a consolidated ITC and whether the amount claimed as refund under one head can be debited from another Head in light of the C.B.I. & C. Circular No. 59/33/2018-GST, dated 4-9-2018 (for brevity the Circular).

3.2 I find that in exercise of its powers conferred under Section 168(1) of the Central Goods and Services Tax Act, 2017 the Board has clarified that the provisions of Circular No. 17/17/2017-GST, dated 15-11-2017 shall also be applicable to the following types of refund claims inasmuch as it relates to the manner of filing of the refund claim and its processing which is consistent with the relevant provisions of the CGST Act, 2017 (hereafter referred to as ‘the CGST Act’) and the CGST Rules, 2017 (hereafter referred to as ‘the CGST Rules’). Section 54(3) of the CGST Act reads as under :-

(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period :

Provided that no refund of unutilized input tax credit shall be allowed in cases other than –

(i)      zero-rated supplies made without payment of tax;

(ii)    where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council :

Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty :

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

3.3 In case of refund claim arising due to inverted duty structure, the following statements – Statement 1 [under Rule 89(5)] and Statement 1A [under Rule 89(2)(h)] of FORM GST RFD-01A have to be filed under the law.

3.4 Further, sub-rule (5) of Rule 89 of the CGST Rules provides the formula for computing maximum amount refund which could be granted to the assessee in case of goods produced by the assessee falls under inverted duty structure. The formula is reproduced below :

Maximum Amount of refund = {(Turnover on inverted rated supply of goods) x Net ITC + Adjusted Turnover} – Tax payable on such inverted rated supply of goods and services.

3.5 As per Notification No. 21/20018-Central Tax, dated 18-4-2018 :

“Net ITC’’ shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both.

However Notification No. 26/2018-Central Tax New Delhi, the 13th June, 2018 Rule 89(5) was substituted further with retrospective effect i.e. w.e.f. 1-7-2018.

3.6 The Appellants in this regard have further pleaded that their refund claim should be considered in light of the clarification issued under Para 3 of the C.B.I. & C. Circular No. 59/33/2018-GST, dated 4-9-2018. Whereas, I find that the contention of the appellants do not hold good inasmuch as the computation of eligible amount of refund after following credit utilization mechanism has already been provided under Section 49(5) of CGST Act, 2017. Moreover, it has been amply made clear in the Para 3.3 of the said circular that the procedure prescribed in the circular is applicable to all the refund applications filed after the date of issue of this circular and I find that the instant claim has already been decided on 21-6-2018 vide the impugned order by the adjudicating authority. Hence, the benefit of the said circular cannot be extended to the appellant. Moreover, the appellant vide letter dated 24-4-2018 has agreed with the contention of the Sanctioning Authority that credit taken on Services and the turnover of sale of input as such was inadmissible and accordingly amended the refund claims by computing the revised refund. I do not find any infirmity in the same and uphold the impugned order passed by the adjudicating authority.

3.7 The appellant has further pleaded that computation of the maximum refundable amount as per the formula prescribed in Rule 89(5) of the CGST Rules was to be applied on the consolidated amount of ITC as per the circular which specifically deals with system validations in calculating refund amount. In this regard I find that the C.B.I. & C. Circular dated 4-9-2018 has clarified the system validations in calculating refund amount and the manner of debiting the amount from the electronic credit ledger of the claimant. The circular has further clarified that –

(a)     The above method of debiting the amount is not presently available in the portal; and

(b)     Till the time such facility is made available on the common portal, the taxpayers are advised to follow the order as explained in Para 3.2(b) for cross-utilization of the ITC for debiting of the electronic credit ledgers all refund applications filed after the date of issue of this circular.

3.8 I further find that the Appellants have sought the benefit granted in respect of cross-utilization of input tax credit as provided in Para 3.2(b) of the Circular dated 4-9-2018 with regard to all the four refund claims filed in respect of the amounts rejected due to non-availability of balance available in the particular head of the relevant Electronic Credit Ledger. Since the said circular is not applicable with retrospective effect and refers specifically to refund claims filed and pending with the tax authorities, where this order of debiting the claimed amount is not adhered to by the claimant, no adverse view may be taken by the tax authorities. However the refund claims filed with the jurisdictional tax authorities has been adjudicated long before the issuance of the clarification issued vide the aforesaid circular and therefore the benefit of the same cannot be extended to the present appeals. The adjudicating authority has correctly decided the claims of the appellant in terms of the provisions available at the relevant time.

3.9 All the case laws cited by the Appellant are to emphasize that C.B.E. & C. circulars were binding on the Sanctioning Authority is admitted to the extent that interpretation of the circulars is for clarification and explanation of the procedures under law. Clarification on Refund related issues have been issued by the Board to ensure uniformity in the implementation of law across all field formations and the Appellants have placed reliance on the circular which specifically deals with system validations in calculating refund amount and is only applicable for all refund applications filed after the date of issue of the Circular dated 4-9-2018. Hence I find that the refund sanctioning authority has correctly sanctioned all the four refund claims within the ambit of the provisions of CGST law. I do not find any infirmity in the same and accordingly uphold the same.

3.10 In light of the foregoing I find that the benefit of the Circular No. 59/33/2018-GST, dated 4-9-2018 cannot be extended to the present appeals inasmuch as the procedure prescribed in the circular is applicable only to the refund applications filed after the issuance of the said circular. Furthermore, the adjudicating authority has correctly calculated the tax amount Head-wise since the payment of the respective sanctioned final amount has to be made by the respective Central and State Tax authorities independently in pursuance to the procedure laid down in Circular No. 24/24/2017-GST, dated 21-12-2017. The refund claim has been appropriately computed and sanctioned by the adjudicating authority in accordance with the provisions of law and I uphold the same.

ORDER

4. In view of the above, all the four appeals filed by the Appellant are rejected and the impugned sanctioned orders are upheld.