Messrs Meghmani Organochem Limited & Anr. Vs Union of India & Ors

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

[1] By way of this petition under Articles 226 and 227 of the Constitution of India, the petitioner has approached this Court for the following prayers:

“17(A) That Your Lordships may be pleased to issue a writ of prohibition or any other appropriate writ, order or direction completely and permanently prohibiting the respondents, their servants and agents from taking any action against the petitioner pursuant to order in appeal No.VAD-CGST-002-APP-ADC-182-2023-24 dated 30.11.2023 (Annexure-”E”) passed by the Additional Commissioner (Appeals), CGST & Central Excise, Vadodara, the 2^nd respondent herein;

B. That Your Lordships may be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing and setting aside order in appeal No.VAD-CGST-002-APP-ADC-182-2023-24 dated 30.11.2023 (Annexure – “E”) passed by the Additional Commissioner (Appeals), CGST & Central Excise, Vadodara, the 2^nd respondent herein;

C. Pending hearing and final disposal of the present petition, Your Lordships may be pleased to restrain the respondents, their servants and agents from implementing order in appeal No.VAD-CGST-002-APP-ADC-182-2023-24 dated 30.11.2024 and from taking any action against the petitioner pursuant to this order in appeal No.VAD-CGST-002-APP-ADC-182-2023-24 dated 30.11.2023;

D. An ex-parte ad-interim relief in terms of para 17(C) above may kindly be granted;”

[2] The brief facts of the case can be stated as under:

[2.1] The petitioner is a company, inter alia, engaged in the business of manufacture of chemical products and has a Special Economic Zone at Dahej SEZ. A Letter of Permission for being operated as SEZ Unit is issued in favour of the petitioner on 5th August 2008. The petitioner is also a registered person under the provisions of the CGST, IGST Act and the Rules framed thereunder by way of GST Registration No.GSTIN24AANCM0056E2ZQ.

[2.2] The petitioner being a ZEZ Unit, the goods manufactured are exported to foreign countries without payment of tax. However, the petitioner complied with the GST procedure including maintenance of statutory registers like Electronic Credit ledger, Electronic Cash Ledger, GSTR-3B returns etc. and also reported to the jurisdictional GST officers all the details of the business transactions by furnishing statutory returns.

[2.3] As per the Special Economic Zones Act, 2005 and schemes framed thereunder vide various Notifications like Notification Nos.15/2017-Integrated Tax (Rate) dated 30^th June 2017 and 18/2017-Integrated Tax (Rate), the goods and services brought in an SEZ Unit (and also those procured by an SEZ Developer) for authorized operations are exempt from payment of GST. However, the said exemption is subject to fulfillment of the conditions laid down under the Notifications. The petitioner has also been procuring and receiving various input supplies on payment of appropriate tax thereon with the statutory documents like tax invoice for such supplies. In these cases, Input Tax Credit of tax paid on such supplies is taken by the petitioner in the Electronic Credit Ledger and such transactions are also reported to the jurisdictional GST officers while filing monthly returns. The Input Tax Credit remains accumulated in the credit ledger because the outward supplies of SEZ Units are ordinarily made without payment of tax under LUT or a bond and thus, the Input Tax Credit of input supplies is not utilized for discharging tax on the outward supplies.

[2.4] The petitioner, therefore, lodged online claim for refund of Rs.65,05,135/- under Rule 89(4) of the Rules and the category of refund was shown in the claim as “Export of goods / services without payment of tax (accumulated ITC)”. The said claim was for the tax period of May 2021 to March 2022.

[2.5] The Assistant Commissioner issued a notice in Form GST RFD 08 dated 17^th October 2022 for reducing the amount of refund claimed by the petitioner on the ground that certain transactions and credit attributable thereto were not to be taken into consideration while calculating the amount of refund under Rule 89(4) of the Rules.

[2.6] The aforesaid notice received by the petitioner was replied by the petitioner on 29^th October 2022 by uploading RFD 09 online. The Assistant Commissioner held a personal hearing in the matter and passed a refund sanction order in Form GST RFD 06 on 3rd November 2022 and sanctioned refund of Rs.65,05,135/- and accordingly, the respondents have paid the amount of Rs.65,04,550/- to the petitioner.

[2.7] Thereafter, the Commissioner of CGST, Vadodara – II directed the Assistant Commissioner to file an appeal against the above refund order on the ground that the petitioner being a recipient of taxable supplies in SEZ Unit, the petitioner as an SEZ Unit was not allowed to claim refund under the GST law and the refund claim for the tax period on supplies made to SEZ Unit / Developers can be claimed only by the supplier of goods or services. Accordingly, the Assistant Commissioner filed an appeal on 6^th June 2023. The petitioner filed a detailed written submissions before the Appellate Authority by taking all the relevant and factual submissions.

[2.8] However, the Appellate Authority, vide its order dated 30^th November 2023, quashed and set aside the order of the Assistant Commissioner granting refund sanction order.

3. Being aggrieved and dissatisfied with the aforesaid, the petitioner has approached this Court by way of this petition with the aforesaid prayers.

4. We have heard learned advocate Mr. Paresh M. Dave for the petitioner and learned advocate Mr. Siddharth Dave for the respondents.

5. Learned advocate Mr. Dave for the petitioner, at the outset, submitted that the issue with regard to the entitlement of an SEZ Unit for claiming refund of unutilized ITC accumulated under Rule 89 of the CGST Rules because of exports made without payment of tax under LUT is well settled by the Coordinate Bench of this Court in the case of Britannia Industries Limited vs. Union of India reported in 2020 (42) G.S.T.L. 3 (Guj). He further submitted that although the S.L.P. against the said decision is pending, but no stay has been granted by the Hon’ble Apex Court and therefore, the law laid down by the Coordinate Bench of this Court in the case of Britannia Industries Limited (supra) holds the field and thereby, the Appellate Authority could not have ignored the proposition of law merely on the ground that the S.L.P. is pending against the said judgement. Learned advocate Mr. Dave further submitted that the Appellate Authority ought not to have bye passed the judgement even it has been challenged before the higher forum and its operation and implementation has not been stayed. Under the circumstances, the Appellate Authority ought to have dismissed the appeal preferred by the Revenue and ought to have confirmed the order passed by the Assistant Commissioner granting refund in favour of the petitioner.

6. By making above submissions, learned advocate Mr. Dave for the petitioner has prayed this Court to allow the present petition as prayed for.

7. Per contra, learned advocate Mr. Siddharth Dave for the respondent – Revenue while vehemently opposing this petition could not dispute the fact that the issue involved in the present petition has already been decided by the Coordinate Bench of this Court in the case of Britannia Industries Limited (supra) in favour of the petitioner. Learned advocate Mr. Dave further further could not dispute the fact that the S.L.P. is pending against the decision in the case of Britannia Industries Limited (supra) without any stay order.

[8] Having heard the learned advocates for the respective parties and having gone through the material placed on record, in our considered opinion, the issue involved in the present petition is no more res integra in view of the decision of the Coordinate Bench of this Court in the case of Britannia Industries Limited (supra). The relevant observations in the case of Britannia Industries Limited (supra) are as under:

“21. In facts of the present case, instead of Rule 96 as was applicable in case of M/s. Amit Cotton Industries(supra), Rule 89 would be applicable which is pertaining to refund of the input tax credit. Rule 89 of the CGST Rules provides for procedure for application for refund of tax, interest, penalty, fees and prescribes that in respect of supplies to a SEZ unit, the application for refund has to be filed by the supplier of goods or services. The contention of the respondents that as the petitioner is not the supplier of the goods and services, the petitioner would not be entitled to file application for refund is not tenable because in facts of the present case, input service distributor i.e. ISD as defined under section 2(61) of the CGST Act is an office of the supplier of goods and services which receives tax invoices issued under section 31 of the CGST Act towards the receipt of input services and issues a prescribed document for the purpose of distributing the credit of CGST, SGST Or IGST paid on such goods or services. Therefore, in facts of the case, it is not possible for a supplier of goods and services to file a refund application to claim the refund of the input tax credit distributed by ISD. Therefore, the stance of the department that the petitioner is not entitled to seek the refund of the ITC paid in connection with goods or services supplied to SEZ unit is not tenable.

22. This aspect is further fortified by notification no. 28/2012 dated 20th June, 2012 which was in connection with service tax attributable to the services used in more than one unit to be distributed pro-rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units and similarly, in facts of the present case also, credit of service tax is distributed to all the units by the ISD and therefore, the claim of refund made by the SEZ unit of the petitioner is required to be granted.

23. We are of the opinion that in view of the aforesaid decision in case of M/s. Amit Cotton Industries (supra), the petitioner is entitled to claim refund of the IGST lying in the Electronic Credit Ledger as there is no specific supplier who can claim the refund under the provisions of the CGST Act and the CGST Rules as input tax credit is distributed by the input service distributor.

24. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned order is quashed and set aside. The respondents are directed to process the claim of refund made by the petitioner for unutilized IGST credit lying in Electronic Credit Ledger under section 54 of the CGST Act, 2017. Such exercise shall be completed within three months from the date of receipt of the writ of this order.”

[9] Admittedly, no stay has been granted by the Hon’ble Apex Court in the S.L.P. preferred by the Revenue against the aforesaid decision in the case of Britannia Industries Limited (supra). The ratio laid down by the Division Bench of this Court in the case of Britannia Industries Limited (supra) still holds the field and thereby, the same ought to have been followed by the Appellate Authority while deciding the appeal of the Revenue. The Appellate Authority could not have ignored the dictum of law merely on the ground that the said decision is pending adjudication before the higher forum more particularly without any stay. The facts of the present case as well as the facts in the case of Britannia Industries Limited (supra) are more or less identical in nature and thereby, we are unable to take a different view than that of already taken by the Coordinate Bench of this Court in the case of Britannia Industries Limited (supra).

[10] In the result, present petition is allowed by quashing and setting aside the impugned order dated 30^th November 2023 passed by the respondent No.2 – Appellate Authority. The present petition is, accordingly, disposed of.