GSTAT Rajkot Dismisses 8 Revenue Appeals, Upholds ITC Refund Relief To Reliance Industries

The GST Appellate Tribunal, Rajkot Bench, has dismissed eight appeals filed by the Revenue and upheld refund relief granted to Reliance Industries Limited for unutilised input tax credit (ITC) distributed by its Input Service Distributor (ISD) to its Special Economic Zone (SEZ) unit.

A bench of Judicial Member Pramod Kumar Rai and Technical Member Kishori Lal held that the SEZ unit could claim a refund of the unutilised ITC because the supplier could not file a refund application for credit distributed through the ISD mechanism.

The appeals concerned refund claims filed by Reliance's SEZ unit at Jamnagar for unutilised ITC relating to common services and, in some cases, tax paid on inward supplies by suppliers. The claims related to ITC lying unutilised in its electronic credit ledger and were made in connection with zero-rated supplies of goods and services.

The first appellate authority had allowed the refund claims after considering decisions of the Gujarat High Court in IPCA Laboratories Ltd. v Commissioner and Britannia Industries Ltd. v Union of India. The Revenue challenged those orders before the tribunal.

The Revenue argued that under Rule 89 of the Central Goods and Services Tax Rules, a refund application in respect of supplies to an SEZ unit had to be filed by the supplier and not the recipient. It also contended that credit distributed by an ISD could not be equated with tax paid on supplies made by a registered person to an SEZ unit.

Reliance argued that the credit remained unutilised in its electronic credit ledger and was eligible for refund. It also took an alternative position that the amount represented excess tax paid by suppliers, the incidence of which had been borne by the company.

The tribunal examined the nature of the refund claims and found that they pertained to unutilised ITC distributed by the ISD. It noted that the show-cause notice itself described the claim as one for unutilised ITC. The tribunal rejected Reliance's alternative contention that the claim was for excess tax paid, observing that it was not supported by documentary evidence or law.

On whether an SEZ unit could claim a refund of ITC distributed by an ISD, the tribunal considered the interpretation of Section 54 of the CGST Act and Rule 89 of the CGST Rules by the Gujarat and Madras High Courts.

It concluded, “Thus the law relating to the refund to SEZ unit provided under section 54 of CGST Act read with rule 89 of the CGST Rules, as interpreted by the Gujarat and Madras High Courts clearly provide that since 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 the instance of the department that the petitioner (SEZ unit) is not entitled to see the refund of the ITC paid in connection with goods or services supplied to SEZ unit is not tenable.”

The tribunal also rejected the Revenue's reliance on CBIC circulars governing manual processing of refund claims. It observed that the circulars were issued because the refund module was unavailable on the common portal and did not bring about any substantial change in the law governing the right of SEZ units to claim refunds.

The tribunal further noted that the Revenue had not produced any order staying the Gujarat High Court's decision in Britannia Industries, despite challenging it before the Supreme Court. It also found that no order staying or reversing the Madras High Court decisions relied upon by Reliance had been produced.

The tribunal accordingly affirmed the first appellate authority's orders and dismissed all eight appeals filed by the Revenue.

For Appellant (Revenue): Sanjay Dharaiya, Authorised Representative

For Respondent: Advocate Vishal Agarwal,