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ITC Transfer From One State To Another Is Not An Inward Supply: Orissa High Court

Mariya Paliwala
27 May 2022 7:15 AM GMT
Orissa High Court

The Orissa High Court bench of Justice Jaswant Singh and Justice M.S. Raman has ruled that an input service distributor (ISD) can claim ITC only in the case of an inward supply, and an ITC transfer from one state to another is not an inward supply.

The petitioner/assessee, JSW Steel, is a public limited company. The assessee is in the business of manufacturing and selling hot and cold rolled coils and sheets, galvanised coils and sheets, and plates. The assessee has been allotted GSTIN in the State of Odisha and GSTIN in the State of Maharashtra.

The petitioner submitted that JSW Steel (Mumbai) participated in the tender process invited by the Government of Odisha. JSW Steel (Mumbai) has been granted a lease to conduct mining operations for iron ore blocks in the state of Odisha.In Odisha, a company has been allotted four blocks, i.e., Jajang Block, Ganua Block, Narayan Poshi Block, and Nuagaon Block. It was claimed by the petitioner that iron ore extracted from the iron ore blocks is either supplied by JSW Steel (Odisha) to JSW Plants by way of stock transfer, or to the extent permissible, supplied to third parties. It has raised tax invoices towards both the supplies and claims to have paid applicable GST.

The scrutiny of returns filed for the tax periods in question revealed that JSW Steel (Odisha) has paid SGST and CGST under the reverse charge mechanism on bid premium, royalty, DMF, NMET, NPV, etc. The order showed that having utilised a portion of the tax paid on RCM, the petitioner-company in Odisha has passed on to JSW Steel in Maharashtra. JSW Steel in Maharashtra was declared as ISD in the shape of IGST in the garb of outward supply of facilitation services to JSW Steel (ISD).

The modality of claiming adjustment of unutilized input tax credit was objected to by the Revenue. A device to facilitate other units of JSW Steel located in other states to claim input tax credit arising in the State of Odisha is contrary to the statutory mandate. Therefore, the ingredients for initiating proceedings under Section 74 were satisfied. The Deputy Commissioner of State Tax has issued a notice which culminated in a demand of Rs. 901.48 crores.

Section 2(61) of the CGST Act defines the term "Input Service Distributor" (ISD). The ISD as an office is required to receive tax invoices for inward supply.

"Since no such supply being shown to have been made by JSW Steel Ltd. of Odisha to JSW Steel Ltd. of Maharashtra, no prima facie case is made out by the Petitioner. The transactions in question prima facie amount case is made out by the Petitioner. Thus transactions in question prima facie amount to syphoning of tax amounts, therefore, apparently warrant invocation of proceeding under Section 74 of the OGST/CGST Act," the court said.

The court, while listing the matter on August 12th, 2022, declined to allow the prayer for restraining the department from effecting recoveries of the demand.

Case Title: M/s. JSW Steel Ltd. Versus Union of India

Citation : 2022 LiveLaw (Ori) 87

Case No: W.P. (C) No. 10052 of 2022

Dated: 17.05.2022

Counsel For Petitioner: Sr. Advocate Arvind Datar, Sr. Advocate Mr. Tarun Gulati, Advocate Nitya Thakur, Advocate Adhiraj Mohanty, Advocate K. Visalaksh

Counsel For Respondent: Advocate General Ashok Ku. Parija

Click Here To Read/Download Order

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