Vedanta Claimed Unutilized ITC Refund, No Scope For Supplementary Refund Application Based On Fresh Calculation: Orissa High Court

The Orissa High Court has held that Vedanta has claimed the refund of the unutilized input tax credit on account of zero-rated supplies by clubbing up all the transactions relating to three units. There is no scope to insist on consideration of a supplementary refund application based on a fresh calculation made by taking individual unit-wise transactions into account.

The division bench headed by Chief Justice S. Muralidhar and Justice Murahari Sri Raman has observed that Rule 89(4) of the Central Goods and Services Tax Rules, 2017 is intra vires. The rule is framed in conformity with the powers conferred on the government under Section 164 of the Central Goods and Services Tax Act, 2017, and there is no necessity to read down Rule 89(4).

Rule 89(4) provides a formula for a refund of ITC to cover a situation in which zero-rated supplies of goods or services or both have been made without payment of tax under a bond or letter of undertaking in accordance with Section 16(3) of the IGST Act.

The petitioner/assessee is a public limited company engaged in the manufacture of aluminium products and has three units. As required under Section 54(3) of the GST Act read with Rule 89(4) of the CGST Rules, 2017, the petitioner applied for a refund of the unutilized input tax credit, including compensation cess, in Form RFD-01 for each month in respect of zero-rated supplies made by all the units taken together.

The refund was allowed by the authority. When the assessee computed the unit-wise quantum of refund, it was found that the quantum of refund allowed by taking all the units together was much less. Therefore, stemming from subsequent circulars dated 18.11.2019 and 23.12.2019, read with Rule 97A of the GST Rules, the petitioner manually applied for a grant of a supplementary refund by setting up a claim on the basis of supplies made unit-wise.

The Assistant Commissioner, GST and Central Excise have refused to entertain such manually submitted applications for the grant of a supplementary refund.

The petitioner contended that the quantum of refund in respect of all three units having a common GSTIN taken together is less than the quantum of refund computed by taking into account each individual unit. The difference is due to the "higher ratio of eligible input tax credit to total turnover" in the thermal power plant unit in comparison to other units. Therefore, the authority erred in not entertaining a supplementary refund application that was claimed unit-wise.

The department contended that the supplementary refund application filed manually is not liable to be considered in view of the provisions contained in Section 54 read with the formula prescribed under Rule 89(4) with reference to a claim made under Section 16 of the IGST Act.

The court held that the petitioner is not deprived of availing an alternative remedy to question the legality of the decision taken by the Assistant Commissioner, who returned the supplementary application for a refund.

Case Title: Vedanta Limited, Jharsuguda Versus Union of India

Case No: W.P.(C) No. 32166 of 2021

Citation: 2023 LiveLaw (Ori) 2

Date: 04.01.2023

Counsel For Petitioner: Advocates Puneet Agrawal and Prasanta Kumar Nayak

Counsel For Respondent: Deputy Solicitor General of India Prasanna Kumar Parhi and Senior Standing Counsel Radheyshyam Chimanka

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