INTRODUCTION
Goods & Services Tax, often touted as ‘One Nation, One Tax’, in
practice consists of many State-specific contradictions due to conflicting
advance rulings. Further, in the case of writ matters we are witnessing
conflicting High Court rulings as well. One such controversy that has come to
the fore pertains to refund of unutilised input tax credit (ITC) under inverted
duty structure in view of two conflicting decisions:
i) VKC
Footsteps India Private Limited vs. Union of India & others –
2020-VIL-340-Guj.
ii) Transtonnelstroy
Afcons JV vs. Union of India & others – 2020-VIL-459-Mad.
In this article, we have analysed the relevant provisions under the
Central Goods & Services Tax Act, 2017 and rules framed thereunder on this
particular topic, the interpretation giving rise to the current issue and the
judicial perspective on it. Of course, the matter will reach finality only
after a Supreme Court decision on the issue.
BACKGROUND OF RELEVANT PROVISIONS
Section 54 of the CGST Act, 2017 deals with the provisions relating to
refunds. While section 54(3) provides for refund of any unutilised input tax
credit (ITC), the first proviso thereof restricts the right to claim
such refund only in the case of zero-rated supplies made without payment of
tax, or where the accumulation of credit is on account of the rate of tax on
inputs being higher than the rate of tax on output supplies (other than
nil-rated or fully exempt supplies). The relevant provisions are reproduced for
reference:
(3) Subject to the provisions of sub-section (10), a registered person
may claim refund of any unutilised input tax credit at the end of any tax
period:
Provided that no refund of unutilised 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.
The procedure for determining the refund due in case of Inverted Duty
Structure is provided for u/r 89(5) of the CGST Rules, 2017 which provides that
the amount of refund shall be granted as per the following formula:
Turnover of Inverted Duty Structure
of goods and services *
Net ITC
________________________
Adjusted
Total Turnover
The term ‘Net ITC’ referred to in the above formula is defined to mean
ITC availed on inputs during the relevant period other than ITC availed for
which refund is claimed u/r 89(4A) or 89(4B) or both. The same is an amended
definition notified vide Notification No. 21/2018 – CT dated 18th
April, 2018 and given retrospective effect from 1st July, 2017 vide
Notification No. 26/2018 – CT dated 13th June, 2018. The pre-amended
definition of ‘Net ITC’ gave the meaning assigned to it in Rule 89(4) which
covered ITC availed on inputs and input services during the relevant period
other than the ITC availed for which refund is claimed under sub-rules (4A) or
(4B) or both.
UNDERSTANDING THE DISPUTE
GST works on the principle of value addition, i.e., tax paid on ‘inputs’
is available as credit to be used to discharge the tax payable on ‘output’. In
other words, what goes IN, goes OUT. On a plain reading, this principle also
appears to be applicable for application of section 54(3) (first proviso
referred above) as well as Rule 89(5). This is because though the proviso
uses the term ‘inputs’, it finds in its company the term ‘output supplies’. The
proviso does not restrict the output supply to be only that of goods. In
other words, if output supply, liable to tax at a lower rate, can be of either
goods or services, the same principle should be applied in the context of
inward supplies also, i.e., it can be both goods as well as services. If this
is not done, the very purpose of the provision becomes redundant.
Let us understand this with the help of a live example. Diamonds are
taxed at a lower rate under GST, generally 0.25% or 3% depending on their
characteristics. On the other hand, the expenses to be incurred by a person
engaged in the supply of diamonds are all taxable at 18%. For example, rental
services, grading services, security services, etc., all attract tax at 18%.
Unless the above interpretation is applied, all suppliers engaged in supply of
diamonds would never get covered under the scope of ‘inverted duty structure’
and would therefore always end up with an unutilised ITC which would never get
utilised since the tax on output supplies would perennially be lower and there
would be ITC on account of purchase of diamonds itself which would be sufficient
for utilisation against the tax payable on output supplies.
Therefore, while interpreting the proviso to section 54(3), the
following questions need consideration:
(i) Whether the term ‘inputs’
referred to in the proviso has to be interpreted as defined u/s 2(59) of
the CGST Act, 2017 which would render the provision non-workable, or should it
be read in context?
(ii) Does the principle of Noscitur
a Sociis apply to this matter and can section 54(3) be liberally
interpreted?
Here are a few judicial precedents relevant to the current dispute and
also to the above questions:
(a) CIT vs. Bharti Cellular Limited [(2009) 319 ITR 319 (Del.)]
This decision was in the context of what constitutes technical services
for the purpose of section 194J. In this case, the Court, relying on the
decision of Stonecraft Enterprises vs. CIT [(1999) 3 SCC 343] held
as under:
19. From this decision, it is apparent that the Supreme Court employed
the doctrine of noscitur a sociis and held that the word minerals took colour from
the words mineral oil which preceded it and the word ores which succeeded it. A
somewhat similar situation has arisen in the present appeals where the word
technical is preceded by the word managerial and succeeded by the word
consultancy. Therefore, the word technical has to take colour from the word
managerial and consultancy and the three words taken together are intended to
apply to those services which involve a human element.
This concludes our discussion on the applicability of the principle of noscitur
a sociis.
(b) Southern Motors vs. State of Karnataka [2017 (368) ELT 3 (SC)]
34. As
would be overwhelmingly pellucid (clear) from the hereinabove, though words in
a statute must, to start with, be extended their ordinary meanings, but if the
literal construction thereof results in an anomaly or absurdity, the courts
must seek to find out the underlying intention of the Legislature and, in the
said pursuit, can within permissible limits strain the language so as to avoid
such unintended mischief.
(c) Commissioner of
Customs (Import), Mumbai vs. Dilip Kumar & Co. [2018 (361) ELT 577 (SC)]
Regard must be had to the clear meaning of
words and matter should be governed wholly by the language of the notification,
equity or intendment having no place in interpretation of a tax statute – if
words are ambiguous in a taxing statute (not exemption clause) and open to two
interpretations, benefit of interpretation is given to the subject.
The above discussion indicates that the term ‘inputs’ referred to in
clause (ii) to the first proviso of section 54(3) is to be given a wider
import and not to be restricted to the definition of inputs provided u/s 2(59)
of the CGST Act, 2017. Therefore, the important question that arises is what is
the cause for the current litigation? The dispute stems from Rule 89(5)
prescribed to lay down the methodology to determine the amount eligible for
refund claim under the 2nd clause of the 1st proviso
of section 54(3) and the manner in which the term ‘Net ITC’ has been defined
therein to mean ITC availed on inputs during
the relevant period other than ITC availed for which refund is claimed u/r
89(4A) or 89(4B) or both.
By interpreting clause (ii) of the first proviso to section 54(3)
r/w/r 89(5) literally, the Revenue authorities have been denying the refund of
unutilised ITC due to inverted duty structure to the extent the accumulation is
on account of input services. In fact, in a few such cases, the taxpayers had
opted for advance ruling on the subject and the Authority for Advance Ruling
has also agreed with the Revenue’s view. Some relevant rulings include the
ruling by the Maharashtra Authority in the case of Daewoo TPL JV [2019
(27) GSTL 446 (AAR – GST)] and Commissioner (Appeals) in
Sanganeriya Spinning Mills Limited [2020 (40) GSTL 358 (Comm. Appeals – GST –
Raj)].
VKC FOOTSTEPS: BEGINNING OF THE BATTLE
In the case of VKC Footsteps, they were faced with a similar challenge
where their refund claim was rejected to the extent it pertained to input
services and therefore they had challenged the validity of Rule 89(5)
restricting the claim of ITC only to the extent it pertained to inputs and not
input services / capital goods.
VKC Footsteps made their case before the Gujarat High Court on the
following grounds:
i) GST is a value-added tax where
the tax is borne by the end customer and businesses do not have to bear the
burden of the said tax as they are eligible to claim credit of taxes paid by
them on their inward supplies.
ii) That even before the
introduction of GST, the Government was aware of a situation where there could
have prevailed an inverted duty structure and the associated problem of credit
accumulation thereon and to overcome this particular anomaly clause (ii) to the
first proviso of section 54(3) was included in the statute.
iii) Section 54(3) specifically
provided for refund of unutilised ITC. There is no restriction u/s 54(3)
restricting the claim of refund to inputs only.
iv) Rule 89(5) has restricted the scope
of operation of the clause by excluding the credit of taxes paid on input
services from the scope of ‘Net ITC’ for determining the amount eligible for
refund and, in fact, deprived the taxpayer of his crystallised and vested right
of refund. For these reasons, it was argued that Rule 89(5) was ultra vires
of the provision of the Act and therefore liable to be set aside.
v) The petitioners had also placed
reliance on the decisions in the cases of Shri Balaganesan Metals vs.
M.N. Shanmugham Shetty [(1987) 2 SCC 707]; Lucknow Development Authority vs.
M.K. Gupta [(1994) 1 SCC 243]; and Lohara Steel Industries
Limited vs. State of AP [(1997) 2 SCC 37].
The Revenue countered the above with a single argument that Rule 89(5)
was notified within the domain of powers vested with the Central Government by
virtue of section 164. It was argued that this section empowered the Centre in
the widest possible manner to make rules on the recommendations of the GST
Council for carrying out the provisions of the Act. Rule 89(5) was notified in
exercise of these powers and therefore cannot be held ultra vires as it
only provides the method of calculating the refund on account of inverted duty
structure. Revenue relied on the decision in the case of Willow-wood
Chemicals Private Limited vs. UoI [2018 (19) GSTL 228 (Guj.)].
After hearing both the parties, the Gujarat High Court held that Rule
89(5) was ultra vires the provisions of section 54(3) of the CGST Act,
2017 based on the following conclusions:
(A) Rule 89(5) excluding credit of
input services from the scope of ‘Net ITC’ to determine the amount of eligible
refund is contrary to the provisions of section 54(3) which provides for refund
of claim of ‘any unutilised input tax credit’. The Court further held that
clause (ii) of the first proviso to section 54(3) refers to both supply
of goods or services, and not only supply of goods as per amended Rule 89(5).
(B) Rule 89(5) does not demonstrate
the intention of the statute. Therefore, the interpretation in Circular
79/53/2018 – GST dated 31st December, 2018 was incorrect.
TRANSTONNELSTROY AFCONS JV: THE SAGA
CONTINUES
Around the same time, the Madras High Court also had occasion to examine
the same issue. The detailed decision in the case of Transtonnelstroy
Afcons JV reignited the controversy. The judgment records a series of
arguments put forth by the petitioner, countered by the respondents and
rejoinder submissions by both sets of parties rebutting the opposite parties’
submissions. We have attempted to summarise (pointwise) the submissions of the
parties.
Vires of Rule 89(5) vis-à-vis
sections 164 and 54(3) of the CGST Act, 2017
The petitioners, placing reliance on the decision of the Supreme Court
in the case of Sales Tax Officer vs. K.T. Abraham [AIR 1967 SCC 1823]
contended that clauses which empower framing of rules only in respect of form
and manner of application are limited in scope. They further contended that a
general rule-making power cannot be resorted to to create disabilities not
contemplated under the CGST Act, 2017 – Kunj Behari Lal Butail vs. State
of HP [(2000) 3 SCC 40].
The petitioners further relied on the decision of the Gujarat High Court
in the case of VKC Footsteps wherein it has held that Rule 89(5)
as amended is contrary to the provision of section 54(3).
In response, the respondent (Revenue) contended that wide Parliamentary
latitude is recognised and affirmed while construing tax and other economic
legislations and that Courts should adopt a hands-free approach qua economic
legislation – Federation of Hotel & Restaurant Associations of India
vs. UoI [(1989) 3 SCC 634] and Swiss Ribbons Private Limited vs.
UoI [(2019) 4 SCC 17].
The respondent further contended that no restriction can be read into
the rule-making power of the Government. Section 164 is couched in extremely
wide language and the only limitation therein is that the Rules should be
applied only for fulfilling the purpose of the CGST Act – K. Damodarasamy
Naidu vs. State of TN [2000 (1) SCC 521)] wherein the Court held that
the distinction between goods and services was valid in case of composite
contracts.
Entitlement to claim refund stems from
section 54 – operative part and not proviso
On their part, the petitioners contended that the general rule for
entitlement of refund of unutilised ITC is contained in section 54(3), while
the principle merely sets out the eligible class of taxpayers who can claim the
refund. Since the entry barrier is satisfied, i.e., they are covered under the
inverted duty structure, the primary condition that the credit accumulation is
due to inverted duty structure is satisfied. The proviso does not
curtail the entitlement to refund of the entire unutilised ITC and merely sets
out the eligibility conditions for claiming such refund. This was also
reiterated during the rejoinder submissions.
The petitioners also stated that the use of the phrase ‘in the cases’
indicates that the proviso is intended to specify the classes of
registered persons who would be entitled to refund of unutilised ITC and not to
curtail the quantum or type of unutilised ITC in respect of which refund may be
claimed.
Scope of clause (ii) of first proviso
to section 54(3)
The petitioners further argued that section
54(3) is drafted in a manner to entitle a claimant for refund of full
unutilised ITC. Therefore, the provisions should be interpreted by keeping the
context in mind. The intention of Parliament was to deploy the words ‘inputs’
and ‘output supplies’ as per their meaning in common parlance. Therefore, the
definition of input u/s 2(59) should not apply since that definition applies
only when the context does not require otherwise. They further relied on the
decision in the case of Whirlpool Corporation vs. Registrar of Trade
Marks [(1998) 8 SCC 1]; M. Jamal & Co. vs. UoI [(1985) 21 ELT 369]; and
Padma Sundara Rao vs. State of TN [(2002) 3 SCC 554].
In response to the above, the respondent referred to the Explanation to
section 54 wherein it has been clarified that refund shall include tax paid on
inputs / input services. On the basis of this, Revenue contended that the terms
‘inputs’ or ‘input services’ were consciously used in section 54 – CIT,
New Delhi vs. East West Import and Export (P) Limited [(1989) 1 SCC 760] and
CST vs. Union Medical Agency [(1981) 1 SCC 51]. The Revenue further
argued that this classification of inputs, input services and capital goods is
continuing since the CENVAT regime and, therefore, even in trade parlance the
same meaning which was applied under the CENVAT regime should continue to apply
under GST.
The respondents further argued that if a term is defined in the statute,
the Court should first consider and apply such a definition and only in the
absence of a statutory definition can the Court consider the definition under
common parlance meaning of the term – Bakelite Hylam Limited vs. CCE,
Hyderabad [(1998) 5 SCC 621].
Manner of interpretation of tax statute –
Strict vs. liberal
The petitioners contended that strict interpretation of a taxing statute
applies only when interpreting a charging provision / exemption notification – Gursahai
Sehgal vs. CIT [AIR 1963 SC 1062] and ITC Limited vs. CCE [(2004)
7 SCC 591]. The petitioners further contended that if section 54(3) is
not interpreted in this manner, the same would be violative of Article 14 of
the Constitution as it would amount to discrimination between similarly placed
persons. They placed reliance on the decision in the case of Government
of Andhra Pradesh vs. Lakshmi Devi [(2008) 4 SCC 720].
In response to the above contentions, the respondents argued that if it
is held that section 54(3)(ii) is violative of Article 14 of the Constitution,
the correct approach would have been to strike down the provisions and not to
expand it to include the person discriminated – Jain Exports Private
Limited vs. UoI [1996 (86) ELT 478 (SC)]. The respondents further
argued that a refund provision should be treated at par with an exemption
provision and should therefore be construed strictly and any ambiguity should
be resolved in favour of the Revenue as held by the Supreme Court in the case
of Dilip Kumar & Co. The Revenue also relied on the decision
in the case of Ramnath vs. CTO [(2020) 108 CCH 0020]. And on
decisions wherein ITC has been equated with a concession and therefore the
terms and conditions associated with it should be strictly complied with – Jayam
& Co. vs. AC(CT) [(2016) 15 SCC 125] and ALD Automotive
Private Limited vs. AC(CT) [2018-VIL-28-SC].
Vide their rejoinder
submission, the petitioners argued that a tax statute should not always be
construed strictly, which can be defined either as literal interpretation,
narrow interpretation, etc. Further, the decision in the case of Dilip
Kumar & Co. was distinguishable as it dealt with interpretation of
an exemption notification which is not similar to refund. Reference was made to
the decision in the case of Ramnath equating exemptions,
incentives, rebates and other things as similar. However, refund of unutilised
ITC is not similar to exemptions, incentives or rebates.
The respondents vide a sur-rejoinder contended that refund
is akin to an exemption / rebate / incentive. Refund is at best a statutory
right and not a vested right and therefore can be exercised only if the statute
grants such right. Reliance was placed on the decision in the case of Satnam
Overseas Export vs. State of Haryana [(2003) 1 SCC 561].
Reading down of the provisions was required
The petitioners further contended that the validity of the provisions
could be upheld only by resorting to reading down the said provisions – Delhi
Transport Corporation vs. Mazdoor Congress & Others [1991 (Supplement) 1
SCC 600] and Spences Hotel Private Limited vs. State of WB &
Others [(1991) 2 SCC 154].
In response, the respondents contended that reading down is intended to
provide a restricted or narrow interpretation and not for the purpose of
providing an expansive or wide interpretation. Words cannot be added to the
statute for the purpose of reading down the statute. The Revenue further
referred to decisions where it has been held that Courts cannot remake the
statute – Delhi Transport Co. (Supra) and UoI vs. Star
Television News Limited [(2015) 12 SCC 665]. The respondents further
argued that a proviso performs various functions such as curtailing,
excluding, exempting or qualifying the enacted clause and may even take the
shape of a substantive provision – S. Sundaram Pillai vs. V.R.
Pattabiraman [(1985) 1 SCC 591] and Laxminarayan R. Bhattad vs.
State of Maharashtra [(2003) 5 SCC 413].
During the rejoinder submission, the petitioners submitted that the
words ‘on inputs’ in Rule 89(5) should be deleted to ensure that the Rule is
not ultra vires to section 54(3). To support the contention of reading
down, the petitioners relied on the decision in the case of Lohara Steel
Industries and D.S. Nakara vs. UoI [(1983) 1 SCC 37].
They further contended that the purpose of a proviso is to exempt,
exclude or curtail and not to expand the scope of the main provision – ICFAI
vs. Council of Chartered Accountants of India [(2007) 12 SCC 210 (ICFAI)].
During the sur-rejoinder submission, the respondents contended
that reading up is not permitted when resorting to the principle of reading
down – B.R. Kapur vs. State of TN [(2001) 7 SCC 231].
Inequalities should be mitigated – Article 38
of the Constitution
The petitioners further argued, referring to Article 38, that the
legislation should be interpreted in such a manner as to ensure that
inequalities are mitigated – Sri Srinivasa Theatre vs. Government of
Tamil Nadu [(1992) 2 SCC 643]; Kasturi Lal Lakshmi Reddy vs. State of Jammu and
Kashmir [(1980) 4 SCC 1]; and UoI vs. N.S. Rathnam [(2015) 10 SCC
681].
The respondents contended that the classification of a registered person
into who is entitled to claim and who is not entitled to claim the refund by
differentiating based on those who procure input goods vs. those who procure
input goods and input services was legitimate. The respondents further argued
that the distinction between treatment of goods and services emanated from the
Constitution wherein goods were defined in Article 366(12) while services were
defined under Article 366(26)(A). More importantly, equity was not an issue in
the current case since there was no restriction from the claim of ITC. The
restriction applied only on claim of refund, to the extent that ITC was on
account of input service, the same continued to be a part of the taxpayers’ credit
ledger.
The petitioners vide a rejoinder submission contended that the
validity or invalidity of classification would depend on the frame of
reference. They further contended that there is no material difference in the
treatment of goods and services under GST law. Goods and services are treated
similarly when dealing with the four basic elements of the GST law, i.e.,
taxable event, taxable person, rate of tax and measure of tax. The only
distinction is in relation to provisions relating to determination of place of
supply, time of supply, etc. They further contended that GST was a paradigm
shift and therefore the historical segregation between goods and services
cannot be relied upon to contend that unequal treatment of goods and services
is valid. In fact, the purpose of introducing GST is to consolidate goods and
services and treat them similarly by keeping in mind that taxes are imposed on
consumption, irrespective of whether goods or services are consumed.
In the sur-rejoinder submission by the respondents, they
contended that the distinction between goods and services continues to apply
under GST also since the nature and characteristics of goods and services are
coherently different – Superintendent and Rememberancer of Legal Affairs,
West Bengal vs. Girish Kumar Navalakha [(1975) 4 SCC 754]; State of Gujarat vs.
Ambika Mills [(1975) 4 SCC 656]; and R.K. Garg vs. UoI [(1981) 4
SCC 675].
CONCLUSION OF THE COURT
After hearing both the parties exhaustively, the Court proceeded with an
analysis of the decision of the Gujarat High Court in the case of VKC
Footsteps and prima facie opined that the decision did not seem
to have considered the proviso to section 54(3) and, more significantly,
its import and implications and therefore proceeded on an independent analysis
of the relevant provisions. The Court referred to various decisions revolving
around the scope and function of a proviso relied upon by both the
parties, arrived at a conclusion that the proviso in the case of section
54(3) performed the larger function of limiting the entitlement of refund to
credit that accumulates as a result of the rate of tax on input goods being
higher than the rate of tax on output supplies. On this basis, the Court
proceeded to conclude that Rule 89(5) was intra vires. It opined that
the Gujarat High Court in VKC Footsteps had failed to take into
consideration the scope, function and impact of the proviso to section
54(3).
The Court also dealt with the argument on the manner of interpreting the
term ‘inputs’ used in the proviso. It concluded that the statutory
definition as well as context point in the same direction, that the word
‘inputs’ encompasses all input goods other than capital goods and excludes
input services. This conclusion was arrived at based on the following
reasoning:
- The definition of inputs u/s 2 excludes capital goods. If the
common parlance meaning was applied, it would result in a conclusion that would
be antithetical to the text.
- Section 54 itself refers to inputs as well as input services
on multiple occasions. Therefore, merely because the undefined word ‘output
supplies’ is used in the proviso, one cannot read the word ‘inputs’
preceding it to include input service also.
Dealing with the issue of strict vs. liberal interpretation, the Court
concluded that the refund claims should be strictly interpreted since it was a
benefit / concession.
The Court also held that the classification, by virtue of which the
right to claim refund of unutilised ITC on account of input services was
curtailed, was not in violation of Article 14. Though it held that the object
of GST was to treat goods and services similarly, this is an evolutionary
process. There are various instances where goods and services are treated
differently, be it the rate of tax or provision for determination of place of
supply. However, the Court abstained from dealing with the arguments relating
to reading down since it had already held that section 54(3)(ii) was not in
violation of Article 14 of the Constitution.
AUTHORS’ VIEWS
Both the decisions referred to above deal with a similar fact matrix,
are detailed and reasoned orders but bear diverse outcomes. However, there are
some aspects which still remain unaddressed and could have been considered in
the current dispute:
1. The Madras High Court
decisions, while concluding that section 54(3)(ii) covers only input goods and
not input services, appears to have not dealt with the key issue raised by the
petitioners, i.e., the intention of the Legislature based on which substantial
arguments were advanced by the petitioners. Even when dealing with the
arguments of applying contextual definition / understanding of the terms, the
Court has held that in interpreting a tax statute the requirement to stay true
to the statutory definition is more compelling. However, while concluding so,
the Court has not considered its own decision in the case of Firm
Foundation & Housing Private Limited vs. Principal CST, Chennai [2018 (16)
GSTL 209 (Mad.)] wherein it has been held that there is enough
precedent available to support the view that Courts will interfere where the
basis of the impugned order is palpably erroneous and contrary to law.
2. The decision in the case of TCS
vs. UoI [2016 (44) STR 33 (Kar.)] is also relevant in the current case.
This involved determination of whether or not a company would be liable to pay
tax under the category of ‘consulting engineer’ services? In this case, the
Court held that when the language of a statute in its ordinary meaning and
grammatical construction leads to manifest contradiction of its apparent
purpose or to inconvenience or absurdity, hardship or injustice, construction
may be put upon that which emphasises the meaning of the words and even the
structure of the sentence.
3. The
Madras High Court concluded that if the interpretation of the petitioners was
accepted that the term ‘inputs’ used in section 54(3)(ii) was to be interpreted
in context with the words accompanying it, it would lead to an interpretation
that even unutilised ITC on account of capital goods would have been eligible
for refund. However, it appears that the Court has not considered the fact that
the Explanation to section 54 specifically provides that refund of unutilised
ITC shall be permitted only to the extent that it pertains to inputs / input
services.
4. As for the question whether
refund when provided in the legislation itself can be treated as a concession,
or it is a right which cannot be curtailed, one needs to keep in mind that
although section 17(5)(h) of the CGST Act, 2017 specifically stated that
certain ITC would be treated as blocked credits, the Orissa High Court in the
case of Safari Retreats Private Limited vs. Chief Commissioner of GST
[2019 (25) GSTL 341 (Ori.)] held the same ultra vires. Of
course, this matter is also currently pending before the Supreme Court, but the
bearing of the outcome of the same on the current dispute cannot be ruled out.
We now stand at a
juncture wherein two Hon’ble High Courts have given detailed and well-reasoned
judgments but diverse decisions on the issue of whether refund of unutilised
input tax credit, on account of input services, would be eligible or not? As a
natural corollary, the aggrieved parties will approach the Supreme Court to
settle the controversy and also lay down the principles of interpretation under
GST. The final decision of the Supreme Court in this matter will either blur
the lines of distinction between goods and services, or underline them in bold.
