Sikkim High Court: A tax related writ petition was brought before this Court under Articles 226 and 227 of the Constitution, wherein the petitioner claimed a refund of Rs 4.37 crore in unutilised Input Tax Credit (‘ITC’) after closure of their business under Section 49(6) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’). A Single Judge Bench of Meenakshi Madan Bai, J., opined that while Section 54(3) laid down specific circumstances for refund of ITC, it did not contain an express bar in Section 49(6) read with Section 54 and 54(3) CGST Act on granting refund upon business closure. The Court thus ordered that the petitioners were entitled to the refund of unutilized ITC claimed by them.
Background:
The petitioners was a company engaged in manufacturing security inks and solutions with a GST registered unit in Sikkim. In January 2019, the petitioners decided to discontinue all its operation in the State and eventually sold all its manufacturing assets and machineries from April 2019 and March 2020. In the course of this process of selling assets, the petitioners as per the GST law reversed the ITC. However, a balance of Rs 4.37 crore was left unutilised. Following this, the petitioners applied for a refund under Section 49(6) of the CGST ACT, which allowed refund of the balance in the electronic credit ledger.
The Assistant Commissioner, CGST and Central Excise, Gangtok, Sikkim, vide Order dated 8-2-2022, rejected the refund application filed by the petitioners, claiming unutilized ITC, lying in Electronic Credit Ledger amounting to Rs 4.37 crore, upon discontinuance of business. Respondent 3-the Additional Commissioner of CGST and Central Excise, Siliguri Appeals Commissionerate, vide Order dated 22-3-2023, upheld Order dated 8-2-2022 of the Assistant Commissioner, holding that a combined reading of Sections 54(3) and 29 CGST Act, it was evident that the current regulations did not provide for refund of unutilized ITC in case of discontinuation or closure of business. Further, it was held that it was evidently clear from the provisions mandated in Section 54(3) CGST Act which was restricted to circumstances under which unutilized ITC was allowed for refund, discontinuation/closure was not one of them.
The petitioners thus prayed to quash, delete, and set aside the impugned Order dated 22- 03-2023, passed by the Respondent 3 rejecting the claim for refund of unutilized ITC, on closure of its business.
Analysis and Decision
The issue for consideration before this Court was “whether the refund of ITC under Section 49(6) CGST Act was only limited to companies carved out under Section 54(3) CGST Act or did every registered company had a right to refund of ITC in case of discontinuance of business?”.
The Court relied on Union of India v. Slovak India Trading Co. Pvt. Ltd., 2006 SCC OnLine Kar 854, and opined that while Section 54(3) laid down specific circumstances for refund of ITC, it did not contain an express bar in Section 49(6) read with Section 54 and 54(3) CGST Act on granting refund upon business closure.
The Court further opined that although, Section 54(3) CGST Act dealt only with two circumstances where refunds could be made, however the statute also did not provide for retention of tax without the authority of law.
The Court set aside the impugned order dated 22-3-2023 of Additional Commissioner and thus ordered that the petitioners were entitled to the refund of unutilized ITC claimed by them.
[SICPA India (P) Ltd. v. Union of India, WP(C) No. 54 of 2023, decided on 10-6-2025]
Advocates who appeared in this case :
For the Petitioners: Ankit Kanodia and Passang Tshering Bhutia, Advocates for the Petitioners.
For the Respondents: Sangita Pradhan, Deputy Solicitor General of India for the Respondents.
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