GST Tribunal Upholds ₹67,993 Excess-Refund Finding Against Candle Exporter Over Unproved ITC Reversal

In brief

The question

Whether the Joint Commissioner (Appeals) correctly calculated the eligible refund under Rule 89(4) of the CGST/KGST Rules, including the Net ITC for the February–March 2018 refund period.

The court held

The Tribunal held that the Joint Commissioner (Appeals) had correctly applied Rule 89(4) and found no infirmity in the impugned order.

It also directed

It upheld the order dated 14 September 2021 and dismissed the appellant’s appeal.

01Facts

The appellant claimed a refund of unutilised input tax credit (ITC) of ₹6,24,536 for February–March 2018 in respect of exports made under LUT.

pp. 2–3

The Assistant Commissioner sanctioned ₹6,16,479 after rejecting ₹8,057 as ineligible credit. On the Revenue’s appeal, the Joint Commissioner (Appeals) recalculated the refund as ₹5,48,486, finding that the Net ITC had been overstated, and held that ₹67,993 had been refunded in excess.

pp. 2–3

The appellant contended that ₹1,58,760 of ITC reversed in February 2018 related to duplicate credit from September 2017 and that deducting it again amounted to duplication.

p. 4 · ¶ 4.1

02Issues

i.Whether the Joint Commissioner (Appeals) correctly calculated the eligible refund under Rule 89(4) of the CGST/KGST Rules, including the Net ITC for the February–March 2018 refund period.

p. 4 · ¶ 4.1

03Law Applied

Section 54(3) of the CGST Act permits refund of unutilised ITC in qualifying cases, including zero-rated supplies made without payment of tax under LUT; Rule 89(4) prescribes the formula for calculating that refund: the turnover of zero-rated supplies multiplied by Net ITC and divided by adjusted total turnover.

pp. 3–5 · ¶ 3.1, 4.2

Under Rule 89(4), Net ITC is the qualifying ITC availed on inputs and input services during the relevant period, subject to the rule’s exclusions.

p. 3 · ¶ 3.1

The Tribunal also referred to Shivam Iron & Steel Co. Ltd., 2026 (9) TMI 1740 (GSTAT Ranchi), concerning the application of statutory refund rules.

pp. 7–8 · ¶ 4.9

Provisions in the judgment · 4 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 Section 53 Section 54 Section 73

KARNATAKA GOODS AND SERVICES TAX ACT, 2017 Section 54

04Reasoning

The Tribunal verified the appellant’s GSTR-3B returns and found total Net ITC of ₹12,11,181 for February–March 2018.

p. 6 · ¶ 4.4–4.5

It accepted the Joint Commissioner (Appeals)’s calculation, which excluded the undisputed ineligible credit of ₹8,057, resulting in eligible Net ITC of ₹12,03,124 for the refund formula.

pp. 6–7 · ¶ 4.6–4.8

The Tribunal rejected the appellant’s duplication argument because the September 2017 refund adjustment and the February 2018 ledger reversal were distinct events; moreover, the appellant had not produced documentary proof of the alleged reversal.

pp. 6–9 · ¶ 4.6–4.8, 4.11–4.12

Applying Rule 89(4), the eligible refund was ₹5,48,486, making the amount originally sanctioned excessive by ₹67,993.

p. 7 · ¶ 4.8

The Tribunal did not treat the other procedural objections raised by the appellant as issues requiring determination, having framed the dispute as one concerning the refund calculation.

p. 4, 9 · ¶ 4.1, 5.0