LI Network
Published on: December 13, 2023 at 00:02 IST
In a significant development, the Delhi High Court has granted approval for the refund of accumulated Input Tax Credit (ITC) related to the inverted duty structure to the Indian Oil Corporation Limited (IOCL).
Justices Vibhu Bakhru and Amit Mahajan, presiding over the case, noted that the tax rate on certain inputs, excluding LPG, was higher than the GST rate applicable to bottled LPG.
This discrepancy led to the accumulation of ITC, as the tax on these inputs exceeded that of the output supply, which is bottled LPG.
IOCL, a public sector undertaking engaged in bottling and distributing LPG for domestic and industrial use, primarily sources LPG from oil refineries processing crude oil.
The court recognized that various hydrocarbons, including propylene, butane, and butylene, constitute LPG, which is liquefied during compression. The petitioner’s bottling plant receives bulk LPG, which is then compressed into liquid form, bottled, sealed, and distributed to customers.
While bulk LPG and bottled LPG are taxed at a 5% rate, other items used in the production process, including safety accessories, are subject to varying GST rates. Despite IOCL’s refund applications being acknowledged, they were not processed, leading to show cause notices and subsequent rejection of claims by the Adjudicating Authority.
The key contention revolved around whether IOCL’s claim for a refund based on accumulated unutilized ITC was admissible, as per Section 54 of the CGST Act. IOCL argued that the higher tax rate on certain inputs compared to the tax on output supplies (bottled LPG) prevented the full utilization of ITC.
The court disagreed with the department’s argument that the refund was inapplicable since the tax rates on bulk LPG and bottled LPG were the same.
Instead, the court directed the concerned authority to promptly process IOCL’s refund applications, including applicable interest, in compliance with the law within six weeks from the date of the ruling.
Case Title: IOCL Versus Commissioner Of Central Goods And Services Tax & Ors.