Calcutta High Court Hears Plea Challenging the Validity of Denial of Accumulated Credit for Services under Inverted Duty Structure

The Calcutta High Court presided on the plea challenging the validity of denial of accumulated credit for services under Inverted Duty Structure.

The Petitioner is engaged in manufacture of textile products which suffers an input tax at the rate of 12% or 18%, while the output tax rate is 5% has approached the Court assailing the Order-in-Original wherein refund claim under section 54 read with Rule 89(5) had been denied to the Petitioner to the extent of input services.

Mr. Sujit Ghosh, Counsel for the petitioner, challenged the validity of Explanation to Rule 89(5) which denies refund of accumulated credit on services in case of inverted duty structure (IDS).

Mr. Ghosh, further challenged the validity of proviso to Section 54(3) on grounds of being ultra-vires to Articles 14 and 19(1)(g) of the Constitution of India.

Section 54 of the CGST Act 2017 provides for claiming refund of tax and interest if any paid on such tax or any other amount. The refund may be claimed of any unutilized input tax credit also accumulated due to the rate of tax on inputs being higher than the rate of tax on outward supplies.

The single judge bench of Justice Shekhar B. Saraf allowed the respondent authority to file Affidavit-in-opposition by 3 weeks and granted a further period of 2 weeks thereof to the Petitioner to file its reply.

Additionally, the court also clarified that the point of maintainability of the writ petition shall be kept open and the writ petitioner shall also be at liberty to file an application in this writ petition if any coercive step is taken against it. The matter was listed for hearing on Lists the matter in March 2021.