This order arises on account of appeals filed by M/s. Supernova Engineers Ltd., Survey Number 1470/1, Village Rajpur, Taluka – Kadi, Dst. Mehsana (hereinafter referred to as the ‘the appellants’ for sake of brevity) against the following two Orders-in-Original (hereinafter referred to as the ‘impugned orders’ for the sake of brevity) passed by the Assistant Commissioner, CGST, Kadi Division, Gandhinagar (hereinafter referred to as the ‘adjudicating authority’ for the sake of brevity);

2. Brief facts of the case are that the appellants are engaged in the manufacture and sale of DG sets (Diesel Gensets) and holding GST Registration Number 24AACCS6758G1Z7. They had filed the above refund claims, before the adjudicating authority, under Section 54 of CGST Act, 2017 for accumulated ITC on account of rate of tax on inputs being higher than the rate of the output supplies. The adjudicating authority, vide the above mentioned impugned orders, partly allowed (rejected entire refund in only one case as mentioned in Serial Number 6 above) the refund claims on the ground that as per Rule 89(5) read with Section 54 of the CGST Act, for the purpose of calculation of net ITC, input means only those inputs on which rate of tax is higher than the rate of final product.

3. Being aggrieved, the appellants have filed the present appeals before me. The appellants argued that the adjudicating authority has adopted a wrong formula to calculate the eligibility of the claims. The appellants argued that refunds should have been sanctioned as per the formula mentioned below;

Maximum Refund Amount = {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover} – Tax payable on such inverted rated supply of goods.

But, the adjudicating authority has rejected part refund by observing that in case of inverted duty structure, the input tax credit pertaining to only such inputs, the rate of tax on which is higher than the rate of tax on output supplies, would be permissible to be put into the formula for calculating refund in case of inverted duty structure. The appellants, thus, pleaded that the adjudicating authority denied the refund of input tax credit pertaining to the inputs where tax is lower or equal to the rate of tax on the output supply of DG sets. Thus, according to the appellants, the formula adopted by the adjudicating authority is incorrect and not in consonance with the GST provisions. The adjudicating authority has derived the amount of net ITC by considering only such input tax credit of purchase invoice which are higher than the rate on the final product.

4. A personal hearing in the matter was held on 13-12-2018 and Shri Jigar Shah, Advocate, appeared before me on behalf of the appellants and reiterated the contents of the grounds of appeal. He claimed that the methodology adopted to quantify the claim is wrong. He also submitted details of pending cases along with details of refund sanctioned and rejected.

6. I have carefully gone through the facts of the case on records, appeal memorandum and submissions made by the appellants at the time of personal hearing. Prima facie, I find that the appellants had filed the refund claims under Section 54 of CGST Act, 2017 read with Rule 89 of CGST Rules, 2017 for accumulated ITC on account of rate of tax on inputs being higher than the rate of the output supplies. Now, the main issue remains to be discussed by me is whether while calculating the inverted rate refund claim under Section 54 of CGST Act net ITC will be taken after deduction of inverted rate purchase or otherwise. I find that sub-rule 5 of Rule 89 of Central Goods & Services Tax Rules, 2017 has given the formula for calculating the matter to refund on account of inverted duty structure. The formula is reproduced below;

“Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods and services.

Explanation : – For the purposes of this sub-rule, the expressions –

(a)     Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and

(b)     Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4).]”

On plain reading of the provision and rules, Net ITC has been specifically defined in the rule, which states that input tax credit availed on input during the relevant period other than input tax credit pertain to zero-rated supply mentioned in Rule 89 of 4A & 4B. So the contention of the department regarding the calculation of the net ITC after deduction of inverted rate purchase ITC i.e. lower rated purchase is not sustainable. I find that net ITC has to be as per the definition mentioned in the above rule i.e. input tax credit availed on inputs during the relevant period. Where there are multiple inputs attracting different rates of tax, in the formula provided in Rule 89(5) of the CGST Rules, the term “Net ITC” covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax. Also, in support of their claim, the appellants have submitted a worksheet which reflects all the detail as per the prescribed formula. I have placed a scanned copy of the said worksheet below, for better understanding;

I have verified the above table and checked the same with the workout conducted in the impugned orders and agree with the submission of the appellants. Thus, looking above, I find that the adjudicating authority, on his own has travelled beyond the clarification as prescribed in the statute. The adjudicating authority should have relied on the “exact wording” of the statute under consideration.

Lord Diplock in the Duport Steel v. Sirs case (1980) defined the rule :

“Where the meaning of the statutory words is plain and unambiguous it is not then for the judges to invent fancied ambiguities as an excuse for failing to give effect to it’s plain meaning because they consider the consequences for doing so would be inexpedient, or even unjust or immoral.”

This definition says that a judge should not deviate from the literal meaning of the words even if the outcome is unjust. If they do they are creating their own version of how the case should turn out and the will of Parliament is contradicted. Similar view has been adopted by the Hon’ble Supreme Court in various cases and I produce, below, some notable head notes of a few cases.

(A)    In the case of Parmeshwaran Subramani, 2009 (242) E.L.T. 162 (S.C.);

Interpretation of statutes – Legislative intention – No scope for court to undertake exercise to read something into provisions which the legislature in its wisdom consciously omitted – Intention of legislature to be gathered from language used where the language is clear – Enlarging scope of legislation or legislative intention not the duty of Court when language of provision is plain – Court cannot rewrite legislation as it has no power to legislate – Courts cannot add words to a statute or read words into it which are not there – Court cannot correct or make assumed deficiency when words are dear and unambiguous – Courts to decide what the law is and not what it should be – Courts to adopt construction which will carry out obvious intention of legislature, [paras 14, 15]

(B)    In the case of Dharamendra Textile Processors, 2008 (231) E.L.T. 3 (S.C.);

Interpretation of statutes – Principles therefore – Court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous – A statute is an edict of the legislature – Language employed in statute is determinative factor of legislative intent.

(C)    In the case of Favourite Industries, 2012 (278) E.L.T. 145 (S.C.);

Interpretation of statutes – Exemption notification – It is concession/exception in fiscal statute, and is required to construed strictly -There cannot be any addition or subtraction to words employed in it – Its wordings have to be given their natural meaning, when they are simple, clear and unambiguous. [paras 14, 25]

7. Therefore, I find that the adjudicating authority has wrongly deducted ITC of the same and lower tax rate availed by the appellants and agree to the arguments placed forward by the latter.

8. In view of above, I set aside the Impugned orders and allow the appeals filed by the appellants.

9. The appeals filed by the appellant stand disposed of in above terms.