ORDER

This is an application under sub-section (1) of Section 97 of the CGST/SGST Act, 2017 (hereinafter referred to as Act) and the rules made thereunder filed by M/s. Uttranchal Filament (India), Plot No. 14, 15, 16 Sector-2, IIE, SIDCUL, Hardwar seeking an advance ruling on following issue :

(a) Whether the meaning of word ‘lapse’ in Notification No. 20/2018-Central Tax (Rate) would mean lapse for refund or lapse for utilization of input tax credit for payment of output tax liability?

2.  Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub-section (2) of Section 97 or sub-section (1) of Section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

3.  As per the said sub-section (2) of Section 97 of the CGST/SGST Act, 2017 advance ruling can be sought by an applicant in respect of :

(a)  Classification of any goods or services or both,

(b)  Applicability of a notification issued under the provisions of this Act,

(c)  Determination of time and value of supply of goods or services or both,

(d)  Admissibility of input tax credit of tax paid or deemed to have been paid,

(e)  Determination of the liability to pay tax on any goods or services or both,

(f)  Whether the applicant is required to be registered?

(g)  Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term?

4.  In the present case applicant has sought advance ruling on applicability of notification. Therefore, in terms of said Section 97(2)(b) of CGST/SGST Act, 2017, the present application is hereby admitted.

5.  Accordingly opportunity of personal hearing was granted to the applicant on 2-5-2019. Shri Sandeep Kumar Gupta and Vishal Gupta (CA), on behalf of the applicant appeared for personal hearing on the said date. Ms. Preeti Manral, Deputy Commissioner, SGST-Dehradun, concerned officer appointed by the State Authority, also present during the hearing proceedings.

6.  From the application submitted by the applicant we find that applicant is registered in Uttarakhand with GSTIN Bearing No. 05AAGPG9026Q1ZC and it is a proprietorship firm which is engaged in manufacturing activities. Before proceeding in the present case, we would first go through the submissions filed by the applicant and the same is summarized as under :

(i)  Notification No. 5/2017-Central Tax (Rate), is restricting the refund on account of inverted duty structure for some specified products only, while there is no condition to restrict the utilization of input tax credit for payment of output tax liability.

(ii)  Notification No. 20-Central Tax (Rate), withdraw some goods, as a result refund was available on these goods subject to the condition that in respect of goods, the accumulated input tax credit lying unutilized in balance, after payment of tax for and up to the month of July, 2018 on the inward supplies received up to the 31-7-2018 shall ‘lapse’.

(iii) Therefore the meaning of word ‘lapse’ in Notification No. 20-Central Tax (Rate) related to refund only and not for utilization in output tax liability.

7. In the present case we are not deciding any wider question but restricting our conclusion to the facts and circumstances which was filed for our consideration in the application. Now we proceed as under :

(A) Whether the meaning of word ‘lapse’ in Notification No. 20/2018-Central Tax (Rate) would mean lapse for refund or lapse for utilization of input tax credit for payment of output tax liability.

(A.1) In this context legal provisions are reproduced as under :

Notification No. 5/2017-Central Tax (Rate), dated 28th June 2017

G.S.R. (E). – In exercise of the powers conferred by clause (ii) of the proviso to sub-section (3) of section 54 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the goods, the description of which is specified in column (3) of the Table below and falling under the tariff item, heading, nub-heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Table, in respect of which no refund of unutilised input tax credit shall be allowed, where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies of such goods (other than nil rated or fully exempt supplies).

TABLE

The said notification was amended vide Notification No. 44/2017-Central Tax (Rate), dated 14-11-2017 wherein following entries were added in the original Notification No. 5/2017-Central Tax (Rate), dated 28-6-2017 :

The Notification No. 5/2017-Central Tax (Rate), dated 28-6-2017 was further amended vide Notification No. 20/2018-Central Tax (Rate), dated 26-7-2018 and the said amendment is reproduced as under :

Notification No. 20/2018-Central Tax (Rate) dated 26th July, 2018

 G.S.R. (E). – In exercise of the powers conferred by clause (ii) of the proviso to sub-section (3) of section 54 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 5/2017-Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 677(E), dated the 28th June, 2017, namely

In the said notification, in the opening paragraph the following proviso shall be inserted, namely :-

“Provided that, –

(i) nothing contained in this notification shall apply to the input tax credit accumulated on supplies received on or after the 1st day of August, 2018, in respect of goods mentioned at serial numbers 1, 2, 3, 4, 5, 6, 6A, 6B, 6C and 7 of the Table below; and

(ii) in respect of said goods, the accumulated input tax credit  lying unutilised in balance, after payment of tax for and up to the month of July, 2018, on the inward supplies received up to the 31st day of July, 2018, shall lapse.”.

(A.2) On perusal of aforesaid notifications, we find that refund is not available to accumulated input tax credit due to inverted duty structure in respect of specified inputs which remain unutilized. The inverted duty structure means rate of tax on inputs being higher than the rate of tax on the output supplies of such goods. We also find that vide notification dated 26-7-2018 proviso to Notification No. 5/2017-Central Tax (Rate), dated 28-6-2017 was inserted vide which applicability of notification dated 28-6-2017 was rescinded to the extent of input tax credit accumulated on supplies received on or after the 1st day of August, 2018, in respect of goods mentioned at Serial Numbers 1, 2, 3, 4, 5, 6, 6A, 6B, 6C and 7 supra.

(A.3) Now coming to the question in hand, we find that aforesaid notifications had been issued under clause (ii) of the proviso to subsection (3) of Section 54 of the Act. Section 54 of the Act provides for refund of accumulated credit on inputs on account of inverted duty structure, i.e., GST rate on inputs being higher than the GST rates on finished goods. However, proviso (ii) to Section 54(3) provides that in respect of notified goods, the refund of such accumulated input tax credit shall not be allowed. Notification No. 5/2017-Central Tax (Rate), dated 28-6-2017 has been issued in terms of this provision and it inter alia prescribes that refund of accumulated ITC on account of inverted duty structure shall not be allowed in respect of goods mentioned supra.

(A.4) We observe that the proviso has to be read with the principal part of the notification. A comprehensive reading of amended notification makes it clear that the proviso seeks to lapse only such input tax credit which is the subject matter of principal notification, i.e. accumulated credit on account of inverted duty structure in respect of notified goods. Thus in terms of amended notification, the input tax credit on account of inverted duty structure lying in balance after payment of GST for the month of July (on purchases made on or before the 31st July, 2018) shall lapse.

(A.5) In view of the above we observe that the said notifications are exclusively dealt with the refund of accumulated input tax credit on account of inverted duty structure Only. We further observe that when a requisite notification has been issued under a particular section, the provisions of said section spring into operation and an assessee, who is covered by the provisions of that section, is entitled to seek benefits thereunder.

ORDER

8. In view of the above discussion & findings we hold that Notification No. 20/2018-Central Tax (Rate) dated 26-7-2018 deals with refund of inverted duty structure only.