Page 196 - GSTL_2nd July 2020 _Vol 38_Part 1

114 GST LAW TIMES [ Vol. 38
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 re-
funds 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 in-
verted 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 de-
nied 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 de-
rived the amount of net ITC by considering only such input tax credit of pur-
chase 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 Ji-
gar Shah, Advocate, appeared before me on behalf of the appellants and reiterat-
ed 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.
1 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 accumu-
lated 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 du-
ty 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
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1 Paragraph number as per official text.
GST LAW TIMES  2nd July 2020  196