Case Title: Micro Systems & Services Sole Proprietorship v. Union of India
Court: High Court of Telangana
Petition No.: Writ Petition No. 37465 of 2021
Category: Refund – Inverted Duty Structure
Date of Judgment: September 5, 2022
Relevant Sections: Section 54(3)(ii), Section 107, Section 168(1) of CGST Act, 2017; Rule 89(4), 89(5) of CGST Rules, 2017
Circulars Involved: Circular No. 135/05/2020-GST dated 31-03-2020 and Circular No. 173/05/2022-GST dated 06-07-2022
Facts of the Case
[Para 3] Petitioner is a proprietorship concern engaged in assembling and supplying computers, supplying mainly to DRDO laboratories, with GST applied at a concessional rate of 5%.
[Para 4] A refund claim of ₹77,91,857 was filed on 02-12-2020 under Section 54 due to accumulation of ITC from inverted duty structure.
[Para 5] The refund was rejected via order dated 04-01-2021 citing CBIC Circular No. 135/05/2020-GST (para 3.2) that disallowed refund when input and output goods are the same.
[Para 6] The appeal filed under Section 107 was also dismissed on 09-04-2021 by Respondent No. 5 affirming the rejection.
[Para 8] Petitioner argued that a later Circular dated 06-07-2022 clarified that such refunds are eligible even when goods are the same if supplied under concessional rate notifications.
Questions in Consideration
[Para 2]
- Whether Circular No. 135/05/2020-GST validly restricts refund of accumulated ITC when input and output goods are the same?
- Whether Circular No. 173/05/2022-GST dated 06-07-2022, which clarifies the earlier circular, can be applied retrospectively to allow refund claims?
Observations of the Court
[Para 10-12] The refund was denied based on para 3.2 of Circular dated 31-03-2020 which disallowed refund where input and output goods were the same.
[Para 13] CBIC received representations and later clarified via Circular No. 173/05/2022-GST that refund should be allowed when the rate difference arises due to concessional notifications even for same goods.
[Para 14] This clarification is deemed clarificatory in nature, thus applicable retrospectively.
[Para 15] The court held that the refund claim should be reconsidered in light of this clarificatory circular.
Judgment of the Court
[Para 16-17]
- The orders dated 04-01-2021 and 09-04-2021 were set aside.
- The matter was remanded to Respondent No. 6 to re-consider the refund claim under Circular dated 06-07-2022.
- The reconsideration must be done within 8 weeks of receipt of the court’s order.
- Writ petition was allowed; no costs were awarded.
Between Fine Lines
The High Court ruled that refund of ITC under the inverted duty structure cannot be denied solely because input and output goods are the same, when the output is taxed at a concessional rate under government notification. The Court recognized the clarificatory nature of the later CBIC circular and allowed it to apply retrospectively. The earlier refund denial was thus unjustified, and the claim must be reassessed. This reinforces the principle that beneficial clarifications must be applied even to past transactions.
Summary of Referred Cases
| S. No. | Name of Case | Citation | Summary | Verdict |
| 1 | N/A | – | No prior judicial precedents were explicitly cited or relied upon in this judgment. | – |
Takeaway
“Same Goods, Different Rates – Refund Still Valid”