Case Note & Summary
The petitioner, Jar Productions Private Limited, is a company incorporated under the Companies Act, 2013, engaged in providing production services to 'A Suitable Company Ltd' (ASCL) located in London, United Kingdom. The petitioner entered into an agreement dated 12th September 2019, effective from 28th March 2018, for providing these services. Clause 4.10 of the agreement provided that any refund of tax component received by the petitioner would be reduced from the production expenses. For providing the services, the petitioner received and utilized various inputs/input services on which CGST/MGST/IGST was paid. The petitioner filed a refund claim for unutilized Input Tax Credit (ITC) for the period August 2019 to October 2019 amounting to Rs. 1,43,56,999/-. The Assistant Commissioner issued a show cause notice and after hearing the petitioner, rejected the claim on the ground that the incidence of tax had been passed on to the client ASCL, resulting in unjust enrichment of the petitioner. The petitioner challenged this order before the Additional Commissioner, who upheld the rejection. The petitioner then filed a writ petition before the Bombay High Court. The High Court examined the provisions of Section 54 of the Central Goods and Services Tax Act, 2017, and Rule 89 of the CGST Rules, 2017. The Court noted that the refund claim was for unutilized ITC on account of export of services. The Court held that the condition of unjust enrichment under Section 54(8)(d) applies only when the incidence of tax is passed on to another person. In the case of export of services, the recipient is located outside India, and the tax burden is not passed on to any person in India. Therefore, the provisions of unjust enrichment are not attracted. The Court set aside the impugned orders and directed the respondents to process the refund claim in accordance with law within four weeks.
Headnote
A) Goods and Services Tax - Refund of Unutilized Input Tax Credit - Export of Services - Unjust Enrichment - Section 54 of Central Goods and Services Tax Act, 2017 - The petitioner, an exporter of production services, claimed refund of unutilized ITC. The Revenue rejected the claim on the ground that the tax incidence was passed on to the foreign client, resulting in unjust enrichment. The High Court held that since the recipient of services is located outside India, the tax burden is not passed on to any person in India, and therefore the provisions of unjust enrichment under Section 54(8)(d) are not attracted. The Court allowed the refund, setting aside the impugned orders. (Paras 1-10) B) Goods and Services Tax - Refund - Unjust Enrichment - Section 54(8)(d) of CGST Act, 2017 - The Court interpreted Section 54(8)(d) and held that the condition of unjust enrichment applies only when the incidence of tax is passed on to another person. In the case of export of services, the foreign client is not a 'person' within the meaning of the provision for the purpose of unjust enrichment, as the tax is not ultimately borne by any person in India. (Paras 8-10)
Issue of Consideration
Whether the rejection of the petitioner's GST refund claim on the ground of unjust enrichment is sustainable when the tax incidence has not been passed on to any person in India.
Final Decision
The impugned orders dated 19.02.2021 and 23.02.2021 are set aside. The respondents are directed to process the refund claim of the petitioner in accordance with law within four weeks from the date of the order.
Law Points
- Refund of unutilized Input Tax Credit
- Export of services
- Unjust enrichment
- Incidence of tax passed on
- Section 54 of CGST Act
- 2017
- Rule 89 of CGST Rules
