Under refund category of an inverted duty structure, whether refund of ITC accumulated on an input service is also admissible?
The Honorable Supreme court in its landmark judgement has upheld the decision of Honorable Madras High Court and ruled out against the order of Honorable Gujarat High Court. The Honorable High Court of Gujarat had challenged the constitutional validity of rule 89(5) of the CGST Rules and said refund of input services should also me admissible accumulated on account of inverted duty structure. On the contrary, Honorable High Court of Madras, upheld the validity of rule 89(5).
Only refund of input goods (and not input services) accumulated on account of inverted duty structure is admissible under Section 54(3) of the CGST Act and proviso to section 54(3) is a restriction and not a mere condition.
The Judgement is based on following facts that, provision to section 54(3) is a restriction and not a mere condition to avail refund; A court cannot redraw the legislative boundaries; section 54(3) is constitutionally valid and Rule no. 89(5) is not ultra vires.