HC Orders Refund of Unutilised ITC Under Inverted Duty

Case Details: ITD Cemindia JV vs. Joint Commissioner of Commercial Taxes (Appeals )-5 - [2025] 181 taxmann.com 653 (Karnataka)

Judiciary and Counsel Details

• S.R. Krishna Kumar, J.
• A. Shankar, Sr. Counsel & U.A. Madhusudhan, Adv. for the Petitioner.
• Smt. Jyoti M. Maradi, HCGP for the Respondent.

Facts of the Case

The assessee applied for a refund of the Input Tax Credit (ITC) on account of unutilised input tax credit (ITC) accumulated due to an inverted duty structure. The competent authority issued against the assessee and subsequently rejected the refund in Form GST-RFD-06. A writ petition was filed to quash the impugned orders and sought a mandamus directing the competent authority to release the refund, which had been decided in the assessee’s favour for other tax periods. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the impugned orders rejecting the refund were unsustainable as per the Section 54(3) of the CGST Act and the corresponding provisions under the Karnataka GST Act expressly provide for refund of unutilised ITC where the rate of tax on inputs exceeds that of output supplies, resulting in an inverted duty structure. The Court confirmed that the competent authority had erred in disregarding those orders. It was held that the assessee was entitled to claim the refund of unutilised input tax credit (ITC) along with interest as per statutory provisions and directed the competent authority to process and release the refund within a stipulated timeframe.

List of Cases Reviewed

• W.P. No. 2490/2023 order dated 28.08.2024 (para 5)
• W.P. No. 2817/2025, order dated 12.03.2025 (para 6) followed

List of Cases Referred to

• ITD Cemindia JV v. Joint CCTes [2025] 174 taxmann.com 87 (Karnataka) (para 3)
• ITD Cemindia JV v. Joint CCTes (Appeals) [2025] 173 taxmann.com 235 (Karnataka) (para 3).