ITC Refund Not Limited to Principal Input Rate | Karnataka HC

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  • Last Updated on 29 July, 2025

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ITC refund inverted duty Input tax credit GST Principal input tax rate Section 54 CGST Act Rule 89 CGST Rules

Case Details: MK Agrotech (P.) Ltd. vs. Union of India - [2025] 176 taxmann.com 600 (Karnataka)

Judiciary and Counsel Details

  • Suraj Govindaraj, J.
  • Smt. Meghna Lal, Smt. Vani Dwevidi and Ravi Raghavan, Advs. for the Petitioner.
  •  Jeevan J. Neeraligi, Adv. for the Respondent.

Fact of the Case

The Petitioner, a manufacturer and dealer of refined vegetable oil, utilised multiple inputs in the course of manufacture, one of which was crude sunflower oil. Input tax credit was initially sanctioned but was later curtailed in revision by the jurisdictional officer under GST, who restricted the refund under the inverted duty structure to the tax rate applicable on the principal input, namely crude sunflower oil. The Petitioner contended that the manufacturing process also involved other ingredients and inputs taxed at rates higher than that applicable to the principal output, and that refund of unutilised input tax credit could not be confined solely to the rate on the principal input. It was submitted that such restriction was contrary to section 54 of the CGST Act and the Karnataka GST Act and Rule 89 of the CGST Rules and Karnataka GST Rules. The matter was accordingly placed before the Karnataka High Court.

HC Held

The Karnataka High Court held that refund of unutilised input tax credit under an inverted tax structure cannot be denied on other inputs taxed at a higher rate merely because the principal input is not taxed at a rate exceeding that of the principal output. It was observed that the issue had already been settled in multiple cases, including by the same High Court in the case of ‘Indian Oil Corporation Ltd. v. Assistant Commissioner of Central Tax [2025] 174 taxmann.com 1 (Karnataka)’, and the legal principle laid down therein was fully applicable to the present matter. The writ petition was accordingly allowed and a writ of certiorari was issued quashing the earlier order by jurisdiction officer.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied