Refund of Unutilised ITC Allowed Even After Business Closure | HC

Case Details: SICPA India (P.) Ltd. vs. Union of India - [2025] 175 taxmann.com 371 (SIKKIM)

Judiciary and Counsel Details

• Meenakshi Madan Rai, J.
• Passang Tshering Bhutia & Ms Ankit Kanodia, Advs. for the Petitioner.
• Ms Sangita Pradhan, Deputy Solicitor General of India for the Respondent.

Facts of the Case

The petitioner, having ceased business operations and obtained cancellation of its GST registration, filed a refund application under section 54 of the CGST Act, 2017 seeking refund of unutilised Input Tax Credit (ITC) lying in its electronic credit ledger. The jurisdictional officer rejected the refund claim, stating that section 54(3) allows refund only in two specific circumstances: (i) zero-rated supplies made without payment of tax, and (ii) accumulation due to inverted duty structure.

The Appellate Authority confirmed the rejection, holding that the closure of business does not fall under either circumstance mentioned in section 54(3), and thus does not entitle the petitioner to a refund of unutilised ITC. The petitioner contended that there was no express bar under the statute preventing such refund and submitted that retention of tax without authority of law is impermissible. Reliance was placed on section 49(6) read with sections 29 and 54 of the CGST Act, 2017, and Rule 5 of the CENVAT Credit Rules, 2002. The matter was accordingly placed before the High Court of Sikkim.

High Court Held

The High Court of Sikkim held that there is no express prohibition in section 49(6) read with section 54 and section 54(3) of the CGST Act, 2017, against claiming refund of unutilised ITC upon closure of business. While section 54(3) enumerates two specific circumstances for refund, the Court observed that the statute does not provide for retention of tax without authority of law. It was concluded that the petitioner was entitled to the refund of unutilised ITC claimed. This ruling affirms that closure of business does not, in itself, disqualify a registered person from seeking refund of accumulated ITC, thereby reinforcing statutory safeguards against unlawful tax retention.

List of Cases Reviewed

• Union of India v. Slovak India Trading Co. (P.) Ltd. [2006] 5 STT 332 (Karnataka) (para 9) followed

List of Cases Referred to

• Shabnam Petrofils (P.) Ltd. v. Union of India [2019] 108 taxmann.com 15/75 GST 801/29 GSTL 225 (Gujarat) (para 4)
• Union of India v. Slovak India Trading Co. (P.) Ltd. [2006] 5 STT 332 (Karnataka) (para 4)
• Eicher Motors Ltd. v. Union of India 1999 taxmann.com 1769/1999 106 ELT 3 (SC) (para 4)
• State of Uttar Pradesh v. Indian Hume Pipe Co. Ltd. 1977 taxmann.com 40/1977 39 ELT 355 (SC) (para 7)
• Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority AIR 2023 SC 781 (para 7).