SEZ Unit Entitled to Refund of Unutilised ITC Under Zero-Rated Scheme | HC

Case Details: Lupin Ltd. vs. State of Maharashtra [2026] 186 taxmann.com 766 (Bombay)

Judiciary and Counsel Details

• Anil L. Pansare & Raj D. Wakode, JJ.
• P. Shah, Sr. Adv., M. Raval & A. Potnis, Advs. for the Petitioner.
• M.I. Dhatrak & P.V. Navlani, Advs. for the Respondent.

Facts of the Case

The petitioner, a SEZ unit, filed applications seeking refund of unutilised Input Tax Credit (ITC), including Input Service Distributor (ISD) credit, under the zero-rated supply mechanism. The jurisdictional authorities rejected the refund claims on the ground that only the supplier making supplies to the SEZ unit was eligible to claim refund, and not the SEZ unit itself. The appellate authority affirmed the rejection, and further declined to follow the decision of the Gujarat High Court in Britannia Industries Ltd. v. Union of India on the ground that a Special Leave Petition against the said judgment was pending before the Supreme Court. The Department also contended that refund eligibility was contingent upon the services being used for authorised operations duly endorsed by the Specified Officer of the SEZ, which, according to the Department, had not been established on record. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that refusal to follow a binding High Court precedent merely on account of pendency of an SLP before the Supreme Court was legally unsustainable, as judicial discipline mandates adherence to binding precedents unless such judgments are stayed or set aside. The Court further held that, in terms of Section 54 of the CGST Act read with Section 16 of the IGST Act and Rule 89 of the CGST Rules, a SEZ unit is entitled to claim refund of unutilised ITC under the zero-rated supply mechanism, and such claims are required to be adjudicated in accordance with law. The Court also observed that the impugned orders failed to record any finding with respect to authorised operations and endorsement by the Specified Officer of the SEZ, as contemplated under the SEZ framework, thereby necessitating reconsideration of the matter. Accordingly, the impugned orders were quashed and the matter was remanded to the adjudicating authority for fresh adjudication in accordance with law.

List of Cases Reviewed

• Britannia Industries Ltd. v. Union of India [2020] 122 taxmann.com 32/42 GSTL 3 (Gujarat)(para 9), followed

List of Cases Referred to

• Britannia Industries Ltd. v. Union of India [2020] 122 taxmann.com 32/42 GSTL 3 (Gujarat) (para 5)
• Union of India v. Messrs Meghmani Organochem Ltd. [2025] 179 taxmann.com 342/112 GST 337 (SC) (para 6)
• CIT Vidarbha v. Smt. Godavaridevi Saraf 1978 (2) ELT (J 624) (Bom) (para 8).