GST INDIA Biz

S.No	Name	Date of Order	Subject	Actions
1	Commissioner, CGST & CX, Siliguri Commissionerate v. M/s Santosh Fragrance	16-09-2026	Inverted duty refund under Section 54(3)(ii) to an agarbatti manufacturer – whether para 3.2 of CBIC Circular 135/05/2020-GST bars the refund.	View Download
BackgroundThe respondent manufactures agarbatti (HSN 3307) taxed at 5%, using perfumes, fragrances, chemicals and packaging materials taxed at 12–18%. A refund of Rs. 4,00,000 of ITC accumulated due to inverted tax structure (April 2022–March 2023) was sanctioned on 18.01.2024 and upheld by the First Appellate Authority. Revenue appealed, contending that para 3.2 of Circular 135/05/2020-GST (as substituted by Circular 173/05/2022-GST) took the case outside Section 54(3)(ii).Final VerdictThe Tribunal framed two questions: whether the credit had accumulated because the tax rate on inputs was higher than on output, and whether para 3.2 of the Circular stood in the way. Applying the definition of “inputs” in Section 2(59) and VKC Footsteps (SC), it held that the perfumes, chemicals and packaging materials were commercially distinct inputs taxed at higher rates than agarbatti, so the ITC had accumulated on account of an inverted rate structure squarely within Section 54(3)(ii). Para 3.2 applies only where input and output are the same goods taxed at different rates at different points of time, and has no application here. Reiterating its own view in Power Tech Global and that of the Principal Bench in Dow Chemical, the Tribunal held that CBIC circulars bind departmental officers but not the Tribunal, and are at most persuasive. The concurrent findings of the lower authorities were affirmed and Revenue’s appeal dismissed.
Commissioner, CGST & CX, Siliguri Commissionerate v. M/s Santosh Fragrance 16-09-2026 Inverted duty refund under Section 54(3)(ii) to an agarbatti manufacturer – whether para 3.2 of CBIC Circular 135/05/2020-GST bars the refund. BackgroundThe respondent manufactures agarbatti (HSN 3307) taxed at 5%, using perfumes, fragrances, chemicals and packaging materials taxed at 12–18%. A refund of Rs. 4,00,000 of ITC accumulated due to inverted tax structure (April 2022–March 2023) was sanctioned on 18.01.2024 and upheld by the First Appellate Authority. Revenue appealed, contending that para 3.2 of Circular 135/05/2020-GST (as substituted by Circular 173/05/2022-GST) took the case outside Section 54(3)(ii).Final VerdictThe Tribunal framed two questions: whether the credit had accumulated because the tax rate on inputs was higher than on output, and whether para 3.2 of the Circular stood in the way. Applying the definition of “inputs” in Section 2(59) and VKC Footsteps (SC), it held that the perfumes, chemicals and packaging materials were commercially distinct inputs taxed at higher rates than agarbatti, so the ITC had accumulated on account of an inverted rate structure squarely within Section 54(3)(ii). Para 3.2 applies only where input and output are the same goods taxed at different rates at different points of time, and has no application here. Reiterating its own view in Power Tech Global and that of the Principal Bench in Dow Chemical, the Tribunal held that CBIC circulars bind departmental officers but not the Tribunal, and are at most persuasive. The concurrent findings of the lower authorities were affirmed and Revenue’s appeal dismissed. View Download
2	Commissioner of CGST & Central Excise, Kolkata North v. M/s HP Cotton Casuals Pvt. Ltd.	10-09-2026	Inverted duty refund to a garment processor – whether denied because input and output share the same HSN, or on “manufacture”, verification and period-wise computation objections.	View Download
BackgroundThe respondent buys fabric and pre-stitched garments (5%) and chemicals and packing materials (12–18%), and supplies finished apparel at 5% after bleaching, dyeing, printing, stitching, branding and packing. Its inverted duty refunds of Rs. 34,47,623 (March 2024) and Rs. 7,86,037 (February 2024) were rejected on the ground that input and output fall under the same HSN. The First Appellate Authority allowed them, and Revenue appealed, also alleging non-verification of capital-goods invoices, GSTR-2B mismatches, export ITC and annual (rather than period-wise) computation.Final VerdictThe Tribunal held that the concept of “manufacture” is no longer relevant under GST, since the levy under Section 9(1) is on supply, so refund eligibility does not depend on whether the claimant is a trader or a manufacturer. Para 3 of Circular 135/05/2020-GST, by its very heading, deals with accumulation due to a reduction in the GST rate, and para 3.2 applies only where the same goods attract different rates at different points of time; it has no application where there is no rate reduction. Following the Madras High Court in Vindhya Spinning Mills (14.07.2026), it held that Section 54(3)(ii) draws no distinction between principal and other inputs, so where higher-taxed chemicals and packing materials cause the accumulation, refund cannot be denied because one input shares the output’s rate or HSN. Computation had been period-specific under Rule 89(5), and the verification objections had already been examined by both lower authorities and were not rebutted by any evidence. Revenue’s appeals were dismissed.
Commissioner of CGST & Central Excise, Kolkata North v. M/s HP Cotton Casuals Pvt. Ltd. 10-09-2026 Inverted duty refund to a garment processor – whether denied because input and output share the same HSN, or on “manufacture”, verification and period-wise computation objections. BackgroundThe respondent buys fabric and pre-stitched garments (5%) and chemicals and packing materials (12–18%), and supplies finished apparel at 5% after bleaching, dyeing, printing, stitching, branding and packing. Its inverted duty refunds of Rs. 34,47,623 (March 2024) and Rs. 7,86,037 (February 2024) were rejected on the ground that input and output fall under the same HSN. The First Appellate Authority allowed them, and Revenue appealed, also alleging non-verification of capital-goods invoices, GSTR-2B mismatches, export ITC and annual (rather than period-wise) computation.Final VerdictThe Tribunal held that the concept of “manufacture” is no longer relevant under GST, since the levy under Section 9(1) is on supply, so refund eligibility does not depend on whether the claimant is a trader or a manufacturer. Para 3 of Circular 135/05/2020-GST, by its very heading, deals with accumulation due to a reduction in the GST rate, and para 3.2 applies only where the same goods attract different rates at different points of time; it has no application where there is no rate reduction. Following the Madras High Court in Vindhya Spinning Mills (14.07.2026), it held that Section 54(3)(ii) draws no distinction between principal and other inputs, so where higher-taxed chemicals and packing materials cause the accumulation, refund cannot be denied because one input shares the output’s rate or HSN. Computation had been period-specific under Rule 89(5), and the verification objections had already been examined by both lower authorities and were not rebutted by any evidence. Revenue’s appeals were dismissed. View Download

Total: 2 case laws

Inverted duty refund under Section 54(3)(ii) to an agarbatti manufacturer – whether para 3.2 of CBIC Circular 135/05/2020-GST bars the refund.

Inverted duty refund to a garment processor – whether denied because input and output share the same HSN, or on “manufacture”, verification and period-wise computation objections.