Facts of the Case

Tvl.Stellar Fashion Incorp, represented by its partner, filed a writ petition under Article 226 of the Constitution before the Madurai Bench of the Madras High Court seeking a Writ of Certiorarified Mandamus. The petitioner challenged a Refund Sanction/Rejection Order No. ZB3312200876725 in Form GST-RFD-06 dated 03.12.2020, passed by the State Tax Officer (Circle), Karur, and sought a direction to honour its refund claim under Section 54 of the CGST Act, 2017 in full, within a time frame fixed by the Court. The claim arose from an inverted duty structure, where input tax paid exceeds the tax payable on output supplies.

Issues Involved

  1. Whether the petitioner's claim for refund under the inverted duty structure, computed in the manner it sought, was legally sustainable.
  2. Whether the Gujarat High Court's earlier view in VKC Footsteps India Pvt. Ltd. vs Union of India, on which such claims were premised, continued to hold the field.

Petitioner's Arguments

  • Learned counsel for the petitioner fairly and candidly submitted that the issue stood covered against the petitioner in view of the Supreme Court's decision in Union of India and others vs VKC Footsteps India Private Ltd. (Civil Appeal No.4810 of 2021 and batch), decided on 13.09.2021.
  • Counsel further acknowledged that the Gujarat High Court's decision in VKC Footsteps India Private Ltd. vs Union of India, which had earlier supported claims of this kind, had been overruled.

Respondent's Arguments

  • The Additional Government Pleader appearing for the respondents relied on the binding Supreme Court ruling and the Madras High Court's own Division Bench decision in Tvl.Transtonnelstroy Afcons Joint Venture vs Union of India, which had accepted the Revenue's interpretation of the refund formula under the inverted duty structure.

Court Order/Findings

  • The Court noted the petitioner's own fair concession that the issue was covered against it by the Supreme Court's decision in Union of India vs VKC Footsteps India Private Ltd., which had overruled the Gujarat High Court's view and effectively endorsed the Madras High Court's Division Bench ruling in Transtonnelstroy Afcons Joint Venture vs Union of India.
  • In view of the binding precedent, the writ petition was dismissed, with no order as to costs.

Important Clarification

  • Refund claims premised on the Gujarat High Court's pre-VKC Footsteps interpretation of the inverted duty refund formula under Rule 89(5) of the CGST Rules cannot survive after the Supreme Court's ruling in Union of India vs VKC Footsteps India, which is now the binding position across India.
  • Where counsel candidly concedes that a claim is covered by adverse binding precedent, courts will dismiss the petition without further examination of the merits.

Sections Involved

  • Section 54(3), CGST Act, 2017 — refund of unutilised input tax credit, including on account of inverted duty structure.
  • Rule 89(5), CGST Rules, 2017 — formula prescribed for computing refund of unutilised ITC in inverted duty structure cases.

Decision – In Favour of

In favour of the Department — the writ petition seeking full refund under the inverted duty structure was dismissed as covered against the petitioner by binding Supreme Court precedent.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: Writ Petition (MD) No.5079 of 2021
  • Parties: Tvl.Stellar Fashion Incorp vs Commissioner of Commercial Taxes & Anr.
  • Coram: Justice C. Saravanan
  • Date of Order: 22.03.2022

Link to Download the Order

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