Facts of the Case

The petitioner, a manufacturer of e-rickshaws (commonly known as TOTO), sought a refund of Rs.8,94,583/- of unutilised input tax credit accumulated on account of an inverted duty structure, which was rejected by the adjudicating authority by order dated 11.10.2023 on the ground that a 'stereo system'/loudspeaker purchased and installed on the e-rickshaws was not an eligible 'input'. The petitioner's appeal against this rejection was in turn dismissed by the Appellate Authority on 12.12.2024, prompting the present writ petition. Notably, in the petitioner's own case involving an identical stereo system, a different appellate order dated 30.05.2024 had allowed the refund, creating divergent outcomes on the same issue.

Issues Involved

  1. Whether a 'stereo system' installed on e-rickshaws manufactured and sold by the petitioner qualifies as an 'input' under Section 2(59) of the CGST Act, 2017.
  2. Whether the input tax credit accumulated on such stereo systems is eligible for refund under the inverted duty structure proviso to Section 54(3) of the CGST Act, 2017.

Petitioner's Arguments

  • The stereo system is used exclusively for installation on e-rickshaws manufactured by the petitioner and constitutes an inward supply of an input used in the course or furtherance of business under Section 2(59).
  • The petitioner's own case, in a separate appellate order, had already recognised the stereo system as an eligible input and allowed a similar refund, warranting a consistent outcome.

Respondent's Arguments

  • The State, after the matter was flagged for clarification, referred it to the Additional CCT (Law), who examined the definitions of 'input' under Section 2(59) and 'business' under Section 2(17) in detail and concluded, in written instructions dated 01.07.2025, that ITC on the stereo system used in manufacturing e-rickshaws is eligible for refund, since the statute does not restrict 'input' to raw materials used strictly in manufacturing.

Court Order / Findings

  • The Court took on record the State's written instructions, which reasoned that 'input' under Section 2(59) covers any goods (other than capital goods) used or intended to be used in the course or furtherance of business, and is not confined to items used directly in the manufacturing process.
  • Based on this concession, the Court held that nothing further remained to be adjudicated, as the Department's own instructions indicated the petitioner was entitled to the refund.
  • The impugned appellate order dated 12.12.2024 was set aside, and the respondents were directed to verify the records and refund the eligible amount within six weeks.

Important Clarification

  • The term 'input' under Section 2(59) of the CGST Act, 2017 is not restricted to raw materials consumed in a manufacturing process; it covers any goods, other than capital goods, used or intended to be used by a supplier in the course or furtherance of business, viewed from the perspective of the business rather than narrowly from the perspective of manufacturing.
  • Consequently, input tax credit on components such as a stereo system fitted to a manufactured product (here, an e-rickshaw) is eligible for refund under the inverted duty structure proviso to Section 54(3), clause (ii), of the CGST Act, 2017.

Sections Involved

  • Section 54(3), CGST Act, 2017 — refund of unutilised input tax credit, including clause (ii) of the first proviso dealing with inverted duty structure.
  • Section 2(59), CGST Act, 2017 — definition of 'input'.
  • Section 2(17), CGST Act, 2017 — definition of 'business'.
  • Section 107, CGST Act, 2017 — appeal to Appellate Authority.

Decision – In Favour of

In favour of the Assessee. The rejection of the refund claim was set aside and a direction for verification and refund within six weeks was issued.

Case Details

High Court of Calcutta; WPA No.1808 of 2025; Coram: Hon'ble Mr. Justice Om Narayan Rai; Date of Order: 22.12.2025.

Link to Download the Order

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