Refund of Unutilized ITC whether to be allowed to the supplier only?

Refund of Unutilized ITC whether to be allowed to the supplier only?

Gujrat High Court in Britania Industries Limited discusses this issue on 11-03-2020 in the context of section 54(3), which says that a registered person shall be allowed refund of unutilized ITC as the end of the tax period.

Rule 89 says that refund can be allowed only to the supplier. In the present case, the assessee is SEZ Unit to whom ITC has travelled through the input service distributor. Normally SEZ Units do not have accumulated ITC because supplies to SEZ are declared zero-rated supplies. There is no notification, circular in the law which talks about a refund of ITC in the hands of SEZ.

High Court held that in the case of Amit Cotton Industries where the registered person had paid back his higher duty drawback claim, a refund of IGST can not be denied for having claimed higher duty drawback in the first place on the strength of Customs Circular.

Relying upon Amit Cotton, Gujrat High Court read down Rule 89 to conclude that though Rule 89 mandates refund to supplier only in the present case, it is not possible to claim a refund by the supplier and hence the claim of SEZ Unit as the recipient of credit can not be denied.

Related Topic:
Refund of unutilized ITC compensation cess

This principle has also been followed while rendering the judgment in VKC Footsteps on 24-07-2020.