In a significant judgement, the Hon’ble Sikkim High Court in the case of SICPA India Private Limited & Anr. [WP (C) No. 54 of 2023] has allowed refund of accumulated Input Tax Credit (ITC) upon closure of business – a scenario not explicitly covered under Section 54(3) of the CGST Act 2017.
A refund claim of unutilized ITC of INR 4.37 Crores was allowed to the company, which has ceased its operations in January 2019.
Key takeaways from the case:
– The HC held that there is no express prohibition under Section 49(6) read with Section 54(3) against such refunds
– The Court relied on Karnataka HC’s ruling in Slovak India, emphasizing that closure of business should not bar refund of legitimate ITC
– It held that retention ot tax without authority of law violates Article 265 of the Constitution
– The judgement underscores that ITC, though a statutory right, cannot be arbitrarily denied in the absence of express prohibition
‼️Why this matters?‼️
This is the first ruling under GST allowing refund of accumulated ITC outside the two scenarios under Section 54(3) – zero rated supplies and inverted duty structure.
While the ruling is specific to business closure, it opens the door for broader interpretation in similar contexts.