The Kolkata Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) has sent an inverted duty structure refund dispute back to the first appellate authority after finding that the records did not establish whether the taxpayer had made three outward supplies taxable at 18%. 

The bench of Sunil Kumar Singh (Judicial Member) and Bijoy Kumar Kar (Technical Member) noted that the first appellate authority had not addressed the alleged 18% supplies. At the same time, the Revenue had not produced the invoices or other supporting documents before the tribunal. On the material available, the bench said it could not determine whether the company’s outward supplies were confined to the 5% rate or also included supplies taxed at 18%.

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The dispute concerns a January 2023 refund claim of approximately ₹11.67 lakh filed by the appellant/assessee, which carries out fabric dyeing on a job work basis. According to the order, its outward job work supplies attract GST at 5%, while several inputs used in its operations attract higher rates. The company sought a refund of accumulated input tax credit under Section 54(3)(ii) of the CGST Act on account of this inverted tax structure.

The jurisdictional officer issued a show cause notice in July 2024 after identifying deficiencies in the refund claim. Despite the company’s reply, the officer rejected the claim in August 2024. The company appealed, and the Additional Commissioner (Appeals) set aside the rejection and allowed the refund in April 2025.

The CGST department then approached GSTAT on a specific calculation issue. It said e-invoice details showed three outward supply invoices charging GST at 18%, but the appellate authority had considered only supplies taxed at 5%. According to the department, adjusted turnover should have been ₹4,91,52,037 instead of ₹4,84,63,857. It calculated the alleged excess refund at ₹71,475.

The company disputed that account. It maintained that it had not dealt in goods taxable at 18% and that its final supplies attracted GST at 5%. It argued that the first appellate authority had correctly applied the refund formula and that the department had shown no factual or legal error warranting interference.

The tribunal identified the central question as the correct value of inverted rated supplies and adjusted total turnover under Rule 89(5) of the CGST Rules. Those figures affect the maximum refund available under the prescribed formula. 

GSTAT therefore did not uphold the department’s ₹71,475 excess-refund calculation. Nor did it finally affirm the refund allowed to the company. It remanded the matter to the first appellate authority to determine the correct values of inverted rated supplies, adjusted turnover and the admissible refund.

The tribunal directed the department to produce documents relating to any 18% outward supplies before that authority. It also directed the authority to give both sides a reasonable opportunity of hearing and pass a reasoned order within three months of receiving the tribunal’s order.

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