Key Case Details:
- Case Name: SICPA India Private Limited and Another Vs Union of India and Others
- Court: Sikkim High Court
- Order Date: June 11, 2025
Significant Relief for Businesses Closing Under GST Law
In a landmark ruling, the Sikkim High Court allowed SICPA India Private Limited and another petitioner to claim a refund of ₹4,37,61,402 in unutilized Input Tax Credit (ITC) after closing their business operations. The judgment clarifies an important area of GST law where businesses discontinue operations but still have unutilized ITC.
Background:
SICPA India Private Limited, a manufacturer of security inks, was registered under GST in Sikkim. The company ceased operations in January 2019 and sold its manufacturing assets by March 2020. Although they reversed ITC according to GST rules, an accumulated ITC balance of ₹4.37 crore remained. The company applied for a refund under Section 49(6) of the CGST Act, arguing that unutilized ITC can be refunded after payment of tax and dues.
Rejection by Tax Authorities:
- The Assistant Commissioner, CGST & Central Excise (Gangtok Division) rejected the refund on February 8, 2022.
- The Additional Commissioner (Appeals), CGST & Central Excise (Siliguri) upheld this rejection on March 22, 2023.
The authorities held that Section 54(3) allows ITC refunds only in two situations:
- Zero-rated supplies made without payment of tax.
- Accumulation of credit due to inverted duty structure.
Since business closure isn’t listed, they denied the refund.
Petitioner’s Arguments:
- Section 49(6) allows refund of balances in the electronic credit ledger as per Section 54.
- Section 54(3)’s exceptions do not eliminate the vested right to ITC refund upon business closure.
- Previous judgments support the petitioners’ claim:
- Shabnam Petrofils Pvt. Ltd. vs. Union of India (2019 SCC OnLine Guj 6910)
- Union of India vs. Slovak India Trading Company Pvt. Ltd. (MANU/KA/0709/2006)
- Eicher Motors Ltd. vs. Union of India (1999) 2 SCC 361
Respondents’ Arguments:
The government, represented by the Deputy Solicitor General of India, argued:
- Business closure isn’t a valid reason for refund under GST law.
- Section 49(6) is not independent but works only within the limits of Section 54.
- Section 29(5) provides for reversal of ITC but not for refund on business closure.
- The petitioner had other legal remedies (like filing an appeal under Section 112) but failed to pursue them.
High Court’s Analysis:
On Alternative Remedies:
The court cited several Supreme Court rulings that allow High Courts to entertain writ petitions even when alternative remedies exist:
- State of U.P. vs. Indian Hume Pipe Co. Ltd. (1977) 2 SCC 724
- M/s. Godrej Sara Lee Ltd. vs. Excise and Taxation Officer (AIR 2023 Supreme Court 781)
Since no factual disputes existed, the court decided the legal issue directly.
On Refund Eligibility:
- Section 49(6) permits refund of electronic credit balances subject to Section 54.
- Section 54(3) only lists two circumstances for ITC refunds but does not explicitly prohibit refunds in other situations, like business closure.
- Citing Slovak India Trading Company Pvt. Ltd., the court emphasized that no express prohibition exists against refunding unutilized ITC when a business closes.
Final Ruling:
The Sikkim High Court ruled that:
- The Appellate Authority’s order (dated 22-03-2023) rejecting the refund is set aside.
- The petitioners are entitled to a refund of their unutilized ITC of ₹4.37 crore.
- Tax cannot be retained by the government without legal authority.
The writ petition was allowed and disposed of.
Key Takeaway:
This judgment provides crucial clarity for businesses shutting down under GST. Even though business closure isn’t mentioned in Section 54(3), unutilized ITC cannot be denied if the law doesn’t explicitly prohibit such refunds.
Read Full Judgment Here:
Source: Taxguru
