Sikkim High Court on GST Refund of Unutilised ITC

📌 Case: Union of India v. SICPA India Pvt. Ltd. 

📌 Court: Sikkim High Court, Division Bench (CJ Biswanath Somadder & J. Bhaskar Raj Pradhan)

📌 Date: 5 September 2025

📌 Issue: Whether refund of unutilised Input Tax Credit (ITC) can be claimed on closure of business under Section 49(6) read with Section 54 of the CGST Act, 2017.

 

🏛 Background

SICPA India Pvt. Ltd. discontinued operations in Sikkim after 2019.

It sought refund of ₹4.37 crore unutilised ITC lying in its electronic credit ledger.

Assistant Commissioner and Appellate Authority rejected the claim, holding closure of business is not a ground under Section 54(3).

Single Judge allowed refund, relying on Slovak India Trading Co. (Karnataka HC, 2006).

Union of India appealed.

 

⚖ Court’s Findings

 

Section 49(6): Permits refund of balance in cash/credit ledger “in accordance with Section 54.”

Section 54(3): Enumerates only two grounds for refund of unutilised ITC:

Zero‑rated supplies without payment of tax.

Inverted duty structure (higher tax on inputs vs. outputs).

Closure of business not covered.

Distinguished Slovak India (Cenvat regime) as not applicable under GST.

Referred to VKC Footsteps (2022) where SC held refund entitlement is strictly as per statute.

Held: Refund of unutilised ITC on closure of business is not permissible under CGST Act.

 

📌 Key Takeaways

 

Refund entitlement is statutory, not equitable. ITC refunds only in cases expressly provided under Section 54(3).

Closure of business does not entitle refund of ITC. Balance must be reversed under Section 29(5).

Judicial consistency: High Courts and SC have clarified that delegated legislation or equitable arguments cannot expand refund grounds.

Compliance note for businesses: Plan ITC utilisation before discontinuance; refunds are limited to zero‑rated supplies and inverted duty cases.

 

Link to Download the order

https://www.mytaxexpert.co.in/uploads/1769075664_UnionofIndiav.SICPAIndiaPvt.Ltd.pdf