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While calculating the inverted rate refund claim under Section 54 of CGST Act the term “Net ITC” covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax.

Section 54 of the CGST Act, 2017— Refund – The appellant engaged in the manufacture and sale of DG sets (Diesel Gensets), filed refund claims for accumulated ITC on account of rate of tax on inputs being higher than the rate of the output supplies. The adjudicating authority partly allowed refund claims on the ground that as per Rule 89(5) read with Section 54 of the Act, for the purpose of calculation of net ITC, input means only those inputs on which rate of tax is higher than the rate of final product. The appellants submitted that the adjudicating authority has adopted a wrong formula to calculate the eligibility of the claims. The adjudicating authority has rejected part refund by observing that in case of inverted duty structure, the ITC pertaining to only such inputs, the rate of tax on which is higher than the rate of tax on output supplies, would be permissible. The authority observed that the adjudicating authority has travelled beyond the clarification as prescribed in the statute. The adjudicating authority should have relied on the “exact wording” of the statute under consideration. The adjudicating authority has wrongly deducted ITC of the same and lower tax rate availed by the appellants. Held that:- The Hon’ble Authority allowed the appeal and set aside the impugned orders.