Assessee Entitled To Refund Of Unutilized ITC Claimed On Closure Of Business: Sikkim High Court

In a significant judgment that provides relief to businesses ceasing operations, the Sikkim High Court has ruled that an assessee is entitled to a cash refund of their unutilized Input Tax Credit (ITC) upon the closure of their business. The court rejected the GST department's argument that refunds are only permissible in cases of zero-rated supplies or inverted duty structures. The High Court observed that ITC is a vested right of the taxpayer, and the government cannot retain it without the authority of law. When a business closes, it has no future output tax liability against which to set off the accumulated credit. Therefore, the court held that denying a cash refund in such a situation would be unjust and would amount to an appropriation of the assessee's property. This decision ensures that businesses can recover the tax they have already paid on inputs when they wind up.