MUMBAI: The Sikkim high court has ruled that businesses are entitled to a refund of unutilised input tax credit (ITC) even upon the discontinuation or closure of operations. The order follows a writ petition filed by SICPA India, a private limited company, which had sought a refund of about Rs 4.4 crore in unutilised ITC after ceasing its manufacturing activities in Sikkim.SICPA, which was a manufacturer of security inks and solutions, had decided to discontinue its Sikkim operations in Jan 2019, selling off its machinery and facilities by March 2020. The company had appropriately reversed ITC on asset sales but was left with a significant unutilised balance in its electronic credit ledger.The company challenged earlier orders from the assistant commissioner and the appellate authority, which had rejected SICPA India’s refund application. The authorities had maintained that Section 54(3) of the CGST Act, 2017, limits ITC refunds to only two specific circumstances, neither of which includes business closure.However, SICPA argued that section 49(6) of the CGST Act provides for the refund of balances in the electronic credit ledger, subject to Section 54. They contended that the exceptions carved out in Section 54(3) cannot negate a vested right to ITC and its refund.Ankit Kanodia, one of the advocates which represented the company told TOI, “The HC examined the provisions of Sections 49(6) and 54(3) of the CGST Act and relevant case laws, including that of the Karnataka HC, in the case of Slovak India Trading, where refunds of unutilised credit were allowed upon business closure. The HC held that there is no express prohibition in the CGST Act against refunding unutilised ITC upon business closure and that retention of tax without authority of law is impermissible.” The judgment stated, “Although, Section 54(3) of the CGST Act deals only with two circumstances where refunds can be made, however the statute also does not provide for retention of tax without the authority of law.” Consequently, in a significant judgment, the HC held that SICPA is entitled to the refund of unutilised ITC claimed by them.