Decided 14 October 2026. The Kolkata Bench of GSTAT has rejected the department's attempt to recover an inverted duty structure refund on the ground that credit notes were wrongly deducted from turnover. Where goods are returned and a valid credit note is issued within the time allowed, the value goes out of turnover for the Rule 89(5) formula.
Case at a glance
| Case | Commissioner of CGST & CX, Siliguri v. Rajshahi Banijya Pvt. Ltd. |
| Forum | GSTAT, Kolkata Bench, Court No. 1 |
| Appeal No. | APL/112/KLK/2026 (department's appeal) |
| Date of order | 14 October 2026 |
| Credit notes | ₹39,58,490 issued October 2021 to March 2022 |
| Key provisions | Section 34 CGST Act; Rule 89(5) CGST Rules |
| Result | Revenue appeal dismissed; refund upheld |
Facts of the case
The taxpayer obtained a refund of accumulated ITC due to an inverted duty structure. The department treated it as an erroneous refund, objecting to the deduction of credit notes from turnover. The first appellate authority (Siliguri) allowed the taxpayer's appeal in February 2023, and the department went to the Tribunal.
The taxpayer relied on a Chartered Accountant's certificate showing credit notes of ₹39,58,490 issued between October 2021 and March 2022.
Issue before the Tribunal
Can credit notes issued for returned goods be deducted from turnover while computing an inverted duty refund under Rule 89(5)?
What the Tribunal held
- The Tribunal itself checked the CA certificate against the GSTR-1 statements and voucher register and found that every credit note matched and was issued within the time limit under section 34(2).
- Under section 34(1), when goods are returned, a credit note is issued because the supply has, in effect, not been made. Its value is to be deducted from turnover for the Rule 89(5) computation.
- The department's objection about the period in which credit notes were issued was not supported by the record. The appellate order was upheld.
Practical takeaways for taxpayers
- Keep credit notes reconciled with GSTR-1 and support them with a CA certificate when claiming an inverted duty refund.
- Issue credit notes within the section 34(2) deadline (30 November of the next financial year, or the date of annual return, whichever is earlier).
- If the department alleges an erroneous refund, ask for the specific credit notes it disputes and answer with matching GSTR-1 data.
Frequently asked questions
Are credit notes deducted from turnover in an inverted duty refund?
GSTAT Kolkata held that valid credit notes for returned goods reduce the turnover used in the Rule 89(5) formula.
What evidence helped the taxpayer?
A CA certificate listing the credit notes, which the Tribunal matched with GSTR-1 returns and the voucher register.
Facing a similar GST dispute?
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This summary is based on the order of the GST Appellate Tribunal, Kolkata Bench in Appeal No. APL/112/KLK/2026. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.