Decided 30 September 2026. The Kolkata Bench of GSTAT has upheld an inverted duty structure refund of ₹63,19,046 to a trader who buys sulphur in bulk at 5% and sells it in packets, using packing material taxed at 18%. The Tribunal held that packing material is an 'input' and that CBIC Circular 135/05/2020, which bars refund where input and output are the same, cannot override section 54(3)(ii).
Case at a glance
| Case | Commissioner of CGST & CX, Siliguri v. Teesta Agro Industries Ltd. |
| Forum | GSTAT, Kolkata Bench, Court No. 1 |
| Appeal No. | APL/20/KLK/2026 (department's appeal) |
| Date of order | 30 September 2026 |
| Refund | ₹63,19,046 for May 2022 |
| Key provisions | Sections 2(59), 54(3)(ii) and 168(1) CGST Act; Circulars 135/05/2020 and 173/05/2022 |
| Result | Revenue appeal dismissed; refund within three months |
Facts of the case
The taxpayer buys loose sulphur (HSN 2503, 5% GST) in bulk and sells it in customised smaller packets at 5%. The packing material (HSN 3923) attracts 18%, causing ITC to accumulate.
Its refund of ₹63,19,046 was sanctioned. The department appealed, relying on Circular 135/05/2020 that refund is not available where input and output supplies are the same. The first appellate authority rejected the department's appeal.
Issue before the Tribunal
Is an inverted duty refund available where the main input and output are the same goods at the same rate, but packing material attracts a higher rate?
What the Tribunal held
- Packing materials are 'inputs' under section 2(59); they are indispensable for selling packed sulphur.
- Para 3.2 of Circular 135/05/2020 deals with situations where the same goods attract different rates at different times due to rate reduction; it does not cover this case.
- Following the Calcutta High Court (Shivaco Associates) and the Delhi and Karnataka High Courts (Indian Oil Corporation), a circular under section 168(1) cannot add to or curtail the Act. If refund is due under section 54(3)(ii), a circular cannot deny it.
- The Tribunal followed its own earlier order in Tea Linker (packaged tea). The department's appeal was dismissed and the refund was to be paid within three months.
Practical takeaways for taxpayers
- Traders and packers who repack 5% goods using 18% packing material can claim inverted duty refunds.
- If your refund is rejected citing Circular 135/2020, rely on Indian Oil Corporation (Delhi HC) and this GSTAT ruling.
- Keep records showing that the packing material is used for the outward supply.
Frequently asked questions
Is packing material an input for GST refund?
Yes. GSTAT Kolkata held packing material used in supplying goods is an input under section 2(59).
Can refund be denied where the input and output goods are the same?
Not on the basis of Circular 135/2020 alone, if the higher-rated packing material causes the inversion.
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This summary is based on the order of the GST Appellate Tribunal, Kolkata Bench in Appeal No. APL/20/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.