Reportable  
                                                       IN THE SUPREME COURT OF INDIA 
                                               CIVIL APPELLATE/ORIGINAL JURISDICTION 
                                                                                      
                                                             Civil Appeal No 4810 of 2021  
                      
                     Union of India & Ors.                                                                                 ....Appellants 
                      
                                                                               Versus 
                      
                     VKC Footsteps India Pvt Ltd.                                                                       .... Respondents 
                      
                                                                                  With  
                                                             Civil Appeal No 4809 of 2021 
                                                                                      
                                                                                  With  
                                                             Civil Appeal No 4811 of 2021 
                                                                                      
                                                                                  With  
                                                             Civil Appeal No 4807 of 2021 
                                                                                      
                                                                                  With  
                                                             Civil Appeal No 4767 of 2021 
                                                                                      
               Signature Not Verified
               Digitally signed by                                                With  
               Sanjay Kumar
               Date: 2021.09.13
               12:44:47 IST
               Reason:                                       Civil Appeal No 4804 of 2021 
                                                                                      
                                                                                     1 
                     
                           With  
                    Civil Appeal No 4806 of 2021 
                              
                           With  
                    Civil Appeal No 4802 of 2021 
                              
                           With  
                    Civil Appeal No 4783 of 2021 
                              
                           With  
                   Civil Appeal Nos 4775-4781 of 2021 
                              
                           With  
                   Civil Appeal Nos 4769-4774 of 2021 
                              
                           With  
                    Civil Appeal No 4805 of 2021 
                              
                           With  
                    Civil Appeal No 4808 of 2021 
                              
                           With 
                               
                   Civil Appeal Nos 4764-4765 of 2021 
                              
                          And With  
                              
                     Writ Petition (C) 489 of 2021 
                              
                              
        
        
                            2 
        
                        J U D G M E N T 
                              
       Dr Dhananjaya Y Chandrachud, J 
       Index  
       A  Introduction...................................................................................................... 4 
       B  Factual Backdrop ............................................................................................ 5 
       C  Statutory Provisions ........................................................................................ 7 
       D  Submissions .................................................................................................. 11 
             D.1       Union of India .................................................................................... 11 
         D.1.1  Part I- Distinction between goods and services ................................ 11 
         D.1.2  Part II- Interpretation of Section 54(3) ............................................... 12 
         D.1.3.  Part III- Legal Propositions ................................................................ 18 
        D.2       Assessees .......................................................................................... 21 
        D.3        Rejoinder by Union of India ................................................................ 59 
       E  Constitutional Scheme of GST ...................................................................... 61 
       F  CGST Act ...................................................................................................... 69 
        F.1  Definitions ............................................................................................... 69 
        F.2  Section 16 & Section 49 of the CGST Act............................................... 73 
        F.3  Interpretation of Section 54(3) of the CGST Act ..................................... 77 
        F.4  Construing the proviso ............................................................................ 94 
        F.5  Constitutional validity: The ultra vires doctrine ...................................... 104 
       G  Rule 89(5).................................................................................................... 113 
        G.1  The validity of Rule 89(5) of CGST Rules in exercise of the rule-making 
        power under Section 164 of the CGST Act .................................................... 115 
        G.2  The vires of Rule 89(5) vis-à-vis Section 54(3) of the CGST Act .......... 117 
        G.3 The validity of the formula prescribed in Rule 89(5) ................................ 122 
       H  Conclusion................................................................................................... 138 
        
                            3 
        
                                                                                                   PART A  
               A      Introduction 
               1      Parliament while enacting the Central Goods and Services Tax Act 2017,1
                                                                                                       has 
               incorporated a provision for refund of tax in Section 54. Sub-Section (3) embodies a 
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               provision for refund of unutilised input tax credit  in cases involving: 
                  (i)    zero rated supplies made without payment of tax; and 
                  (ii)   credit accumulation “on account of rate of tax on inputs being higher than 
                         rate of tax on output supplies”.  
               2      While envisaging a refund in the latter of the above two situations, Parliament 
               was cognizant of the fact that ITC may accumulate due to a variety of reasons. 
               However,  Parliament envisaged  a specific situation  where  the credit has 
               accumulated due to an inverted duty structure, that is where the accumulation of ITC 
               is because the rate of tax on inputs is higher than the rate of tax on output supplies. 
               Taking legislative note of this situation, a provision for refund has been provided for 
               in Section 54(3). The  Central Goods and Service Tax Rules 20173 have been 
               formulated in pursuance of the rule making power conferred by Section 164 of the 
               CGST Act. Rule 89(5) provides a formula for the refund of ITC, in “a case of refund 
               on account of inverted duty structure”. The said formula uses the term “Net ITC”. In 
               defining the expression “Net ITC”, Rule 89(5) speaks of “input tax credit availed on 
               inputs”.
                                                                            
               1 “CGST Act” 
               2 “ITC” 
               3 “CGST Rules” 
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