The dispute in M/s. Vindhya Spinning Mills Private Limited v. The Assistant Commissioner of CGST and Central Excise, Thiruthangal arose from the rejection of refund claims filed under Section 54(3) of the Central Goods and Services Tax Act, 2017 on account of an inverted duty structure.

The petitioner was engaged in the manufacture of cotton yarn. Its principal raw material was raw cotton yarn, which attracted GST at 5%, the same rate applicable to the finished product. However, the manufacturing process also required several ancillary inputs, including chemicals, dyes, consumables, packing materials and other manufacturing inputs, which attracted GST at 12% and 18%.