Zero-rated sales refund entitlement protects the purchasing dealer from unilateral tax adjustment under the statutory scheme.

A registered dealer making zero-rated sales was entitled under section 18(2) to refund of input tax actually borne on goods exported as such or used in manufacture of exported goods, and the revenue could not unilaterally reduce that refund to the legally payable rate or insist that only the seller could claim it. The statutory scheme placed the refund entitlement on the purchasing dealer who had borne the tax burden, and the contrary restriction was unsustainable. The separate dispute on assessability of paper board used as insole in exported shoes was not decided in writ jurisdiction; the assessee was relegated to the statutory revisional remedy.

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Issues: (i) whether a registered dealer making zero-rated sales was entitled under section 18(2) to refund of input tax paid on purchase of goods exported as such or used in manufacture of exported goods, without reduction or suo motu adjustment by the revenue; (ii) whether the challenge regarding assessability of paper board used as insole in exported shoes could be entertained in writ jurisdiction or had to be pursued before the statutory authorities by revision.

Issue (i): Whether a registered dealer making zero-rated sales was entitled under section 18(2) to refund of input tax paid on purchase of goods exported as such or used in manufacture of exported goods, without reduction or suo motu adjustment by the revenue.

Analysis: Section 18(1) grants zero-rating in specified cases and section 18(2) confers a refund right on the dealer who makes such zero-rated sales in respect of input tax paid or payable on purchases of the exported goods or goods used in their manufacture. Section 18(3) contemplates lapse of unadjusted ITC only where no adjustment or refund claim is made within the prescribed period. The Court held that, once the purchaser established actual payment of tax at a rate higher than what was legally payable, the revenue could not unilaterally restrict the refund to the legally payable rate, nor could it insist that the seller alone was the person entitled to claim refund. The statutory scheme placed the refund entitlement on the purchasing dealer who had borne the tax burden in the context of zero-rated sales.

Conclusion: The assessee was entitled to refund of the tax paid without reduction or adjustment, and the revenue's contrary restriction was unsustainable.

Issue (ii): Whether the challenge regarding assessability of paper board used as insole in exported shoes could be entertained in writ jurisdiction or had to be pursued before the statutory authorities by revision.

Analysis: The assessability dispute was treated as a matter to be decided under the statutory mechanism provided by the Act. The Court declined to decide that question in the writ petitions and directed the assessee to avail the revisional remedy available under the Act within the stipulated period.

Conclusion: The writ challenge on assessability of paper board was not adjudicated on merits and the assessee was relegated to the statutory revision remedy.

Final Conclusion: The refund orders were set aside to the extent they curtailed the assessee's entitlement, while the separate assessability dispute was left to the statutory forum.

Ratio Decidendi: Where zero-rated sales confer a statutory refund right under section 18(2), the purchasing dealer who has actually borne the input tax is entitled to refund in full, and the revenue cannot impose a unilateral adjustment contrary to the statutory scheme.

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