High Court orders refund of IGST with interest, stresses compliance with judicial decisions.

The Gujarat High Court ruled in favor of the petitioners, directing the respondent authorities to sanction the refund of IGST and pay interest at 9% on the delayed refund. The Court emphasized that circulars could not override statutory provisions and that authorities must comply with binding judicial decisions. The judgment reinforced the principles of fairness and accountability in the administration of tax refunds.

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Issues Involved:
1. Inaction of the respondent authorities regarding the refund of IGST.
2. Entitlement of interest on the delayed refund of IGST.

Issue-wise Detailed Analysis:

1. Inaction of the respondent authorities regarding the refund of IGST:

The petitioners invoked the extraordinary writ jurisdiction under Article 226 of the Constitution of India, seeking a writ of mandamus directing the respondent authorities to sanction the refund of IGST amounting to Rs. 12,00,800/- paid on the export of goods (Organic Soya Bean Feed Grade) under 'Zero Rated Supplies'. The petitioners argued that they had exported goods under various invoices and paid IGST, but inadvertently claimed a higher rate of drawback by selecting option "1201A" instead of "1201B". This mistake led to the retention of a lower rate of drawback amounting to Rs. 65,512/-, and the differential amount was returned to the Customs Department. Despite complying with mandatory provisions and submitting statutory returns, the refund of IGST was not sanctioned. The petitioners made several representations and sent multiple emails to the respondent authorities, but received no response.

The respondent authorities objected to the petition, arguing that the petitioners claimed a higher rate of drawback and received a higher amount, which disqualified them from receiving an IGST refund. They relied on instructions issued under Board Circular No.37/2018-Customs dated 09.10.2018, which stated that it would not be justified to allow IGST refunds to those who initially claimed higher drawback benefits.

The Court noted that the petitioners had amended the shipping bills and returned the differential drawback amount, which was acknowledged by the respondent authorities. The Court referred to the decision in the case of Amit Cotton Industries Vs. Principal Commissioner of Customs, which held that Rule 96 of the CGST Rules, 2017, provides that shipping bills are deemed to be an application for refund of integrated tax paid on exported goods. The claim for refund can only be withheld under specific circumstances outlined in Rule 96(4), which did not apply to the petitioners' case. The Court concluded that the respondent authorities were not justified in withholding the IGST refund based on the circular, as it could not override statutory rules.

2. Entitlement of interest on the delayed refund of IGST:

The petitioners also sought interest at 18% on the delayed refund of IGST. The Court examined Section 56 of the CGST Act, 2017, which mandates interest on delayed refunds if the tax is not refunded within 60 days from the date of receipt of the application. The Court noted that the petitioners had raised the refund claim within the prescribed time and made various representations, but the respondent authorities failed to take a decision. The Court referred to the decision in the case of E.I. Dupont India (P) Ltd. Vs. Union of India, which emphasized that authorities must abide by binding decisions of higher appellate authorities and courts.

The Court directed the respondent authorities to immediately sanction the refund of IGST paid on the exported goods and granted interest at 9% from the date when the refund bills were raised until actual payment. The refund amount, along with interest, was to be paid within eight weeks from the date of receipt of the order. Failure to release the amount within the stipulated time would result in further interest at 9% until actual payment.

Conclusion:

The Gujarat High Court ruled in favor of the petitioners, directing the respondent authorities to sanction the refund of IGST and pay interest at 9% on the delayed refund. The Court emphasized that circulars could not override statutory provisions and that authorities must comply with binding judicial decisions. The judgment reinforced the principles of fairness and accountability in the administration of tax refunds.

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