Advance Authorisation default bars cash refund where export obligation is not fulfilled under the duty exemption scheme.

Imports made under Advance Authorisation remained subject to the Foreign Trade Policy and the customs exemption conditions, including fulfilment of the export obligation and recovery of duty with interest on default. Because the goods were cleared under a conditional duty-free regime, non-fulfilment of that obligation did not convert the import into an ordinary dutiable transaction capable of yielding a cash refund under the transitional provision in section 142(3) of the CGST Act. Authorities cited for refund of CENVAT credit were held inapplicable. The refund claim was therefore not maintainable, and rejection of the refund was sustained.

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Issues: Whether refund of customs duty paid on imports under Advance Authorization for non-fulfilment of export obligation was admissible under section 142(3) of the Central Goods and Services Tax Act, 2017.

Analysis: Advance Authorization operates subject to the Foreign Trade Policy and the corresponding customs exemption notification, which require compliance with the export obligation and contemplate execution of bond, LUT or bank guarantee in the event of default. The relevant procedure under the Handbook of Procedure also provides for recovery of customs duty with interest on bona fide default and even permits suo motu payment. The imported goods were brought in under a conditional duty-free regime, and when the export obligation was not met, the benefit of that regime could not be recharacterised as a normal dutiable import so as to generate a cash refund. The decisions relied on by the assessee concerned refund of CENVAT credit and not refund arising from default under Advance Authorization, and therefore did not assist the assessee.

Conclusion: The claim for refund was not maintainable and the issue was answered against the assessee.

Final Conclusion: The duty paid on account of failure to fulfil export obligation under Advance Authorization could not be refunded in cash under the transitional provision, and the rejection of the refund was sustained.

Ratio Decidendi: Where imports are made under a conditional duty exemption scheme linked to export obligation, non-fulfilment of that obligation defeats the claim to cash refund of duty paid, particularly when the governing policy and procedure specifically provide for recovery of duty with interest on default.

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