Court Orders Refund of IGST Paid on Exports with Interest, Circulars Cannot Override Statutory Provisions

The court held that the writ-applicants are entitled to a refund of IGST paid on exports with 7% simple interest. The court ruled that the higher duty drawback claimed does not impact refund eligibility. Circulars issued by the Government cannot override statutory provisions or judicial decisions. The respondents were directed to sanction the refund immediately, deducting the differential duty drawback amount. The writ application was allowed, and direct service was permitted.

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Issues Involved:
1. Entitlement to refund of IGST paid on exports.
2. Impact of claiming higher duty drawback on refund eligibility.
3. Applicability and binding nature of circulars issued by the Government.

Detailed Analysis:

1. Entitlement to Refund of IGST Paid on Exports:
The writ-applicants, engaged in the business of trading cotton yarn and cotton waste, sought a refund of IGST paid on exports for the period from July to September 2017. Under Section 16 of the IGST Act, exports are deemed "zero rated supplies," meaning they are exempt from tax liability. Section 16(3) offers two options for claiming refunds: exporting without paying tax against a bond or letter of undertaking and claiming a refund of unutilized input tax credit, or exporting on payment of integrated tax and claiming a refund of the tax paid. The writ-applicants initially exported goods on payment of IGST but erroneously selected the option of export without payment of tax while filing shipping bills, leading to a denial of IGST refund by customs authorities.

2. Impact of Claiming Higher Duty Drawback on Refund Eligibility:
The writ-applicants claimed a higher rate of duty drawback under the Customs Act, 1962, which the customs authorities used as a basis to deny the IGST refund. However, the court referenced the judgment in M/s. Amit Cotton Industries v/s Principal Commissioner of Customs, which held that refund of IGST paid on exports cannot be denied solely on the grounds of claiming a higher duty drawback. Rule 96 of the CGST Rules deems the shipping bill as an application for refund of IGST paid on exported goods and allows withholding of refund only under specific conditions, none of which applied to the writ-applicants.

3. Applicability and Binding Nature of Circulars Issued by the Government:
The respondents argued that the refund claim should be denied based on a Government of India circular dated 9th October 2018. However, the court noted that circulars, while binding on revenue authorities, cannot contradict statutory provisions or judicial decisions. The circular in question was issued after the export date and primarily addressed duty drawback provisions, not IGST refunds. The court cited Supreme Court precedents, emphasizing that circulars cannot override statutory rules or judicial pronouncements.

Conclusion:
The court concluded that the writ-applicants are entitled to the refund of IGST paid on exports, with 7% simple interest from the date of the shipping bills until the actual refund date. The refund should be granted after deducting the differential amount of duty drawback for the specified period. The writ application was allowed, and the respondents were directed to sanction the refund immediately. Rule was made absolute, and direct service was permitted.

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