Interpretation of CGST Act: Refund of Unutilized ITC for Exports of Goods with NIL Export Duty

The High Court of Bombay interpreted the first proviso to section 54(3) of the CGST Act regarding the refund of unutilized ITC in cases of exports of goods with NIL rate of export duty. The court considered a clarification issued on 20.09.2021, which specified that goods with NIL export duty are not restricted from availing ITC refunds. Both parties agreed that the clarification favored the petitioner, leading to the court quashing previous orders and instructing the respondents to process the petitioner's case accordingly. The petition was allowed with no costs, and parties were directed to comply with the court's order.

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Issues:
Interpretation of the first proviso to section 54(3) of CGST/SGST Act regarding refund of unutilized ITC in case of exports of goods with NIL rate of export duty.

Analysis:
The High Court of Bombay heard arguments from both the petitioner's counsel and the respondents' standing counsel. The standing counsel for the respondents informed the court about a subsequent development regarding a clarification dated 20.09.2021. This clarification led the standing counsel to consent to the petition being allowed. The standing counsel presented communications supporting this stance, including one from the Assistant Commissioner, Legal, CGST, Goa. The circular dated 20.09.2021 was crucial, specifically referring to clause 3, which addressed the issue at hand.

The circular clarified that the term 'subjected to export duty' in the first proviso to section 54(3) of the CGST Act means goods actually leviable to export duty and suffering export duty at the time of export. Goods with NIL rate of export duty or fully exempted from export duty are not considered subjected to export duty. Only goods actually subjected to export duty, i.e., on which some export duty has to be paid at the time of export, are covered by the restriction on refund of accumulated ITC under section 54(3). Goods not subject to export duty or covered by exemptions are not restricted from availing the refund of accumulated ITC.

Both counsels agreed that the clarification resolved the issues raised in the petition in favor of the petitioner. Consequently, the court quashed the order-in-original and the order in appeal, directing the respondents to process the petitioner's case based on the clarification provided. The petition was allowed with no costs imposed, and all concerned parties were instructed to act upon the authenticated copy of the court's order.

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