2022 (1) TMI 547 - HC - GST

Customs authorities must immediately sanction IGST refund for export of comber noil under zero rated supplies

Gujarat HC allowed IGST refund for export of comber noil under zero rated supplies. The court held that customs authorities arbitrarily withheld refund ... Zero-rated supply - Refund of IGST - Deeming fiction under Rule 96 - Withholding of refund limited to specified contingencies - Circulars not overriding statutory rule - Interest on delayed refunds under Section 56Zero-rated supply - Refund of IGST - Deeming fiction under Rule 96 - Withholding of refund limited to specified contingencies - Circulars not overriding statutory rule - Entitlement to refund of IGST paid on zero-rated exports where exporter initially claimed higher drawback but amended shipping bills and repaid the differential drawback. - HELD THAT: - The Court found that the exported goods were zero-rated supplies and that Rule 96 casts a deeming fiction whereby the shipping bill is an application for refund of integrated tax paid on exported goods, subject to the limited contingencies in Rule 96(4). On the facts, the shipping bills were amended under Section 149 of the Customs Act and the differential drawback was repaid and realised by Customs. The respondents' reliance on Board Circular No.37/2018-Customs and related notifications to deny refund was held untenable: circulars or departmental instructions cannot override the statutory scheme under Rule 96 and Section 54. The Court followed its earlier decision in Amit Cotton Industries (and noted the dismissal/continuance of challenges before the Apex Court) holding that withholding refund on the ground that the exporter had, initially of its own volition, claimed higher drawback is not justified where the statutory grounds for withholding under Rule 96(4) are not engaged. The adjudicating authority's failure to follow the binding precedent and to decide the refund application was held to be arbitrary. [Paras 11, 12, 13, 14, 16]Respondent authorities directed to immediately sanction the refund of IGST paid in respect of the shipping bills dated 05.07.2017 to 10.08.2017.Interest on delayed refunds under Section 56 - Entitlement to interest on delayed refund and the rate of interest to be awarded in the peculiar facts of the case. - HELD THAT: - Section 56 provides for interest where tax ordered to be refunded is not paid within sixty days of a complete application, with the statutory ceiling for such interest specified. Applying Section 56 and having regard to the delay caused by respondent authorities in deciding and releasing the refund despite binding judicial precedent, the Court awarded interest. Considering the factual matrix and precedents relied upon, the Court granted interest at 9% from the date the bills for refund were raised until actual payment, directing payment of refund and interest within eight weeks and providing for further interest at 9% in case of default beyond that period. [Paras 16, 17]Interest at 9% directed from the date of raising the refund bills until actual payment; refund with interest to be paid within eight weeks, failing which further interest at 9% shall accrue.Final Conclusion: Writ petition allowed. Respondents directed to sanction and pay the IGST refund claimed in relation to the shipping bills dated 05.07.2017 to 10.08.2017, with interest at 9% from the date of raising the refund bills until actual payment; payment to be made within eight weeks, failing which further interest at 9% shall accrue. Issues Involved:1. Refund of Integrated Goods and Services Tax (IGST) paid on exported goods.2. Claim of higher drawback rate by mistake.3. Entitlement to interest on delayed refund.Detailed Analysis:1. Refund of Integrated Goods and Services Tax (IGST) Paid on Exported Goods: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 immediately sanction the refund of IGST amounting to Rs. 14,94,739/- paid on exported goods (Comber Noil) under various invoices. The petitioners had filed the necessary forms (GSTR-1 and GSTR-3B) within the prescribed time. However, due to an inadvertent mistake, they claimed a higher drawback rate instead of the lower rate while generating shipping bills. This mistake was acknowledged, and the petitioners requested an amendment to the shipping bills under Section 149 of the Customs Act, 1962, and expressed their willingness to refund the differential amount of Rs. 3,39,245/-, which was realized by the Customs authorities. Despite various representations, the refund of IGST was not sanctioned.2. Claim of Higher Drawback Rate by Mistake:The petitioners mistakenly claimed a higher drawback rate by selecting options '5202A' and '600699A' instead of '5202B' and '600699B'. Upon realizing the mistake, they requested the Customs authorities to amend the shipping bills and refund the differential amount. The Customs authorities acknowledged the amendment of the shipping bills and the receipt of the differential amount. However, the respondents objected to the refund of IGST, citing the petitioners' initial choice of a higher drawback rate and reliance on Board Circular No.37/2018-Customs dated 09.10.2018.3. Entitlement to Interest on Delayed Refund:The petitioners also sought interest at 18% on the delayed refund of IGST from the date of the shipping bill until the actual payment. The court referred to Section 56 of the CGST Act, 2017, which provides for interest on delayed refunds if the refund is not made within sixty days from the date of receipt of the application. The court noted that the petitioners had made timely applications and various representations for the refund. The court also referred to previous judgments, including Amit Cotton Industries Vs. Principal Commissioner of Customs, which held that the claim for refund can only be withheld under specific circumstances as provided in Rule 96(4) of the CGST Rules, 2017.Judgment:The court directed the respondent authorities to immediately sanction the refund of IGST paid on the exported goods, as the petitioners had complied with the necessary procedures and rectified their mistake. The court also directed the respondents to pay interest at 9% from the date the refund bills were raised until the actual payment. The refund and interest were to be paid within eight weeks from the date of the order, failing which further interest at 9% would accrue until payment.Conclusion:The court upheld the petitioners' claim for the refund of IGST paid on exported goods and directed the respondent authorities to process the refund along with interest for the delay. The judgment emphasized the importance of adhering to statutory provisions and judicial pronouncements, rejecting the respondents' reliance on the Board Circular that contradicted the statutory rules.