Customs must sanction IGST refund for zero-rated exports despite minor duty drawback conflict under Section 54 CGST Act

Gujarat HC directed customs authorities to sanction IGST refund for zero-rated export supplies after goods were exported in September 2017. The refund was withheld claiming higher duty drawback rate conflict, though the rate difference was only 2%. Court found the Custom House Agent inadvertently failed to disclose IGST payment details of Rs. 17,30,468. Following precedent in Amit Cotton Industries case, HC held that shipping bills constitute refund applications under Section 54 CGST Act read with Section 16 IGST Act. Authorities were directed to grant refund with 7% simple interest from shipping bill dates until actual refund for three specific shipping bills dated September 2017.

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Issues Involved:
1. Refund of Integrated Goods and Service Tax (IGST) for zero-rated supplies.
2. Interest on delayed refund.
3. Mismatch of invoice and shipping bill details.
4. Higher vs. lower rate of duty drawback.
5. Applicability of relevant legal provisions and circulars.

Detailed Analysis:

1. Refund of Integrated Goods and Service Tax (IGST) for Zero-Rated Supplies:
The petitioner, a partnership firm engaged in the manufacturing and export of valves, sought a refund of IGST paid on zero-rated supplies made in September 2017. The petitioner claimed that the refund was illegally withheld by the authorities due to an error in the duty drawback scheme selection. The petitioner had opted for a higher rate of duty drawback (Scheme A) instead of the lower rate (Scheme B), which led to the withholding of the IGST refund.

2. Interest on Delayed Refund:
The petitioner also sought interest at 9% on the refund amount from the date of the shipping bill until the refund is paid. The court noted that the respondents had failed to process the refund despite the petitioner rectifying the error and making multiple representations. The court held that if the refund is not sanctioned within six weeks, interest would start accumulating at 9%.

3. Mismatch of Invoice and Shipping Bill Details:
The petitioner initially faced issues due to a mismatch between the invoice and shipping bill details. The Central Board of Excise & Customs (CBEC) provided an alternative mechanism to rectify such errors through Circular No. 05 of 2018, which the petitioner complied with by filing a concordance table. However, the refund was still not processed.

4. Higher vs. Lower Rate of Duty Drawback:
The respondents argued that the petitioner opted for a higher rate of duty drawback (2%) by selecting Scheme A, which precluded the IGST refund. The court disagreed, noting that the rate of duty drawback was the same (2%) for both higher and lower schemes in this case. The court referenced the decision in Amit Cotton Industries vs. Principal Commissioner of Customs, which held that opting for a higher duty drawback does not preclude an IGST refund if the rate is the same.

5. Applicability of Relevant Legal Provisions and Circulars:
The court examined the relevant provisions of the CGST Act, IGST Act, and the CGST Rules. It noted that under Section 54 of the CGST Act read with Section 16 of the IGST Act, the shipping bills are deemed to be an application for refund of IGST paid on exported goods. The court found that the respondents' reliance on Circular No. 37 of 2018 was misplaced as it could not override the statutory provisions and rules. The court also noted that the decision in Amit Cotton Industries was upheld by the Supreme Court, making it binding.

Conclusion:
The court allowed the petition, directing the respondents to sanction the refund of IGST paid on the goods exported under the specified shipping bills. The court also directed the respondents to pay interest at the statutory rate from 01.07.2019 if the refund is not processed within six weeks. The court emphasized the need for authorities to follow binding judicial decisions to avoid unnecessary litigation and harassment to taxpayers.

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