2022 (2) TMI 441 - HC - GST

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

JAL ENGINEERING THROUGH PARTNER KARISHMA SHAIKH Versus UNION OF INDIA THROUGH SECRETARY

Gujarat HC directed customs authorities to sanction IGST refund for zero-rated export supplies after goods were exported in September 2017. The refund was ... Refund of IGST - goods exported zero rated supplies - Refund withheld on the ground that since drawback is claimed at a higher rate of refund of the petitioner, the same cannot be sanctioned under Section 54 of the Central Goods and Service Tax Act, 2017 - inadvertently the Custom House Agent (CHA)failed to disclose the details of IGST paid of ₹ 17,30,468/- - HELD THAT:- The provision of Section 54 of the CGST Act read with Section 16 of IGST Act after the goods are exported, the shipping bills are treated as the application of refund of IGST paid in regard to the export goods and the respondents are required to refund the amount of IGST to the petitioner. In the matter on hand, the exports had been made on September, 2017, the refund has not been made available. It is though the contention raised by the respondents of the rate of higher and lower duty drawback, though is of 2% in the instant case, the Circular No. 37 of 2018 dated 09.10.2018 is applicable and the exporters, who had availed the option to take drawback at higher rate in case of IGST refund will need to punch accordingly in the EDI system and the mistake, which has been made by the petitioner in relation to the three bills where the refunds have not been given, the EDI system itself has not allowed the IGST refund. We are in complete disagreement with the respondents as not only the petitioner in subsequent correspondence with the respondents has made it completely clear that in the case of these exports the higher duty drawback and the lower duty drawback are the same, the case is covered by the decision of this Court rendered in case of M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [2019 (7) TMI 472 - GUJARAT HIGH COURT] where the Court in detailed has discussed this very issue and held that respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund. As the issue raised before this Court is identical, no separate or independent discussion would be necessary to be made before this Court. Therefore, the request of refund so far as the three shipping bills are concerned will need to be permitted. The respondent authority is required to sanction the refund of IGST paid in regard to the goods exported i.e. zero rated supplies made vide these three Shipping Bills No.8465051, 8459617 and 8455069 dated 05.09.2017, 05.09.2017 and 14.09.2017 respectively. The decision in case of Amit Cotton Industries has been delivered on 27.06.2019. The representation had been made by the petitioner in May, 2019 and the last one before this petition has been filed, was on 03.02.2021, when this decision had already become final. Assuming that there was nothing in respect of the interest so far as the IGST refund of the said shipping bills was concerned, it could have granted the same knowing fully well that the issue has been covered, the respondents have chosen not to abide by the decision - Considering the fact that the sanction of the refund towards the IGST paid in respect of the goods exported i.e. “zero rated supplies”, vide the shipping bills ought to have been completed as the two circumstances provided in sub clauses (a) & (b) of Clause (4) of Rule 96 of Rules, 2017 do not exist. The shipping bills, as per Rule 96, exporter once file are deemed to be an application for refund of Integrated tax paid on the exports of goods and withholding of the same is made permissible under Rule 96 (4) when read with Section 54 as specified in the said decision of Amit Cotton Industries. The respondents are directed to sanction the refund towards the IGST paid in respect to the goods exported i.e. ‘Zero Rated Supplies’ made vide the Shipping Bills No. 8465051, 8459617 and 8455069 dated 05.09.2017, 05.09.2017 and 14.09.2017 respectively - Petition allowed. 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.