Exporter wins IGST refund on zero-rated supplies despite claiming duty drawback benefits under Section 16

Gujarat HC allowed petition for IGST refund on zero-rated export supplies. Petitioner, a registered GST exporter, had exported goods in July-August 2017 and paid IGST at 5%. Court held that exported goods constitute zero-rated supplies under Section 16 of IGST Act, 2017, entitling petitioner to refund. Under Rule 96 of CGST Rules, 2017, shipping bills serve as deemed refund applications. Despite petitioner's declaration for duty drawback benefits under Mercantile Scheme, court directed authorities to sanction IGST refund of Rs. 37,10,326 within two weeks, recognizing petitioner's valid registration and export documentation.

---

---

Issues Involved:
1. Refund of IGST for exported goods.
2. Entitlement to "Zero Rated Supplies" benefit.
3. Error in claiming higher duty drawback instead of IGST refund.
4. Validity of Circular No. 37/2018-Customs dated 09.10.2018.
5. Manual processing of refund claims due to EDI system limitations.
6. Interest on delayed refund.
7. Costs of litigation due to respondent authorities' actions.

Detailed Analysis:

1. Refund of IGST for Exported Goods:
The petitioner, a proprietorship concern engaged in exporting agricultural products, filed for a refund of Rs. 37,01,326/- IGST paid on exported goods during July and August 2017. The petitioner provided all necessary documents, including GST invoices, export invoices, shipping bills, and statutory returns (GSTR-1 and GSTR-3B).

2. Entitlement to "Zero Rated Supplies" Benefit:
The petitioner claimed the "Zero Rated Supplies" benefit under Section 16 of the IGST Act, 2017, which allows exporters to claim a refund of IGST paid on exported goods. The court confirmed that the petitioner is entitled to this benefit as the goods were exported outside India.

3. Error in Claiming Higher Duty Drawback Instead of IGST Refund:
The petitioner's customs broker mistakenly claimed a higher duty drawback rate instead of the IGST refund by using the code "A" instead of "B". Upon realizing the mistake, the petitioner approached the Assistant Commissioner of Customs for an amendment, which was granted. The petitioner also surrendered the excess drawback amount with interest.

4. Validity of Circular No. 37/2018-Customs dated 09.10.2018:
The respondent authorities rejected the IGST refund claim based on Circular No. 37/2018-Customs, stating that once a higher duty drawback is claimed, IGST refund cannot be granted. The court found this circular to be contrary to the statutory provisions of the IGST and CGST Acts, and not binding on the court. The court referred to its previous judgment in Amit Cotton Industries vs. Principal Commissioner of Customs, which held that such circulars cannot override statutory provisions.

5. Manual Processing of Refund Claims Due to EDI System Limitations:
The respondent authorities cited EDI system limitations as a reason for not processing the refund. The court dismissed this argument, stating that the EDI system's limitations cannot override the petitioner's statutory right to a refund.

6. Interest on Delayed Refund:
The petitioner requested interest at 18% on the delayed refund amount. The court directed the respondent authorities to pay interest at 9% from the date of raising the shipping bills until the actual date of refund realization.

7. Costs of Litigation Due to Respondent Authorities' Actions:
The petitioner sought litigation costs due to the respondent authorities' actions. The court did not explicitly address this issue in the final order but focused on the statutory entitlement to the refund and interest.

Conclusion:
The court directed the respondent authorities to sanction the refund of Rs. 37,01,326/- within two weeks and pay interest at 9% from the date of the shipping bills until the refund is realized. The petition was disposed of accordingly.

---