2022 (5) TMI 591 - HC - Customs

Manufacturer wins IGST refund case, court orders refund with interest.

The court ruled in favor of the petitioner, a manufacturer and exporter seeking a refund of IGST against two shipping bills. The court held that the ... Refund of IGST on zero rated supplies - eligibility to claim refund after payment of integrated tax - refund procedure under Rule 96 of the CGST Rules - duty drawback election versus IGST refund - applicability where drawback rates are identical - interest on delayed refund of taxRefund of IGST on zero rated supplies - refund procedure under Rule 96 of the CGST Rules - duty drawback election versus IGST refund - applicability where drawback rates are identical - Petitioner entitled to refund of IGST paid on the exports covered by the two shipping bills despite initial claim of duty drawback by reference to an incorrect code which was subsequently corrected. - HELD THAT: - The court found as a matter of law and fact that the petitioner had paid IGST and was thus entitled to refund under the statutory scheme for zero rated supplies read with Rule 96 and Section 16 of the IGST Act. The respondent's reliance on the CBIC circular (para 3) to deny IGST refund because the exporter had availed higher drawback was factually inapplicable: the Schedule to the notification shows that the drawback rates in Column A and Column B for tariff entry 853699 were identical (2%), so there was no higher drawback election to bar refund. The petitioner was permitted to correct the drawback code upon payment of prescribed fee and penalty, and that correction (permitted on 25.10.2018) removed any factual bar. Reliance on earlier High Court decisions (Amit Cotton Industries; Shyam Textile) supported the legal entitlement to refund in comparable circumstances. For these reasons the court directed the respondent to grant the IGST refund in respect of the two shipping bills. [Paras 5, 6, 7, 8, 9]Refund of IGST ordered in respect of the two shipping bills.Interest on delayed refund of tax - rate and commencement of interest for delayed refund - Petitioner entitled to interest on the withheld refund and the rate and commencement date for such interest were fixed by the court. - HELD THAT: - The court directed payment of interest on the refund because the refund had been unreasonably withheld after the respondent permitted correction of the drawback code. Having regard to the date when the correction was effected (25.10.2018) and consistent with precedents relied upon by the court, interest was awarded at the rate of 7% per annum (simple) from 25.10.2018 until payment. The court thereby quantified the interest entitlement and fixed its commencement tied to the date of correction. [Paras 9]Interest at 7% per annum (simple) awarded from 25.10.2018 on the refund amount.Final Conclusion: Writ petition allowed: respondent directed to refund IGST in respect of the two specified shipping bills and to pay simple interest at 7% per annum from 25.10.2018; parties to act on the digitally signed copy of the judgment. Issues:1. Refund of IGST paid on export of goods.2. Claim for interest on delayed refund.3. Dispute over duty drawback code.4. Interpretation of CBIC circular.5. Entitlement to IGST refund.6. Applicability of higher duty drawback rate.7. Delay in granting IGST refund.8. Legal precedent from Gujarat High Court judgments.Detailed Analysis:1. The petitioner, a manufacturer and exporter of electrical connectors, sought a refund of IGST against two shipping bills. The refund amounts were claimed under Section 16 of the IGST Act read with Rule 96 of the CGST Rules. The petitioner had paid IGST at 28% of the export value and claimed refunds of Rs. 8,00,621/- and Rs. 8,25,349/- against the two shipping bills, respectively.2. The petitioner mistakenly claimed duty drawback under the incorrect code initially but later applied for correction, which was allowed upon payment of fees and penalties. Despite the correction, the IGST refund was not granted, leading to the filing of the writ petition.3. The respondent relied on a CBIC circular stating that exporters who opted for a higher rate of duty drawback could not claim IGST refund later. However, the court held that this circular did not apply in this case as the duty drawback rates were identical for both scenarios.4. The court emphasized the petitioner's entitlement to the IGST refund under the relevant provisions of the IGST Act and CGST Act. The argument that the petitioner could not claim IGST refund due to the duty drawback claim at a higher rate was deemed factually incorrect.5. Citing legal precedents from the Gujarat High Court, the court directed the respondent to refund the IGST against the shipping bills. Additionally, interest at the rate of 7% per annum was to be paid from the date of correction, considering the delay in granting the refund despite the correction being made in 2018.6. The judgment highlighted the importance of following legal provisions and precedents to ensure timely and rightful refunds to exporters, emphasizing the petitioner's clear entitlement to the IGST refund in this case.