2022 (10) TMI 313 - HC - GST

Exporters Win IGST Refund Battle: Full Reimbursement Granted with Interest Based on Clear Legal Precedents

HC ruled in favor of petitioners challenging Notification dated 31st October, 2016, regarding IGST refund on exported goods. The court directed ... Refund of IGST on zero-rated supplies - drawback claimed under Column A versus Column B of the Drawback Schedule - ultra vires challenge to conditions restricting IGST refund in presence of drawback claim - transitional period (July-September, 2017) - deduction of differential duty drawback from IGST refund - verification and adjustment by Jurisdictional Commissionerates - interest at the rate of 7% p.a. on delayed refundRefund of IGST on zero-rated supplies - drawback claimed under Column A versus Column B of the Drawback Schedule - ultra vires challenge to conditions restricting IGST refund in presence of drawback claim - Petitioners entitled to refund of IGST paid on export of goods during the Transitional Period even where higher drawback was claimed under Column A. - HELD THAT: - The Court accepted the petitioners' case that the impugned administrative instruments could not lawfully withhold IGST refunds paid on exports during the transitional phase merely because the exporter had claimed drawback at the higher rates in Column A. The Court treated the matter as covered by the Gujarat High Court decision in M/s Amit Cotton Industries (reproduced at paragraph 6) and noted that the Special Leave Petition against that decision was dismissed by the Supreme Court (paragraph 7). Applying those precedents, the Court held that refund of IGST on zero-rated supplies must be granted, subject to the limited financial adjustments specified by the Court, and that the circular relied upon by the respondents did not justify denial of the refund for exports that took place during the transitional period (paragraphs 6-8). [Paras 6, 7, 8]Writ petitions allowed directing refund of IGST paid on exports during the Transitional Period, after permissible adjustments, with interest.Deduction of differential duty drawback from IGST refund - verification and adjustment by Jurisdictional Commissionerates - interest at the rate of 7% p.a. on delayed refund - Refund to be granted after deducting differential duty drawback (if not already returned) and subject to verification/adjustment by Jurisdictional Commissionerates; interest at 7% p.a. payable from date of shipping bill till actual refund. - HELD THAT: - The Court directed that the refund of IGST shall be made after deducting the differential amount of duty drawback, where applicable, and ordered payment of interest at 7% per annum from the date of the shipping bill until actual refund (paragraph 8). The Court further empowered the respective Jurisdictional Commissionerates to verify the extent of drawback availed and whether CENVAT Credit/Central Excise & Service Tax components were claimed, and to make any necessary adjustments (paragraph 9). This constitutes a limited verification/adjustment mandate rather than denial of the substantive right to refund. [Paras 8, 9]Respondents directed to sanction IGST refunds within twelve weeks after deducting differential drawback, with 7% interest, and Jurisdictional Commissionerates permitted to verify and adjust claims.Final Conclusion: Writ petitions allowed: petitioners entitled to IGST refund on exports during the Transitional Period (July-September, 2017), subject to deduction of any differential drawback and verification/adjustment by the Jurisdictional Commissionerates; refunds to be paid within twelve weeks with interest at 7% p.a. from the date of the shipping bill. Issues:1. Challenge to the validity of Paragraph 11(d) read with 12A(a)(ii) of the Notification dated 31st October, 2016, and related Circulars.2. Denial of refund of IGST paid on exported goods due to higher drawback rates claimed.3. Allegation of confusion and lack of technical knowledge during the transitional phase.4. Non-joinder of necessary parties in the writ petitions.5. Interpretation of relevant legal provisions and prior judgments on similar issues.Issue 1:The petitioners sought a declaration that certain provisions of the Notification dated 31st October, 2016, and subsequent Circulars were ultra vires and violative of constitutional provisions. They argued that these provisions denied them the refund of IGST paid on exported goods. The contention was that the impugned instruments were not in line with the IGST Act, CGST Act, and CGST Rules, and infringed upon constitutional rights.Issue 2:The petitioners claimed that despite higher drawback rates under Column A compared to Column B, the IGST paid on exported goods was even higher. They argued that claiming drawback under Column A did not benefit them in terms of IGST refund. The confusion and lack of technical knowledge during the transitional phase were cited as reasons for choosing Column A for drawback claims.Issue 3:Reference was made to a previous judgment where the refund of IGST paid on goods exported during the Transitional Period was allowed, even though duty drawback was claimed at a higher rate. The court noted that the issue raised in the present petition was similar to the one addressed in the previous judgment, indicating a consistent judicial approach to such matters.Issue 4:The respondents raised a procedural objection regarding the non-joinder of necessary parties in the writ petitions. They argued that various Jurisdictional Commissionerates involved in refund claims were not impleaded as parties, which could impact the outcome of the petitions. However, the court did not find this objection valid in light of the specific circumstances of the case.Issue 5:The court referred to a judgment of the Gujarat High Court and a subsequent Supreme Court decision dismissing a Special Leave Petition related to the same issue. The court relied on these precedents to allow the present writ petitions, directing the authorities to grant the refund of IGST paid on exported goods. The judgment emphasized the entitlement of the petitioners to claim the refund with interest, based on the legal clarity provided by previous judicial pronouncements.In conclusion, the judgment addressed various legal issues concerning the refund of IGST paid on exported goods, highlighting the importance of legal provisions, constitutional rights, prior judicial decisions, and procedural considerations in resolving the dispute.