Delhi HC allows petition challenging rejection of integrated tax refund claim on zero-rated export services under Rule 89(4) CGST Rules 2017

Delhi HC allowed petition challenging rejection of integrated tax refund claim on zero-rated export services. Revenue authorities incorrectly applied Rule 89(4) of CGST Rules 2017, which applies only to zero-rated supplies without payment of tax under bond/letter of undertaking, not to cases seeking refund of integrated tax paid on zero-rated supplies. Appellate Authority erroneously assumed petitioner sought accumulated ITC refund instead of addressing actual legal contention. Matter remanded to Appellate Authority for fresh decision on correct legal principles.

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Issues involved:
The petitioner's appeal against the rejection of a refund claim for integrated tax paid on zero-rated supplies made in October 2018.

Details of the Judgment:

Issue 1: Refund Claim Rejection
The petitioner sought a refund of integrated tax paid on zero-rated supplies in October 2018. The Adjudicating Authority initially requested the Foreign Inward Remittance Certificate and later raised queries regarding tax payments and Input Tax Credit (ITC) discrepancies. Despite the petitioner's clarifications, the Adjudicating Authority rejected the refund claim citing Rule 89(4) of the Central Goods and Services Tax Rules, 2017. The Authority considered turnover for November 2018 instead of October 2018, leading to the rejection of the claim.

Issue 2: Applicability of Rule 89(4)
The petitioner contended that Rule 89(4) of the Rules, which governs zero-rated supplies without tax payment, was inapplicable to their case as they had paid integrated tax on zero-rated supplies. The petitioner emphasized that they were not seeking a refund of accumulated ITC but of the integrated tax paid. The High Court agreed with the petitioner, stating that Rule 89(4) does not apply to cases of refund of integrated tax paid on zero-rated supplies.

Conclusion:
The High Court found merit in the petitioner's argument that Rule 89(4) did not apply to their situation. The Appellate Authority's rejection of the refund claim based on an erroneous assumption was deemed unsustainable. The Court set aside the impugned order and remanded the appeal to the Appellate Authority for a fresh decision based on the observations in the judgment. The petition was disposed of accordingly.

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