Higher Duty Drawback Adjusted Against IGST Refund with 7% Interest Penalty for Delayed Payment Within 6 Weeks.

The HC directed the respondents to adjust the higher duty drawback against the IGST refund claimed by the petitioner and to pay the remaining balance within six weeks. If the payment is delayed, an interest penalty of 7% will apply from the refund request date until payment, following the precedent in G.NXT Power Corp.'s case.

---

---

Issues Involved:
1. Entitlement to refund of IGST paid on exported goods.
2. Impact of claiming higher duty drawback on IGST refund eligibility.
3. Applicability of CBIC Circulars during the transition period from 01.07.2017 to 30.09.2017.
4. Adjustment of higher duty drawback against IGST refund.

Detailed Analysis:

1. Entitlement to Refund of IGST Paid on Exported Goods:
The petitioner sought a writ of mandamus for the sanction of a refund of IGST paid on exported goods, classified as 'zero rated supplies', under shipping bills dated 08.07.2017 and 19.07.2017. The petitioner, registered with the Ministry of Commerce and holding an Importer-Exporter Code (IEC) and GST Registration Certificate, claimed that the refund was due under Section 54 of the CGST Act, 2017, read with Section 16 of the IGST Act. Corrections in the IGST amounts were made, but the refund was rejected due to the drawback claimed in Part 'A'.

2. Impact of Claiming Higher Duty Drawback on IGST Refund Eligibility:
The petitioner's counsel argued that under Rule 96 (4) of the CGST Rules, 2017, a refund could only be withheld if requested by the jurisdictional Commissioner or if goods were exported in violation of the Customs Act, 1962. The petitioner asserted that claiming a drawback should not preclude the refund of IGST. However, the respondents justified the rejection by referring to CBIC Circular No. 22/2017-Customs and Circular No. 37/2018-Customs, which stipulated that exporters claiming higher duty drawback rates during the transition period relinquished their IGST claims.

3. Applicability of CBIC Circulars During the Transition Period:
The respondents cited CBIC Circular No. 22/2017-Customs and Circular No. 37/2018-Customs, which clarified that during the transition period (01.07.2017 to 30.09.2017), exporters claiming higher duty drawback rates could not subsequently claim IGST refunds. The circulars mandated that exporters who declared drawback serial numbers suffixed with 'A' or 'C' and made necessary declarations in the shipping bills consciously relinquished their IGST/ITC claims. Thus, the petitioner's shipping bills dated 08.07.2017 and 19.07.2017 fell within this period, and the higher duty drawback claim precluded IGST refund eligibility.

4. Adjustment of Higher Duty Drawback Against IGST Refund:
The petitioner's counsel referred to a previous court order in a similar case (CWP No. 2854 of 2021), where the petitioner was granted an IGST refund as no higher duty drawback was claimed. However, in the present case, the refund was rejected due to the higher drawback claimed. The court referenced the Kerala High Court's judgment in G.NXT Power Corp. vs. Union of India, which allowed adjustment of higher duty drawback against IGST refunds. The court directed the respondents to adjust the higher duty drawback amount already availed by the petitioner and pay the balance IGST within six weeks, failing which interest at 7% would be applicable.

Conclusion:
The court disposed of the petition by directing the respondents to adjust the higher duty drawback amount against the IGST refund and pay the balance within six weeks. If the payment was delayed, the respondents would incur an interest penalty of 7% on the balance amount from the date of the refund request until payment. This decision aligns with the precedent set in G.NXT Power Corp.'s case, ensuring fair adjustment and timely refund processing.

---