Refund of IGST to DTA supplier to SEZ upheld under Section 16(3)(b); Rule 90(3) limits clarified

HC held that a DTA unit supplying to SEZ is entitled to refund of IGST paid under Section 16(3)(b) of the IGST Act once goods have entered the SEZ and endorsements are obtained, regardless of delay attributable to the AO. Denial of refund on grounds of endorsements not being issued within 45 days, being "inappropriate," or not mentioning "authorized operations" was held unsustainable, particularly as the "authorized operations" requirement applies only prospectively from 01.10.2023. The HC further held that limitation could not be invoked where applications were filed within two years and no deficiency memo under Rule 90(3) was issued, and that mismatch in endorsement dates was a curable technical defect. The impugned refund rejection orders were set aside and the petition allowed.

---

---

Issues Involved:
1. Inordinate delay in obtaining endorsement, inappropriate endorsement, and endorsement not stating that goods supplied were for authorized operations.
2. Rejection of applications on the ground of alleged delay in submitting supporting documents.
3. Mismatch of details in the endorsement dates mentioned in invoices and Statement-4.

Summary:

Issue 1: Inordinate Delay in Obtaining Endorsement, Inappropriate Endorsement, and Endorsement Not Stating Goods Were for Authorized Operations:

The petitioner argued that Rule 30(4) of SEZ Rules, 2006, which mandates obtaining endorsement within 45 days from the date of invoice, does not apply to their case as they supplied goods to SEZ units on payment of tax under Section 16(3)(b) of the IGST Act. The court held that once the petitioner has paid IGST and the goods have entered SEZ with endorsement obtained, refund cannot be denied for delay in obtaining endorsements. Moreover, the court noted that the significance of the endorsement is to ensure goods have reached SEZ and tax has been paid. The delay in obtaining the endorsement is not the petitioner's fault but that of the Authorized Officer (AO). The court also noted that the provisions of Section 16 of the IGST Act do not require the endorsement to state that goods are for authorized operations, and this requirement was introduced only prospectively from 01.10.2023. Therefore, the rejection of the refund claim on these grounds was not tenable and was set aside.

Issue 2: Rejection of Applications on the Ground of Alleged Delay in Submitting Supporting Documents:

The petitioner submitted that Section 54 of the CGST Act prescribes a two-year time limit for filing refund applications, and Rule 90(2) and (3) of CGST Rules require the proper officer to scrutinize the application within 15 days and issue a deficiency memo if documents are missing. The court noted that the petitioner filed the applications within the prescribed time limit and that the respondent-Department issued acknowledgments without pointing out deficiencies. The court held that non-submission of documents at the time of filing the application cannot be deemed a delay, and the delay in obtaining endorsements due to Covid-19 was beyond the petitioner's control. The court also referred to a notification excluding the period from 01.03.2020 to 28.02.2022 for computing the period of limitation for filing refund applications. Therefore, the rejection of the refund claim on the ground of limitation was set aside.

Issue 3: Mismatch of Details:

The petitioner rectified the mismatch in endorsement dates in the invoices and Statement-4 at the time of filing the reply. The court noted that the respondent-Department accepted the rectified Statement-4. Therefore, the rejection of the refund claim on the ground of mismatch was not sustainable and was set aside.

Conclusion:

The court found that the respondents committed serious flaws in the decision-making process. Consequently, the impugned orders were set aside, and the second respondent was directed to process the petitioner's refund applications and issue the refund within 30 days. The matter was posted for filing a compliance report on 18.12.2023.

---