Exporter entitled to IGST refund under sections 16 IGST Act and 154 CGST Act for July-August 2017 exports

Gujarat HC held that petitioner was entitled to IGST refund for exports made in July-August 2017. Court ruled that conjoint reading of section 16 IGST Act 2017, section 154 CGST Act 2017, and Rule 96 CGST Rules 2017 supported refund claim for zero-rated supplies. Notification 37/2018 denying IGST refund was issued after petitioner's export dates and therefore inapplicable. Following Supreme Court precedent in Ratan Melting case, court emphasized that circulars contrary to statutory provisions have no legal existence. Petitioner held valid CGST registration and qualified as exporter under IGST Act provisions. Shipping bills constituted deemed applications for refund under prescribed procedures. Petition allowed.

---

---

Issues Involved:
1. Entitlement to refund of IGST on exported goods.
2. Legality of withholding IGST refund due to higher rate of drawback claimed.
3. Applicability and binding nature of Circular No. 37/2018-Customs.
4. Entitlement to interest on delayed IGST refund.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of IGST on Exported Goods:
The petitioner, a registered partnership firm under the GST regime, exported goods in July and August 2017 and paid IGST amounting to Rs. 2,26,087/-. As per Section 16 of the IGST Act, 2017, these exports qualify as 'Zero Rated Supply', entitling the petitioner to claim a refund of the IGST paid. Rule 96 of the CGST Rules, 2017, deems the shipping bill filed by an exporter as an application for refund of IGST, provided the exporter has filed a valid return in Form GSTR-3 or GSTR-3B. The petitioner complied with all necessary requirements and was, therefore, entitled to an immediate refund of the IGST paid.

2. Legality of Withholding IGST Refund Due to Higher Rate of Drawback Claimed:
The respondent authorities withheld the IGST refund, citing that the petitioner claimed a higher rate of drawback by selecting "Category-A" instead of "Category-B" on the shipping bills. The authorities referenced Circular No. 37/2018-Customs and Notification 131/2016, as amended by Notification 59/2017, which they argued justified withholding the refund. However, the court found this stance untenable, noting that the circular was issued after the date of the petitioner's exports and could not retroactively apply. Additionally, the higher rate of drawback claimed did not contravene the statutory provisions, and the petitioner had not received any undue benefit.

3. Applicability and Binding Nature of Circular No. 37/2018-Customs:
The court referenced its earlier decision in Amit Cotton Industries v. Principal Commissioner of Customs, where it was held that Circular No. 37/2018-Customs, which restricts IGST refunds if higher duty drawback is claimed, has no legal force as it conflicts with statutory rules. The court reiterated that circulars are merely instructions for understanding statutory provisions and are not binding on the court. Circulars that contradict statutory provisions have no legal existence. Therefore, the petitioner's claim for IGST refund could not be denied based on this circular.

4. Entitlement to Interest on Delayed IGST Refund:
The petitioner also sought interest on the delayed refund of IGST. The court, referencing multiple precedents, including Amit Cotton Industries, held that the petitioner was entitled to interest on the delayed refund. The court directed the respondent authorities to pay interest at the rate of 9% per annum from the date of filing the shipping bills until the actual realization of the refund amount.

Conclusion:
The court concluded that the petitioner was entitled to a refund of Rs. 2,26,087/- towards IGST paid on exported goods, as these were 'Zero Rated Supplies'. The court directed the respondent authorities to immediately sanction the refund and pay interest at the rate of 9% per annum from the date of filing the shipping bills until the actual realization of the refund. The rule was made absolute to this extent, with no order as to costs.

---