IGST refund on zero-rated exports denied due to circulars; Rule 96 applied, refund ordered with 7% interest

Refund of IGST paid on export of goods treated as zero-rated supplies was denied on the basis of departmental circulars. The HC held the issue concluded by its coordinate Bench decision, which, on construing Rule 96 of the CGST Rules, 2017, clarified that such circulars do not govern IGST refunds on exports and that refund must be granted forthwith with 7% simple interest from the date of the shipping bill until actual refund; the SC having dismissed the challenge, the precedent bound the authorities. The authority was directed to immediately sanction IGST refund with 7% simple interest from the shipping-bill dates, and the petition was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the authorities were justified in withholding refund of IGST paid on exported goods treated as "zero-rated supplies", on the ground that the exporter had opted for higher duty drawback and in view of departmental circulars/notifications relied upon by the Customs authority.

(ii) If withholding was unjustified, whether the exporter was entitled to a direction for sanction of IGST refund together with interest, and at what rate and for what period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Justification for withholding IGST refund on zero-rated exports due to higher drawback option/circulars

Legal framework (as discussed by the Court): The Court treated export of goods as "zero-rated supplies" and considered that refund of IGST on exports is governed by the applicable GST refund procedure, including the mechanism connected with shipping bills. The Customs authority's stance was that the EDI system withholds IGST refund where a higher drawback category is chosen and that circulars/notifications bar simultaneous availment.

Interpretation and reasoning: The Court held that the central question-whether withholding IGST refund on such basis is permissible-was already settled by an earlier decision of this Court. That earlier decision had examined the relevant GST refund procedure (including Rule 96 of the CGST Rules, 2017 as noted by the Court) and concluded that the circulars relied upon by the Customs authority "have got nothing to do with the IGST refund." The Court treated that view as binding and final in substance, noting that the challenge to the earlier decision was carried further but did not succeed (the special leave petition was dismissed). The Court also noted that the present case was not shown to be distinguishable on facts so as to warrant a different approach.

Conclusion: The respondents were not justified in withholding the IGST refund for exported goods (zero-rated supplies) on the basis of the circulars/notifications and the exporter's selection of a drawback category as urged by the Customs authority.

Issue (ii): Entitlement to refund with interest-rate and period

Legal framework (as discussed by the Court): The Court relied on the earlier decision's determination that IGST refund on exports should be sanctioned and that interest is payable from the date of the relevant shipping bill until actual refund.

Interpretation and reasoning: Applying the settled view, and finding no distinguishing features, the Court directed immediate sanction of refund of IGST paid in respect of exported goods. On interest, the Court adopted the rate and computation period reflected in the earlier decision as applied to the present facts.

Conclusion: The Court directed the respondent authority to immediately sanction the IGST refund relating to the exported goods, along with 7% simple interest calculated from the date of the shipping bills till the date of actual refund.

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