2024 (9) TMI 378 - HC - GST

Exporters can claim IGST refund even after selecting higher drawback rates when columns A and B are identical

The Bombay HC ruled on IGST refund for exported goods under zero-rated supplies where the petitioner claimed higher duty drawback rates. Following ... Zero Rated Supplies - Refund of IGST on exports - Section 16(3)(b) of the IGST Act (zero-rated export by payment of IGST) - Section 54 of the CGST Act (refund mechanism) - Rule 96 of the CGST Rules (shipping bill as refund application) - Drawback at higher rate (Column 'A') vs lower rate (Column 'B') - Deduction of differential drawback from IGST refund - Drawback scheme as an independent and complete CodeRefund of IGST on exports - Section 16(3)(b) of the IGST Act (zero-rated export by payment of IGST) - Section 54 of the CGST Act (refund mechanism) - Rule 96 of the CGST Rules (shipping bill as refund application) - Drawback at higher rate (Column 'A') vs lower rate (Column 'B') - Deduction of differential drawback from IGST refund - Entitlement to refund of IGST paid on exported goods where exporter selected Column 'A' and claimed drawback at the higher rate - HELD THAT: - The Court held that exports are zero-rated under Section 16(3)(b) of the IGST Act and refund of IGST paid is governed by Section 54 of the CGST Act and the procedure under Rule 96 of the CGST Rules (shipping bill to be treated as refund application). The Drawback provisions form an independent code; notifications and circulars clarify conditions for claiming higher drawback but do not directly negate the statutory entitlement to IGST refund. Prior decisions show two lines of outcomes: (a) where rates under Column A and B are identical, refund of IGST is ordered because no double benefit arises; and (b) where higher drawback has been claimed but the exporter has repaid or the differential drawback is adjusted, courts have allowed IGST refund subject to deduction of the differential drawback. Applying these authorities and facts, the Court observed that the petitioner voluntarily selected Column 'A' to claim higher drawback and had not refunded or offered to refund the differential amount. Granting IGST refund without adjustment would result in double benefit, because higher duty drawback reflects erstwhile Customs/Central Excise and Service Tax components subsumed in GST. Consequently, the petitioner is entitled to IGST refund but only after deduction of the differential amount of drawback, with statutory interest, rather than unconditional refusal of refund. [Paras 29, 30, 31, 32, 33]Refund of IGST to be granted after deducting the differential amount of duty drawback; refund to be paid within 12 weeks with interest at 7% p.a.Final Conclusion: The petition succeeds in part: respondents are directed to grant the petitioner the IGST refund on exports for July, August and September 2017 after deducting the differential drawback, within 12 weeks, with interest at 7% p.a.; the impugned order of 6th October 2023 is modified accordingly; no order as to costs. Issues Involved:1. Eligibility for refund of IGST paid on exported goods.2. Impact of claiming higher rate of duty drawback on IGST refund eligibility.3. Application of relevant statutory provisions, notifications, and circulars.4. Compliance with procedural requirements for IGST refund.5. Judicial precedents on IGST refund and duty drawback.Detailed Analysis:1. Eligibility for Refund of IGST Paid on Exported Goods:The Petitioner exported stainless steel articles and paid IGST on these exports, as detailed in the provided table. Under Section 16 of the IGST Act, 2017, exported goods are considered 'Zero Rated Supplies,' making the exporter eligible for a refund of IGST paid, as per Section 54 of the CGST Act, 2017. The Petitioner argued that the shipping bills should be treated as applications for refund under Rule 96 of the CGST Rules, 2017, and that the refund should be credited directly to their bank account.2. Impact of Claiming Higher Rate of Duty Drawback on IGST Refund Eligibility:The Petitioner claimed a higher rate of duty drawback by selecting Column 'A' instead of the lower rate in Column 'B.' The Respondents argued that this disqualified the Petitioner from receiving an IGST refund. The Petitioner contended that Section 54 (3) of the CGST Act restricts refund of unutilized input tax credit when higher duty drawback is claimed, but this restriction does not apply to IGST refunds under Section 54 (1).3. Application of Relevant Statutory Provisions, Notifications, and Circulars:The Petitioner complied with the conditions of Notification No. 131/2016-Cus. (N.T.) and Notification No. 73/2017-Cus. (N.T.), which require a declaration regarding non-availment of IGST credit. The Petitioner argued that these notifications and Circular No. 32/2017 and Circular No. 37/2018 should not prevent the IGST refund, as they had not availed input tax credit.4. Compliance with Procedural Requirements for IGST Refund:The Petitioner had filed GSTR-1 and GSTR-3B on time, fulfilling the procedural requirements for claiming the IGST refund. Despite this, the refund was not credited, leading to multiple requests and eventually a legal petition.5. Judicial Precedents on IGST Refund and Duty Drawback:The Petitioner cited several judgments, such as Sunlight Cable Industries, Gujarat Nippon International Pvt. Ltd., and others, where courts allowed IGST refunds even when higher duty drawback was claimed, provided the differential amount was paid back or deducted from the refund. The Respondents cited contrary judgments but acknowledged that the differential drawback should be paid back if IGST refund is claimed.Conclusion:The court noted that the issue is well-settled by various judgments. If the rate of drawback under Column 'A' and Column 'B' is the same, refund of IGST should be ordered even if Column 'A' is selected. In cases where the higher rate is claimed, the refund of IGST can be granted after deducting the differential amount of duty drawback.Order:a. The Respondents are directed to grant the refund of IGST paid on the exported goods after deducting the differential amount of duty drawback within 12 weeks, along with interest at the rate of 7% p.a. from the date of the shipping bill to the date of actual refund.b. The Order dated 6th October 2023 is modified accordingly.c. Rule is made absolute in these terms.d. No order as to costs.