Export goods refund claim allowed as proof of payment not required under CGST Rules 89(2)(b) and (c)

The HC allowed the writ petition challenging rejection of a refund claim for exported goods. The revenue authority had rejected the application citing non-furnishing of documents/certificates. The HC held that proof of payment is required only for export of services, not goods, under CGST Rules 89(2)(b) and (c). For goods export, only reconciliation statement of Shipping Bill and Export Invoices is required, which was already provided. The 2019 Circular clarifies that proof of export proceeds realization should not be insisted upon for goods export refund claims. The rejection order was based on extraneous grounds beyond CGST Act requirements and was therefore unsustainable.

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the rejection of a refund application under the Central Goods and Services Tax (CGST) framework. The issues include:

• Whether the rejection of the refund application based on non-furnishing of receipt of payment within 180 days of export is valid.
• Whether the rejection due to non-furnishing of proof of export within 90 days of the invoice is justified.
• Whether the requirement for a declaration of non-prosecution was legally necessary.
• Whether the demand for an undertaking under the proviso to Section 11 (2) of the Cess Act was appropriate.
• Whether the non-furnishing of a statement as per Para 43(C) of the 2019 Circular was a valid ground for rejection.

ISSUE-WISE DETAILED ANALYSIS

Non-furnishing of receipt of payment within 180 days of export

The relevant legal framework includes Rule 89 (2) (b) and 89 (2) (c) of the CGST Rules, which specify that proof of payment is required for the export of services, not goods. The Court noted that for the export of goods, a reconciliation statement of the Shipping Bill and Export Invoices suffices, which was provided by the petitioner. Furthermore, paragraph-48 of the 2019 Circular states that proof of realization of export proceeds should not be insisted upon for processing refund claims related to the export of goods. The Court found that the petitioner's payments were received within the stipulated nine months, as per the RBI Circular, rendering this ground of rejection legally unsustainable.

Non-furnishing of proof of export within 90 days of invoice

The Court referred to Rule 96A-3, which allows for recovery under Section 79 if goods are not exported within the prescribed time. However, paragraph-45 of the 2019 Circular and paragraph-4.6 of the 2023 Circular clarify that refunds should not be denied if goods are exported beyond the prescribed timeframe. The Court found that the petitioner had provided EGM details within the 90-day period, making this ground of rejection contrary to the binding Circulars.

Non-furnishing of declaration of non-prosecution

The Court observed that there is no statutory requirement under the Act for such a declaration. Paragraph-46 of the 2019 Circular explicitly states that self-declaration is not warranted for refunds under a Letter of Undertaking (LUT). The petitioner had nonetheless provided the declaration in response to the show cause notice, making this ground inconsistent with the Circular.

Non-furnishing of undertaking under proviso to Section 11 (2) of the Cess Act

The Court highlighted that the proviso to Section 11 (2) only applies when ITC of Cess is set off against Output Tax Liability of Cess. As the petitioner exported goods under LUT without tax payment, this provision was inapplicable. Paragraph-42 of the Impugned Circular further clarifies that this stipulation applies only to zero-rated supplies on payment of Integrated tax, invalidating this ground of rejection.

Non-furnishing of statement as per Para 43 (C) of the 2019 Circular

The Court noted that Para 43 (C) applies only when there has been a reversal of credit, which was not the case here. The petitioner had submitted a CA certificate confirming that the incidence of Compensation of Cess had not been passed on, fulfilling the requirement. Thus, this ground was also found to be without merit.

SIGNIFICANT HOLDINGS

The Court held that the impugned orders were based on grounds extraneous to the CGST Act, Rules, and binding Circulars. The rejection of the refund application was quashed, and the respondents were directed to refund the amount of Rs. 1,23,22,617 with interest under Section 56 of the CGST Act within 12 weeks.

Key principles established include the non-requirement of proof of payment for goods export refunds, the irrelevance of a declaration of non-prosecution, and the inapplicability of certain provisions when exports occur under LUT without tax payment. The judgment reinforces adherence to statutory frameworks and binding Circulars in refund applications.

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