IGST refund denied for import duties paid through TR6 challans under Section 142(3) CGST Act

CESTAT Hyderabad dismissed the appeal seeking refund of IGST paid manually through TR6 challans for import duties under Customs Act, 1962. The tribunal held that appellants were not eligible for refund under Section 142(3) of CGST Act, 2017, as TR6 challans are not specified documents under Rule 36 of CGST Rules. The decision followed consistent precedents from CESTAT Chennai in similar cases. Despite SC directions in UOI vs COSMO Films Ltd and subsequent CBIC Circular No.16/2023, the corrective measures only have prospective application, providing no benefit to current appellants.

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The core legal questions considered in the judgment are:

1. Whether the appellants are entitled to refund of IGST paid manually through TR6 challans in respect of import duties paid under the Customs Act, 1962, given that TR6 challan is not a specified document under Rule 36 of the CGST Rules for availing input tax credit.

2. Whether Customs authorities have jurisdiction to entertain refund claims of IGST paid on imported goods, or whether such claims fall exclusively under GST laws.

3. Whether refund of IGST paid on import of goods can be granted under Section 27(1)(a) of the Customs Act, 1962 or Section 142(3) of the CGST Act, 2017, especially when the payment is made via manual challans and no document of assessment is communicated to the importer.

4. Whether denial of refund on technical grounds violates substantive rights or constitutional provisions, particularly in light of precedents recognizing that indirect taxes are not meant to be passed on as business costs.

5. Whether the appellants can raise new grounds relating to lacunae in communication of assessment documents at the appellate stage before the Tribunal.

Issue-wise Detailed Analysis:

Issue 1: Entitlement to refund of IGST paid via TR6 challans when TR6 is not a specified document under Rule 36 of CGST Rules

The legal framework involves the Customs Act, 1962; CGST Act, 2017; and associated rules. Rule 36 of the CGST Rules specifies documents required for availing input tax credit (ITC). TR6 challan, a manual payment instrument, is not recognized under Rule 36 as a valid document for ITC. The appellants contended that since no provision allows credit for IGST paid via TR6 challan, refund should be granted.

The Court noted that the Original Adjudicating Authority and Commissioner (Appeals) consistently held that there is no statutory provision enabling refund of IGST paid by manual TR6 challans under Customs law or GST law. The refund of duties paid in excess can only be claimed under Section 27 of the Customs Act, which does not cover such payments. The Court emphasized that ITC of IGST on imports is governed by GST laws, and Customs Officers are not the proper authorities to entertain refund claims of IGST.

Precedents such as the Tribunal's own decisions in the appellant's prior cases and other Bench rulings were cited, holding that refund of IGST paid by manual challans is not permissible. The Court also referred to the Supreme Court's decision in the case of M/s ITC Limited, which clarified that self-assessment orders cannot be set aside under Section 27 for refund purposes without following proper reassessment procedures.

Thus, the Court applied the law to facts by affirming that since TR6 challan is not a recognized document for ITC, and no reassessment was done, refund claims fail.

Issue 2: Jurisdiction of Customs Officers to entertain refund claims of IGST paid on imported goods

The Court examined whether Customs Officers have jurisdiction to entertain refund claims of IGST paid on imported goods. It was held that IGST is governed by GST laws, and refund of IGST is governed by the CGST Act and Rules. Customs Officers have jurisdiction only for refund claims under Customs law, which does not include IGST refund claims except in limited cases such as exports under Rule 96 of CGST Rules.

The appellants' refund claims related to import of goods and payment of IGST via manual challans, which is outside Customs Officers' jurisdiction. The Court relied on earlier decisions including Tribunal orders and the Supreme Court ruling in M/s ITC Limited, emphasizing that refund claims must be pursued through proper GST authorities.

The Court rejected the appellants' contention that denial of refund violates substantive rights, noting that input tax credit is a concession and not a vested right, supported by judgments from various High Courts and Tribunals.

Issue 3: Applicability of Section 27(1)(a) of Customs Act and Section 142(3) of CGST Act for refund claims

The appellants sought refund under Section 27(1)(a) of the Customs Act and Section 142(3) of the CGST Act. The Court held that Section 27 allows refund only for duties paid in excess or erroneously, but does not permit setting aside final self-assessment orders without proper reassessment. Section 142(3) of CGST Act relates to refund of unutilized input tax credit but does not confer right to cash refund where credit is not admissible under law.

Tribunal precedents, including the appellant's own previous cases and other Bench rulings, were cited to demonstrate that refund of IGST paid via manual challans is not admissible under these provisions. The Court noted that if credit is not admissible under GST law, Section 142(3) cannot be invoked to claim cash refund.

The Court also referred to the Supreme Court's ruling in M/s ITC Limited, which requires modification of assessment orders through proper proceedings before refund claims can be entertained.

Issue 4: Substantive rights and constitutional provisions vis-`a-vis technical grounds for refund denial

The appellants argued that denial of refund on technical grounds violates substantive rights and constitutional provisions, citing a High Court decision that indirect taxes are not meant to be passed on as business costs. They contended that the adjudicating authorities prioritized technicalities over substantive benefits.

The Court acknowledged the argument but held that input tax credit is a concession and not a vested right, supported by multiple judgments. The Court emphasized that the appellants' failure to produce required documents and follow procedural requirements precludes refund claims. The Court also pointed out that the appellants did not dispute the assessment or pay IGST under protest, which would have allowed challenge to the assessment order.

Hence, the Court concluded that the denial of refund on procedural and legal grounds does not violate substantive rights or constitutional provisions.

Issue 5: Raising new grounds of lacuna in communication of assessment documents at the appellate stage

The appellants raised a new ground that the Customs Department failed to communicate documents of assessment properly, causing inability to claim ITC or refund. They relied on a recent Supreme Court observation directing CBIC to address such lacunae and a CBIC circular prescribing procedures for payments under Section 28 of the Customs Act.

The Court observed that this ground was not raised before the Original Adjudicating Authority or Commissioner (Appeals) and was not part of the grounds of appeal before the Tribunal. Therefore, the Court declined to entertain this new ground at the appellate stage, adhering to the principle that new grounds cannot be introduced at a later stage without prior opportunity to the authorities.

Significant Holdings:

"There is no provision under Customs Act 1962, which covers such cases; that refund of duties paid in excess can only be claimed under Section 27."

"ITC of IGST paid against import of goods is governed by the GST laws and therefore, Customs Officers are not the proper officers to entertain such refund claims."

"Refund of IGST by Customs Officers in respect of export consignments alone is expressly provided for in Rule 96 of the CGST Rules, 2017, which is not the case here."

"When we consider the overall effect of the provisions prior to amendment and post-amendment under Finance Act 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self- assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and re-assess the duty for making refund and in case any person is aggrieved by any order which would include self- assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act." (Supreme Court)

"Merely because the appellants had paid the duty, it is not a vested right that they would be entitled for taking the credit."

"If the refund of credit is not admissible in cash under the existing law then section 142, per se, would not make them entitled for refund in cash."

"This ground of lacuna in communication of documents has neither been taken by the appellant before the original Adjudicating Authority nor before the first Appellate Authority and the same is not part of the prayer or the Grounds of Appeals filed before the Tribunal. Hence this new ground cannot be entertained at this stage."

The Court ultimately dismissed the appeals, holding that the appellants are not entitled to refund of IGST paid via manual TR6 challans under the existing statutory framework and procedural requirements. The principles established emphasize strict adherence to procedural mandates for refund claims, the non-vested nature of input tax credit, and the jurisdictional limits of Customs and GST authorities in refund matters.

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