2025 (7) TMI 691 - HC - GST

Gujarat HC allows IGST refund claim under Rule 96, finds no Rule 96(10) violation with EPCG Certificate

Gujarat HC allowed petitioner's writ petition challenging rejection of IGST refund claim under Rule 96 of CGST Rules, 2017. The refund was denied alleging ... Refund of IGST paid under Rule 96 of the Central Goods and Services Tax Rules, 2017 - rejection of refund claim on the ground that the petitioner had availed the benefit of Notification No.79/2017-Customs dated 13.10.2017 resulting into violation of the Rule 96(10) of the CGST Rules - HELD THAT:- It is not in dispute that the petitioner has filed the reply to provide the details called for in the show-cause notice in Form GST RFD-08 by submitting ITC Details of November, 2023 and Invoices for export of goods. It is also apparent from the notice dated 14.02.2024 issued by the respondent that the petitioner was not called upon to provide the EPCG Certificate. The petitioner therefore, during the course of the appellate proceedings, has provided the EPCG Certificate and therefore, it cannot be said that, in the facts of the case, any of the Clauses (a) to (d) of Rule 112 of the CGST Rules would be applicable. On perusal of Rule 112, it appears that when the petitioner has not been called upon to submit the EPCG Certificate, Clauses (a) to (d) of the Rule 112(1) of the CGST Rules would not be applicable as neither the adjudicating authority has refused to admit the evidence, nor the petitioner was prevented from sufficient cause from producing the evidence which he was called upon to produce, nor the petitioner was prevented by sufficient cause from producing before the adjudicating authority which is relevant to any ground of Appeal. The Clause (d) of the Rule 112(1) of the CGST Rules is also not applicable, as in the facts of the case, the petitioner after considering the order of rejection of adjudicating authority has placed on record the EPCG Certificate along with the Bank Guarantee required under the said Scheme for import of the capital goods to avail the benefit of the Notification No.79/2017 and therefore, there is no violation of Rule 96(10) of the CGST Rules by the petitioner. The Appellate Authority ought to have considered the additional evidence placed on record by the petitioner to verify as to whether the EPCG Certificate produced by the petitioner would entitle the petitioner to claim the refund or not, as import of the capital goods availing the benefit of Notification No.79/2017 has been excluded from purview of Rule 96(10) of the CGST Rules. Matter remanded back to the Appellate Authority to consider the additional evidence produced by the petitioner in accordance with law and to pass a fresh de-novo order on verification of such additional evidence - petition disposed off by way of remand. The core legal questions considered in this judgment revolve around the entitlement to refund of Integrated Goods and Services Tax (IGST) paid on export of goods, specifically:1. Whether the petitioner violated the provisions of Rule 96(10) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) by availing the benefit of Notification No.79/2017-Customs dated 13.10.2017 in relation to imported capital goods under the Export Promotion Capital Goods (EPCG) Scheme;2. Whether the Appellate Authority was justified in rejecting the petitioner's appeal under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST Act) by invoking Rule 112 of the CGST Rules to refuse consideration of additional evidence (EPCG Certificate and Bank Guarantee) not produced before the Adjudicating Authority;3. The applicability and interpretation of Rule 112 of the CGST Rules regarding production of additional evidence before the Appellate Authority, particularly the relevance of Clauses (a) to (d) of Rule 112(1) in the facts of the case;4. The procedural fairness and scope of appellate review in refund claims under the CGST Act and Rules.Issue 1: Violation of Rule 96(10) of the CGST Rules by availing benefit of Notification No.79/2017-CustomsThe legal framework involves Rule 96 of the CGST Rules which governs refund of IGST paid on zero-rated supplies such as exports. Rule 96(10) specifically restricts refund claims where the goods imported have availed certain customs exemptions, to prevent double benefits. Notification No.79/2017-Customs provides customs duty exemption on import of capital goods under the EPCG Scheme.The petitioner contended that the goods imported under the EPCG Scheme are capital goods and thus excluded from the restrictions under Rule 96(10). The petitioner submitted EPCG Script and Bank Guarantee documents to establish this fact.The Adjudicating Authority rejected the refund claim on the ground that the petitioner had availed the benefit of Notification No.79/2017, thereby violating Rule 96(10). However, the petitioner argued that capital goods imported under EPCG Scheme fall outside the scope of Rule 96(10) restrictions, and thus the refund claim should be allowed.The Court noted that the EPCG Scheme's import of capital goods is indeed excluded from the purview of Rule 96(10), meaning the petitioner's claim is prima facie valid if supported by documentary evidence.Issue 2: Rejection of additional evidence by the Appellate Authority under Rule 112 of the CGST RulesRule 112 of the CGST Rules restricts the production of additional evidence before the Appellate Authority or Tribunal, except under specific circumstances enumerated in Clauses (a) to (d) of Rule 112(1). These include situations where evidence was wrongly excluded by the Adjudicating Authority, or where the appellant was prevented by sufficient cause from producing the evidence earlier.The petitioner produced EPCG Certificate and Bank Guarantee for the first time before the Appellate Authority, which were not submitted during the adjudication proceedings. The Appellate Authority rejected these documents relying on Rule 112, holding that the petitioner failed to demonstrate applicability of Clauses (a) to (d) to justify admission of new evidence.The petitioner argued that it was never called upon to produce the EPCG Certificate during adjudication, so none of the Clauses (a) to (d) apply. Therefore, the Appellate Authority should have admitted and considered the additional evidence.The Court analyzed Rule 112(1) and observed that since the petitioner was not asked to produce the EPCG Certificate earlier, the conditions for exclusion under Clauses (a) to (d) do not arise. The petitioner was not prevented by sufficient cause from producing evidence it was called upon to submit, nor was the evidence refused admission by the Adjudicating Authority. Hence, the Appellate Authority erred in rejecting the additional evidence outright.Issue 3: Applicability and interpretation of Rule 112(1) Clauses (a) to (d)The Court quoted Rule 112(1) verbatim and interpreted it in light of the facts:'The appellant shall not be allowed to produce before the Appellate Authority or the Appellate Tribunal any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the adjudicating authority or, as the case may be, the Appellate Authority except in the following circumstances, namely:-(a) where the adjudicating authority or, as the case may be, the Appellate Authority has refused to admit evidence which ought to have been admitted; or(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the adjudicating authority or, as the case may be, the Appellate Authority; or(c) where the appellant was prevented by sufficient cause from producing before the adjudicating authority or, as the case may be, the Appellate Authority any evidence which is relevant to any ground of appeal; or(d) where the adjudicating authority or, as the case may be, the Appellate Authority has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.'The Court held that none of these exceptions applied because the petitioner was not called upon to produce the EPCG Certificate during adjudication, nor was it refused admission, nor was the petitioner prevented by sufficient cause. The petitioner submitted the additional evidence only during appeal, which should have been considered.Issue 4: Procedural fairness and scope of appellate reviewThe Court emphasized that the Appellate Authority has a duty to consider all relevant evidence, especially when such evidence may determine the petitioner's entitlement to refund. The rejection of additional evidence without proper consideration violates principles of natural justice and procedural fairness.The Court noted that the petitioner's submission of EPCG Certificate and Bank Guarantee during appeal was crucial to establish that the imported goods were capital goods exempted under Notification No.79/2017 and thus outside the prohibition of Rule 96(10).The Court concluded that the Appellate Authority ought to have admitted and examined the additional evidence to verify the petitioner's claim and decide the refund application on merits.The Court therefore quashed and set aside the impugned order of the Appellate Authority and remanded the matter back to it for fresh consideration. The Appellate Authority was directed to consider the additional evidence in accordance with law and pass a fresh de novo order within twelve weeks.Significant holdings and core principles established:'When the appellant has not been called upon to submit certain evidence during adjudication proceedings, the exceptions under Clauses (a) to (d) of Rule 112(1) of the CGST Rules are not attracted, and such additional evidence can be admitted and considered by the Appellate Authority.''Import of capital goods under the EPCG Scheme availing benefit of Notification No.79/2017-Customs is excluded from the restrictions imposed by Rule 96(10) of the CGST Rules on refund claims of IGST paid on exports.''The Appellate Authority must exercise its jurisdiction to consider all relevant evidence placed before it, including additional evidence submitted during appeal, to ensure just and fair adjudication of refund claims.''Rejection of additional evidence on the sole ground of non-production before the Adjudicating Authority without examining applicability of Rule 112(1) exceptions amounts to procedural impropriety.'The final determinations were:- The petitioner did not violate Rule 96(10) as the imported capital goods under EPCG Scheme are excluded.- The Appellate Authority erred in refusing to admit additional evidence under Rule 112.- The impugned order rejecting the refund claim was set aside.- The matter was remanded for fresh consideration of the additional evidence and a fresh decision on refund entitlement.