IGST Refund taken by EOU contrary to Rule 96(10)

[ROHIT GOEL]

Dear experts,

An EOU has taken refund of IGST paid on exports after 9th Oct 2018 even though after such date as per Rule 96(10), EOU claiming IGST and BCD exemption on imports was not allowed to take IGST refund and could only take ITC refund.

Now assessee served notice to repay the amount with interest and penalty. However, situation is revenue neutral since as per calculation by Rule 89, unutilised ITC refund for the same period would have been more than refund already taken. However, there is violation of Rule 96 and therefore procedural lapse at end of assessee.

Is there any legal grounds available with assessee to argue matter in its favour?

AI Summary

Restriction on IGST refund for zero-rated exports shapes EOU refund claims despite input tax credit neutrality.
Export-oriented unit claimed IGST refund despite Rule 96(10) barring EOUs claiming IGST and BCD exemption from taking IGST refunds; revenue demanded repayment with interest and penalty, although unutilised input tax credit refunds may exceed the amount, and the legal dispute centers on whether subordinate rules can restrict refund eligibility under the statutory grant permitting refunds "subject to such conditions, safeguards and procedure".