Refund of cess in case of exports on payment of IGST

[haribabu koduri]

Can refund of accumulated cess be claimed/allowed, in case of exports on payment of IGST, where the product is not liable for cess. For ex., Input us liable for cess. Output is not liable for cess. Cess got accumulated. Exports are made on payment of IGST. Refund of IGST is claimed from customs. Can refund claim be filed for refund of accumulated cess, in proportion to exports?

[Raam Srinivasan Swaminathan Kalpathi]

Please refer to the discussion wherein your question has been beautifully delineated by experts in query no.119531.  

[Rajagopalan Ranganathan]

Sir,

Since cess not leviable on the exported goods and you are exporting the goods on payment of IGST, you cannot claim. The accumulated cess is to be allowed to lapse,

[KASTURI SETHI]

(i) In this situation, export on payment of IGST is a hurdle in getting refund claim of accumulated compensation cess.

(ii) The department should be concerned with the actual export of goods as per the parameters laid down in the definition of 'Export' as per Section 2 (5) of IGST Act and 'zero rated supply' as per Section 16 of IGST Act for the purpose of sanctioning refund claim of accumulated compensation cess.

(iii) It is well settled law that a circular cannot override Rules & Notifications and Rules & Notifications cannot override the Act.

(iv) So if any rule or circular or notification is not in consonance with an Act that need to be either amended or withdrawn in the interest of fair justice to the exporter.

(v) If compensation cess is not leviable on the final product, the taxpayer/exporter should not suffer without his fault. Export is always in the interest of economy of India and, in turn, for the welfare of our country.

[haribabu koduri]

There is no reason for differentiating between exports under LUT or on payment of duty, for refund of cess accumulated on account of exports. 

Cess gets accumulated since input is liable for cess, but not output. If the tax payer exports part of the output, he should be granted refund of cess in proportionate to exports. Not allowing refund in case of exports on payment of IGST, is against the basic principle of "NOT TO EXPORT TAXES". 

As usual, we have to litigate the matter and approach higher forums, since the department has rejected the refund claims stating that - refund of cess is permissible only in case of exports under LUT, but not in case of export exports on payment o IGST

[KASTURI SETHI]

Yes. I agree with you. The issue is worth contesting.

[Shilpi Jain]

If you have done an export with payment of tax you can take the credit though you will not be eligible for refund.

Also, the law has provided certain conditions and procedures to follow to be eligible for refund. So in case you wish to challenge that, note that it will not be an easy battle. Legislature is given the latitude to put it s conditions and restrictions.

Atleast for future exports consider doing them under LUT to encash cess credits.

[YAGAY and SUN]

Whether such Cess was taken into consideration for forming the part of RODTEP Scheme representation to the Ministry of Commerce and if was considered at that time and if duly included by the Government/MOCI/DGFT then you cannot seek refund of the same, as eligible Exporters are under statutory obligation to file the Annual Return under RODTEP scheme to reconcile the RODTEP availed by them against actual incurred by them.

[KASTURI SETHI]

Technically, statutorily, etymologically, grammatically, literally, logically  it is inappropriate to say, use or  apply the phrase, "Taxes/duties  cannot be exported" inasmuch as taxes are neither goods nor services.

[KASTURI SETHI]

Tax is a levy and imposition of tax is a method.

[KASTURI SETHI]

This is in continuation of all my above posts :-

To cap it all, Section 54 of CGST Act coupled with Section 16 of IGST Act should be determinant factor here.

[haribabu koduri]

It is the policy of the Government that "taxes and duties should not be exported" as mentioned in the PIB Press Release Dt.15-12-2022 in relation to RoDTEP. Therefore, the observation is not based on any assumption. Cess burden is not included in the RoDTEP scheme, since the refund is permitted in case of exports under LUT, as per the department's opinion.

[haribabu koduri]

There is no restriction under Section 54 of the CGST Act or 16 of the IGST Act, for refund of accumulated cess on account of exports on payment of IGST

[KASTURI SETHI]

Any press release has no statutory force. 

[KASTURI SETHI]

A press release has no statutory force until and unless it is notified and notification should be in consonance with the respective Act.

[KASTURI SETHI]

Legal validity of a press release

As per the news in Times of India dated 06.11.2024, Hon'ble Supreme Court has held that a Govt. press release announcing a policy change does not constitute a law. The benefits can only be claimed only after a formal notification is issued. The Supreme Court has emphasized that that a press release is a mere statement of intent, not a legal amendment.

For more details go the following link :

2024 (11) TMI 216 - SUPREME COURT (LB)

http://timesofindia.indiatimes.com/articleshow/114992850.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[Yash Shah]

As per Circular  No.1 /1/2017-Compensation Cess, in case export is made on payment of cess then exporter will be eligible for refund of cess paid and in case export is made without payment of cess under bond then exporter can claim refund of ITC of compensation cess.

However, according to para 5.3 of Circular No. 45/19/2018-GST, in case where inputs are liable for cess and output (export) is not liable to cess and exports are made on payment of IGST then refund of compensation cess cannot be claimed by registered person.

Therefore, in the given case as per circular no. 45/19/2018 refund of cess cannot be claimed. However, since above para 5.3 of circular no. 45/19/2018 is not in line with the principle that no taxes be exported therefore the above circular can be challenged

AI Summary

Compensation cess refund denied for exports on payment of IGST under departmental circular, prompting calls for legal challenge.
The departmental view per Circular No.45/19/2018 (para 5.3) denies refund of accumulated compensation cess where inputs were cess liable but exported outputs are not and exports are made on payment of IGST, allowing refund only for exports under bond/LUT; commentators dispute that position, citing Sections 54 CGST and 16 IGST as not prohibiting such refunds, arguing the circular conflicts with the statutory principle against exporting tax burdens and can be subject to legal challenge, while recommending export under LUT as a practical alternative.