Post reassessment of a Bill of Entry, exemption was allowed resulting in reduction of BCD/SWS and consequential reduction in IGST. The importer had already availed IGST ITC. The department is insisting on reversal of IGST ITC with interest as a pre-condition for grant of refund and is withholding refund of BCD/SWS till such reversal.
Importer does not want to reverse IGST and only want BCD/Cess Refund.
Whether, in law, refund of BCD/SWS can be denied on this ground and whether interest is payable on IGST Reversal.
Customs BCD SWS refund withheld pending IGST ITC reversal; entitlement and interest implications queried in law Post-reassessment reduced basic customs duty and social welfare surcharge while also reducing IGST; importer had already availed IGST ITC. The core questions are whether refund of BCD/SWS may be withheld until IGST ITC is reversed, and whether interest is payable on IGST reversal. The legal effect depends on whether customs law treats BCD/SWS and IGST as independent tax heads such that entitlement to BCD/SWS refund arises upon exemption irrespective of IGST ITC statusif independent, refund cannot be lawfully withheld. Separately, liability to pay interest on IGST reversal arises only where statutory provisions or notification mandate interest for delayed reversal, in which case interest becomes payable. (AI Summary)
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