Validity of Withholding BCD Refund Pending Reversal of IGST ITC

[Kumar Gaurav]

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. 

AI Summary

Withholding BCD/SWS refunds cannot be conditioned on non-reversal of IGST ITC, and interest typically not payable.
A customs-duty refund (BCD/SWS) should not be withheld as a means to compel reversal of IGST ITC because customs and GST are separate statutes and no provision makes IGST reversal a precondition for customs refunds; interest on IGST reversal is said to be inapplicable where ITC was lawfully availed and later disallowed solely by post-import reassessment, though if reassessment reduces ITC it ought to be reversed and interest depends on utilisation.