2019 (7) TMI 472 - GUJARAT HIGH COURT

Circular No.37/2018-Customs dated 9th October 2018 was issued by the Government of India, Ministry of Finance, Department of Revenue, as regards the IGST refunds.

In view the above circular, the question before the High Court was that:

"Whether the respondents are justified in withholding the refund of the IGST paid by the writ-applicant in connection with the goods exported, i.e. 'zero rated supplies'."

The Court has analyzed various provision of the Central GST Act, 2017 and GST Rules, 2017 and observed as follows:

"23. Section 16 of the IGST Act, 2017, referred to above provides for zero rating of certain supplies, namely exports, and supplies made to the Special Economic Zone Unit or Special Economic Zone Developer and the manner of zero rating.

24. It is not in dispute that the goods in question are one of zero rated supplies. A registered person making zero rated supplies is eligible to claim refund under the options as provided in sub-clauses (a) and (b) to clause (3) of Section 16 referred to above.

25. Section 54 of the CGST Act, 2017, provides that any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, shall make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed. If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined will have to be credited to the Fund referred to in Section 57 of the CGST Act, 2017.

26. Rule 96 of the CGST Rules provides for a deeming fiction. The shipping bill that the exporter of goods may file is deemed to be an application for refund of the integrated tax paid on the goods exported out of India. Section 54 referred to above should be read along with Rule 96 of the Rules. Rule 96(4) makes it abundantly clear that the claim for refund can be withheld only in two circumstances as provided in sub-clauses (a) and (b) respectively of clause (4) of Rule 96 of the Rules, 2017.

27. In the aforesaid context, the respondents have fairly conceded that the case of the writ-applicant is not falling within sub-clauses (a) and (b) respectively of clause (4) of Rule 96 of the Rules, 2017. The stance of the department is that, as the writapplicant had availed higher duty drawback and as there is no provision for accepting the refund of such higher duty drawback, the writ-applicant is not entitled to seek the refund of the IGST paid in connection with the goods exported, i.e. 'zero rated supplies'.

28. If the claim of the writ-applicant is to be rejected only on the basis of the circular issued by the Government of India dated 9th October 2018 referred to above, then we are afraid the submission canvassed on behalf of the respondents should fail as the same is not sustainable in law.

29. We are not impressed by the stance of the respondents that although the writ-applicant might have returned the differential drawback amount, yet as there is no option available in the system to consider the claim, the writ-applicant is not entitled to the refund of the IGST. First, the circular upon which reliance has been placed, in our opinion, cannot be said to have any legal force. The circular cannot run contrary to the statutory rules, more particularly, Rule 96 referred to above.'

Court has further analyzed the decision of the Apex Court in the cases of:

Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries [2008 (10) TMI 5 - SUPREME COUR]

and 

 J.K.Lakshmi Cement Limited v. Commercial Tax Officer, Pali [2016 (9) TMI 721 - SUPREME COURT]

Finally, it has been decided that:

34. We take notice of two things so far as the circular is concerned. Apart from being merely in the form of instructions or guidance to the concerned department, the circular is dated 9th October 2018, whereas the export took place on 27th July 2017. Over and above the same, the circular explains the provisions of the drawback and it has nothing to do with the IGST refund. Thus, the circular will not save the situation for the respondents. We are of the view that Rule 96 of the Rules, 2017, is very clear.

35. In view of the same, the writ-applicant is entitled to claim the refund of the IGST.

36. In the result, this writ-application succeeds and is hereby allowed. The respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund.

 

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Full Text:

2019 (7) TMI 472 - GUJARAT HIGH COURT

Zero-rated supplies entitlement: IGST refund cannot be denied solely because exporter claimed higher drawback; statutory rules prevail. The statutory refund regime treats the shipping bill as a deemed application for IGST refund on exports and allows withholding of refund only in the specific, enumerated circumstances provided by the rules. Administrative circulars cannot override the statute; availing a higher duty drawback or technical limitations in departmental systems do not, without falling within the prescribed withholding contingencies, defeat an exporter's entitlement to IGST refund for zero-rated supplies.