GST Refund With Interest of Rs. 1.23 Crores To Tata Steel

Jharkhand High Court has taken decision in favor of Tata Steel, allowing them to receive a GST refund of Rs. 1.23 crores, along with interest.

The Jharkhand High Court, with the bench of Chief Justice M. S. Ramachandra Rao and Justice Deepak Roshan, thoroughly checked into the rules about GST refunds, specifically when someone is exporting goods or services. They observed, under Rule 89(2)(b) and 89(2)(c) of the CGST (Central Goods and Services Tax) Rules, that proof of payment is only required when services are exported and not when goods are exported.

The court said that when someone exports goods, they only need to provide a document matching the Shipping Bill and Export Invoices to get a GST refund. This document has already been submitted with the refund request.

The court also said that asking for proof that the payment was received from the foreign buyer is not required by the law for goods exports. So, tax officials shouldn’t demand that kind of proof when processing refund claims for exported goods.

The bench said the payment should be done within 9 months of export as per clause A2 of RBI Circular being FED Master Direction No. 16/2015-16 dated 1.1.2016 as changed time to time and as per the records, all the payments have been received by the complainer within 9 months.

The court pointed out that Rule 96A(3) of the GST law clearly says that if goods are not exported within the given time period, then the government can take action to recover the tax under Section 79 of the GST Act. So, the law already has a clear process in place for handling delays. Also, the court referred to a government circular that says if the goods are actually exported after the 3-month deadline, tax officers should not force the exporter to first pay IGST (Integrated GST) and then claim a refund later. In short, as long as the goods are eventually exported, exporters shouldn’t be made to follow extra steps just because they missed the 3-month deadline.

Tata Steel, which makes steel and sponge iron, needs coal as a raw material. When it buys coal, it pays a Compensation Cess under the GST law and is able to claim an Input Tax Credit (ITC) for that cess. However, because Tata Steel exports its products under a letter of undertaking (meaning it doesn’t pay tax on these exports), it cannot use this ITC. As a result, the ITC for the Compensation Cess accumulates without being offset by tax payments on exports.

The application for the refunded amount was filed by the petitioner company for the period of the financial year 2021-2022, along with all the necessary documents for the refund.

However, the tax authorities sent a notice to the company asking why its refund application shouldn’t be rejected. Even though the company quickly responded, its refund application was still rejected because it did not submit some required documents or certificates.

The court, after reviewing the case, ruled in favor of the company. It directed the tax authorities to refund the company an amount of Rs. 1,23,22,617, along with the required interest under Section 56 of the CGST Act. This refund must be processed within 12 weeks from when the court’s order is received or produced.