Gujarat HC orders : Circular cannot run contrary to Statutory Provisions grant of IGST Refund

Case of Amit Cotton Industries Vs PR CC reported in 2019- TIOL-1443-HC-AHM-GST

Facts :

Writ-applicant had exported goods in July 2017. It is the case of the writ-applicant that it is eligible to seek refund of the IGST in accordance with the provisions of the IGST Act, 2017. However, according to the writ-applicant, without any valid reason the refund to the tune of Rs.19,05,121/- has been withheld. According to the writ-applicant, despite many representations addressed to the respondent no.2, i.e. the Deputy Commissioner of Customs, no cognizance has been taken so far as regards the claim for the lawful refund of the requisite amount.

Writ-applicant vehemently submitted that there is no legal embargo on availing the drawback at the rate of 1% higher rate on one hand and availing refund of the IGST paid in regard to the ‘Zero Rated Supply’, i.e. the goods exported out of India, on the other.

It is submitted that the refund ought to have been sanctioned immediately irrespective of the fact, whether the drawback was claimed at the rate of 1% (higher rate) or at the rate of 0.15% (lower rate).

Writ-applicant further submits that the stance of the respondents that the writ-applicant is not entitled to claim refund as the writ-applicant had availed drawback at the higher rate in regard to the finished goods exported out of India, is not sustainable in law.

The Honble High Court held as under

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.

Respondents have fairly conceded that the case of the writapplicant 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 writ-applicant had availed higher duty drawback and as there is no provision for accepting the refund of such higher duty drawback, the writapplicant is not entitled to seek the refund of the IGST paid in connection with the goods exported, i.e. ‘zero rated supplies’. 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.

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.

Rule 96 is relevant for two purposes. The shipping bill that the exporter may file is deemed to be an application for refund of the integrated tax paid on the goods exported out of India and the claim for refund can be withheld only in the following contingencies as enumerated in sub-clauses (a) and (b) respectively of clause (4) of Rule 96 of the Rules, 2017

In 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.

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

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.