2020 (1) TMI 1298 - Commissioner - GST

Refund of unutilized ITC - zero-rated supplies made under Section 16 of the IGST Act 2017 - refund rejected on the ground that the appellant has claimed higher drawback under column A of drawback schedule and also refund of credit found inadmissible under Section 17(5) of CGST Act 2017. HELD THAT - Consequent upon implementation of GST with effect from 1-7-2017 Customs Central Excise Duties and Service Tax Drawback Rules 1995 were continued for a transition period of three months i.e. from July 2017 to September 2017 vide Circular No. 22/2017-Cus. dated 30-6-2017 - According to notes conditions No. 7 to Notification No. 131/2016-Cus. dated 31-10-2016. if the rate indicated is the same in the columns (4) and (6) it shall mean that the same pertains to only Customs component and is available irrespective of whether the exporter has availed of Cenvat Facility or not . I also find that the appellant s commodity are classifiable under Tariff Item No. 6914 Other Ceramic Articles which attracts the same rates of drawback i.e. 1.5% under both the columns (4) (6). Hence it is evident that the appellant has claimed drawback of Customs component only for their export. Further as per Circular No. 22/2017-Cus. dated 30-6-2017 which deals with drawback claims for the transition period clearly provides that While a transition period of three months has been allowed the exports shall have an option to claim only Customs portion of AlRs of duty drawback i.e. rates and caps given under column (6) (7) respectively of the Schedule of AIRs of duty drawback and avail input tax credit CGST or IGST or refund of IGST paid on exports . Furthermore C.B.E. C. vide Circular No. 37/11/2018-GST in F. No. 349/47/2017-GST dated 15-3-2018 has also clarified that a supplier availing drawback only with respect to basic custom duty shall be eligible for refund of unutilized input tax credit of Central tax/State tax/Union territory tax/Integrated tax/Compensation Cess under the said provision - Further vide Para 40 of Circular No. 125/44/2019-GST issued under C. No. CBEC-20/16/04/18-GST dated 18-11-2019 it is clarified that as per the third proviso to sub-section (3) of Section 54 of the CGST Act states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services or both avails of drawback in respect of Central tax. Thus it is clarified that if a supplier avails of drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback Rules 2017 he shall be eligible for refund of unutilized input tax credit of Central tax/State tax/Union Territory tax/Integrated tax/Compensation Cess. It is also clarified that refund of eligible credit on account of State tax shall be available if the supplier of goods or services or both has availed of drawback in respect of Central tax. Appeals filed by the appellant allowed only to the extent of rejection of refund of IGST and CGST on account of higher drawback under column A of drawback schedule.

Summary

Issues:
Appeals under Section 107 of the CGST Act, 2017 against Refund Sanction/Rejection orders.

Analysis:
1. The appeals were filed by a company engaged in manufacturing and trading of ceramic handicraft items, seeking refund under Section 54 of the CGST Act, 2017 for unutilized ITC on zero-rated supplies. The refund claims were rejected due to alleged higher drawback claims and inadmissible credit under Section 17(5) of the Act.

2. The appellant contended that the rejection based on claiming higher drawback was faulty as the rates of drawback were the same for customs component only. The appellant cited Circular No. 22/2017-Cus. and Notification No. 131/2016-Cus. to support their claim that the higher drawback was permissible during the transition period from July to September 2017.

3. The Additional Commissioner noted that the appellant correctly claimed only the customs component of the drawback for their exports, as per Circular No. 22/2017-Cus. and Notification No. 131/2016-Cus. The Circular also allowed claiming only the Customs portion of AIRs of duty drawback during the transition period.

4. Referring to Circular No. 37/11/2018-GST and Circular No. 125/44/2019-GST, the Commissioner clarified that a supplier availing drawback only on basic custom duty is eligible for refund of unutilized input tax credit. Based on these clarifications, the appeals were allowed to the extent of rejection of refund of IGST and CGST due to higher drawback claims.

5. However, the rejection of refund for inadmissible credit under Section 17(5) of the CGST Act, 2017 was upheld as no valid grounds were presented by the appellant against it.

6. Consequently, the appeals were disposed of by allowing the refund claims related to IGST and CGST due to higher drawback claims, while rejecting the appeals regarding inadmissible credit under Section 17(5) of the Act.