2019 (7) TMI 472 - HC - GST

Refund of IGST - Export of goods in July 2017 - zero rated supplies - simultaneous duty drawback claim - refund was rejected without any valid reason rejecting the claim - rejection of claim only on the basis of the circular issued dated 9th October 2018 - principles of natural justice - HELD THAT - 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. 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 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 - (a) a request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of subsection (10) or sub-section (11) of Section 54; or (b) the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962. Reliability on Circular No.37/2018-Customs dated 9th October 2018 - HELD THAT - 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. The writ-applicant is entitled to claim the refund of the IGST - 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 - application allowed.

Summary

Issues Involved:
1. Entitlement to refund of IGST paid on exported goods.
2. Legality of withholding the IGST refund due to availing higher duty drawback.
3. Validity and applicability of Circular No. 37/2018-Customs dated 9th October 2018.
4. Compliance with the provisions of Section 16 of the IGST Act, 2017, Section 54 of the CGST Act, 2017, and Rule 96 of the CGST Rules, 2017.
5. Claim for interest on the delayed refund of IGST.

Issue-wise Detailed Analysis:

1. Entitlement to refund of IGST paid on exported goods:
The petitioner, a Cotton Ginning Mill, exported goods in July 2017 and claimed a refund of the IGST paid on these goods as per Section 16 of the IGST Act, 2017. The petitioner argued that the exported goods were 'Zero Rated Supplies' and thus eligible for a refund under Section 54 of the CGST Act, 2017. Despite fulfilling all statutory requirements, the refund was withheld by the respondent authorities without any valid reason.

2. Legality of withholding the IGST refund due to availing higher duty drawback:
The petitioner initially claimed a higher duty drawback rate of 1% but later refunded the differential amount (0.85%) along with interest. The respondent authorities verbally informed the petitioner that the refund was withheld due to the higher duty drawback claim. The petitioner contended that there is no legal provision allowing the withholding of IGST refunds on this basis. The respondent authorities argued that the system-based IGST refund mechanism does not recognize the refund of differential drawback amounts and thus denied the refund.

3. Validity and applicability of Circular No. 37/2018-Customs dated 9th October 2018:
The respondent authorities relied on Circular No. 37/2018-Customs, which states that exporters who claimed higher duty drawback relinquished their IGST/ITC claims. The petitioner argued that the circular is not legally binding and cannot override statutory provisions. The court agreed, stating that the circular cannot contradict Rule 96 of the CGST Rules, which clearly outlines the conditions under which IGST refunds can be withheld.

4. Compliance with the provisions of Section 16 of the IGST Act, 2017, Section 54 of the CGST Act, 2017, and Rule 96 of the CGST Rules, 2017:
The court examined the relevant provisions and found that the petitioner complied with all statutory requirements for claiming the IGST refund. Rule 96 of the CGST Rules specifies that the shipping bill is deemed an application for refund, and the claim can only be withheld under specific conditions, none of which applied to the petitioner's case. The court held that the respondent authorities' refusal to process the refund based on the higher drawback claim was not supported by the law.

5. Claim for interest on the delayed refund of IGST:
The petitioner also sought interest on the delayed refund of IGST. The court directed the respondent authorities to sanction the refund with 7% simple interest from the date of the shipping bills until the date of actual refund, recognizing the undue delay in processing the refund.

Conclusion:
The court allowed the writ application, directing the respondent authorities to immediately sanction the refund of IGST paid on the exported goods with 7% simple interest from the date of the shipping bills till the date of actual refund. The court emphasized that the circular relied upon by the respondents could not override statutory provisions and that the petitioner's compliance with the relevant laws entitled them to the refund.