2021 (2) TMI 551 - Commissioner - GST

100% EOU - Refund of ITC accumulated - export of goods services without payment of Integrated Tax against filing the Letter of Undertaking - rejection on the grounds that the appellant has not followed the procedure for procurement of goods from DTA units - HELD THAT - The question of deemed export arises as the appellant is 100% EOU and supply received by them is deemed export, therefore, the appellant had to comply with provisions of Circular No. 14/14/2017-GST, dated 6-11-2017 and other provisions for the time being in force. The deemed export refer to supplies of goods manufactured in India (and not Services) which are notified as deemed export under Section 147 of the CGST Act, 2017 and recipient EOU shall have to follow the procedure as per Circular No. 14/14/2017-GST - Rule 89 of the CGST Rules, 2017 as amended vide Notification No. 47/2017-Central Tax, dated 18-10-2017 allow either the recipient or supplier of deemed export supplies to claim refund of tax paid thereon. The appellant has also contested that the condition of furnishing undertaking has been specified only in case when the supplier of the deemed export intends to file refund claim. As per Para 4 of C.B.E. C. Circular No. 24/24/2017-GST, dated 21-12-2017 - Whereas, the Government has issued notification No. 48/2017-Central Tax, dated 18-10-2017 under Section 147 of the CGST Act wherein certain supplies of goods have been notified as deemed export. Further, the third proviso to Rule 89(1) of the CGST Rules allows the recipient or the supplier to apply for refund of tax paid on such deemed export supplies. In case such refund is sought by the supplier of deemed export supplies, the documentary evidences as specified in Notification No. 49/2017-Central Tax, dated 18-10-2017 are also required to be furnished which includes an undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and that no input tax credit on such supplies has been availed of by him. The undertaking should be submitted manually along with the refund claim. Similarly, in case the refund is filed by the recipient of deemed export supplies, an undertaking by the supplier of deemed export supplies that he shall not claim the refund in respect of such supplies is also required to be furnished manually. Thus, the undertaking in both the case is to be furnished mandatorily, therefore the contention of the appellant is not acceptable. Further, vide Para 41 of Circular No. 125/44/2019-GST, dated 18-11-2019 it is also clarified that the procedure regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU)/Electronic Hardware Technology Park (EHTP) Unit/Software Technology Park (STP) Unit/Bio-Technology Parks (BTP) Unit under deemed export as laid down in Circular No. 14/14/2017-GST, dated 6-11-2017 needs to be complied with. Thus, the appellant was required to follow the procedure as prescribed but they failed to do so. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Rejection of refund claim due to non-compliance with procedural requirements for procurement of goods from Domestic Tariff Area (DTA) units.
2. Requirement of furnishing an undertaking for refund claims.
3. Applicability of procedural compliance for deemed exports.

Issue-wise Detailed Analysis:

1. Rejection of Refund Claim Due to Non-Compliance with Procedural Requirements for Procurement of Goods from DTA Units:

The appellant, a 100% Export Oriented Unit (EOU), filed a refund claim under Section 54 of the CGST Act, 2017, for the period of November 2017, amounting to ?5,79,552. The adjudicating authority rejected the claim on the grounds that the appellant did not follow the prescribed procedure for procurement of goods from DTA units as outlined in Circular No. 14/14/2017-GST, dated 6-11-2017. Specifically, the appellant failed to provide prior intimation in Form A, pre-approved by the Development Commissioner, to the registered supplier and the jurisdictional officers.

The appellant argued that the procedural requirements were newly introduced in November 2017 and that there was ambiguity and lack of clarity in the procedures. They contended that the procedural non-compliance was of a technical nature and should be condoned, citing legal precedents that support substantial compliance over strict procedural adherence.

2. Requirement of Furnishing an Undertaking for Refund Claims:

The appellant contested the requirement of furnishing an undertaking as specified in Para 4 of Circular No. 24/24/2017-GST, dated 21-12-2017. They argued that this requirement was applicable only when the supplier of deemed export intended to file a refund claim, not the recipient. The appellant submitted that they had obtained such undertakings from most suppliers to demonstrate compliance, even though it was not mandated for the recipient under the rules.

The adjudicating authority held that the undertaking was mandatory in both scenarios—whether the refund claim was filed by the supplier or the recipient. This was further supported by Para 41 of Circular No. 125/44/2019-GST, dated 18-11-2019, which reiterated the need for compliance with the procedural requirements laid down in Circular No. 14/14/2017-GST.

3. Applicability of Procedural Compliance for Deemed Exports:

The appellant argued that the procedure prescribed by Circular No. 14/14/2017-GST was only applicable to suppliers of goods claiming deemed export benefits under Section 147 of the CGST Act. They contended that as recipients of deemed exports, they were not required to follow this procedure. The appellant also highlighted that there was no system in place for issuing pre-approved Form A by the Development Commissioner, which was confirmed through discussions and written communication with the Development Commissioner, Noida SEZ.

The adjudicating authority, however, maintained that the appellant, as a recipient of deemed exports, was required to comply with the procedural safeguards outlined in Circular No. 14/14/2017-GST. The authority emphasized that the procedures were in addition to the terms and conditions of the Foreign Trade Policy (FTP) 2015-20 and the duty exemption notifications availed by such units.

Conclusion:

The adjudicating authority rejected the appeal, concluding that the appellant failed to comply with the procedural requirements for procurement of goods from DTA units and the mandatory furnishing of undertakings. The authority found the appellant's arguments and cited case laws inapplicable to the present case, upholding the initial rejection of the refund claim.