2021 (11) TMI 1013 - HC - GST

Refund of unutilized input tax credit (ITC) - export of iron ore fines - export duty is nil as a result of an exemption notification - HELD THAT - In earlier writ petition of the Petitioner i.e. W.P.(C) No.26685 of 2021, the challenge was to two instructions dated 8th June and 25th June 2021 issued by the Joint Commissioner of CT and GST (Law) at Cuttack instructing Circle Heads in Odisha to treat such export as duty paid and refusing the refund - This Court had in the said writ petition on 8th September 2021, while issuing notice directed that no further steps would be taken vis- -vis the Petitioner by the Opposite Parties pursuant to those impugned notices. The Petitioner in the said writ petition had also challenged the show cause notice (SCN) dated 21st July 2021 which was pertaining to the period April 2019 to March. 2020. A development that has taken place subsequent to the above order passed by this Court is that the GST Council at its 45th Meeting on 17th September 2021 decided inter alia to issue a clarification in respect of goods for which the export duty is in fact not paid. It was clarified that only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54 (3) of the CGST Act, 2017 from availment of refund of accumulated ITC. - As a result of the above decision of the GST Council, a fresh circular dated 20th September 2021 has been issued by the Central Board of Indirect Taxes and Customs (CBITC), GST Policy Wing, Ministry of Finance, Government of India in which one of the questions addressed is, at serial No.3, whether the first proviso to section 54(3) of the CGST/SGST Act, prohibiting refund of unutilized ITC is applicable in case of exports of goods which are having NIL rate of export duty? It is seen that since the instruction dated 25th June 2021 stands withdrawn, clearly the earlier instruction dated 8th June 2021 which is in the same vein also does not survive. Therefore, one of the prayers of the previous petition as well as the present petition challenging the aforementioned circulars does not survive - Since the impugned SCN has been issued only as result of the circulars, it also does not survive and is accordingly set aside. A direction is now issued to the Opposite Party-authority to reprocess the refund application of the Petitioner in light of the fresh circular issued on 20th September 2021 (Annexure-14) and convey the decision to the Petitioner thereon not later than 7th February, 2022. It is made clear that whatever the technical issues for reprocessing the refund application should be resolved by the authority as expeditiously as possible and in a manner to ensure compliance with the timeline set by this Court in this order. The rejection of the refund application does not survive and is hereby set aside - Petition allowed.

Summary

Issues involved:
Denial of refund of unutilized input tax credit (ITC) against export of iron ore fines due to exemption notification; Challenge to instructions issued by Joint Commissioner of CT and GST; Challenge to show cause notice (SCN) dated 21st July 2021; Interpretation of the term "subjected to export duty" under section 54(3) of the CGST Act; Processing of refund application in light of fresh circular issued by GST Council; Withdrawal of earlier clarifications; Time-bound disposal of refund application.

Analysis:
The judgment addresses the second writ petition filed by the Petitioner, challenging the denial of refund of unutilized input tax credit (ITC) against the export of iron ore fines, which are exempt from export duty. The earlier petition challenged instructions issued by the Joint Commissioner of CT and GST, directing to treat such exports as duty paid and refusing the refund. The Court had earlier directed to halt further actions based on those instructions. The present petition challenges the letters and an SCN issued in relation to the export. A significant development post the Court's order was the GST Council's decision to clarify the applicability of the first proviso to section 54(3) of the CGST Act concerning goods not subjected to export duty. The clarification emphasized that goods with NIL export duty rate or fully exempted are not considered subjected to export duty, impacting the refund eligibility. Consequently, the Petitioner sought a direction to reprocess the refund application based on the fresh circular.

The Additional Standing Counsel for the Department acknowledged the withdrawal of an earlier clarification and assured compliance with time-bound disposal of the refund application. The Court noted the withdrawal of the instruction dated 25th June 2021, rendering the challenge to the circulars moot. As the impugned SCN was issued based on the now-defunct circulars, it was set aside. A direction was issued to reprocess the refund application in line with the recent circular, with a deadline of 7th February 2022. The Court emphasized resolving technical issues promptly to meet the timeline and directed cooperation from relevant authorities. Consequently, the rejection of the refund application was set aside, and parties were granted the option to approach the Court in case of difficulties.

In conclusion, the writ petition was disposed of with the specified directions for processing the refund application and ensuring compliance within the set timeline. An urgent certified copy of the order was directed to be issued as per rules, concluding the legal judgment comprehensively.