2022 (4) TMI 760 - HC - GST

Duty Drawback - IGST refunds - zero rated supply - Section 16 of the Integrated Goods and Services Tax Act, 2017 - whether exports made without payment of IGST under bond on which, duty drawback is claimed under the provisions of the Customs and Central Excise Duties and Service Tax Drawback Rules, 2017, (formerly 1995) would entitle such an exporter, the benefit of refund of input tax credit under sub-Section (3) of Rule 16 of the IGST Act 2017 r/w 54 of the CGST Act, 2017 read with the Rules made thereunder? HELD THAT - When the goods were exported by the petitioner, the Central Excise Act, 1944, Rules made thereunder, Chapter V of the Finance Act, 1994 containing the provisions of Service Tax, Rules made thereunder and other Indirect Taxes had been repealed and subsumed into the provisions of the Goods and Services Tax enactments with effect from 01.07.2017. Corresponding changes in the Customs Notifications were not fully made. Refund of the input tax credit under Section 16(3) of Integrated Goods and Services Tax Act, 2017 r/w Section 54 of the Central Goods and Services Tax Act, 2017 and Rules 89 and 96 of Central Goods and Services Tax Rules, 2017 cannot be denied, merely because the petitioner has claimed duty drawback under the provisions of Customs and Central Excise Duties and Service Tax Drawback Rules, 2017. It does not mean that the petitioner is not entitled to refund under Section 16(3) of the Integrated Goods and Services Tax Act, 2017 r/w Section 54 of the Central Goods and Services Tax Act, 2017 and Rules 89 and 96 of Central Goods and Services Tax Rules, 2017. Paragraph No.2.5 of Circular No.37/2018-Cus, dated 09.10.2018 cannot be pressed to deny legitimate export incentive as same is not sanctioned under law. Only higher rate of drawback cannot be claimed exports covered by shipping bills, where for such exports, the refund of IGST is claimed if two rates are then. IGST refund is completely system driven and processed in the system and manual intervention by the Departmental Officers to rectify the same is also not possible. However, that would apply only where higher rate of duty drawback is claimed. The respondents are directed to scrutinize the refund claims filed by the petitioner under Section 16(3) of the Integrated Goods and Services Tax Act, 2017 read with Section 54 of the Central Goods and Services Tax Act, 2017 and Rule 89 of the Central Goods and Services Tax Rules, 2017 and other applicable Rules and refund the same together with applicable interest - petition allowed.

Summary

Issues:
- Whether exports made without payment of IGST under bond on which duty drawback is claimed would entitle the exporter to the benefit of refund of input tax credit under relevant Acts?
- Whether the petitioner is entitled to refund under Section 16(3) of the Integrated Goods and Services Tax Act, 2017 read with Section 54 of the Central Goods and Services Tax Act, 2017 and Rules 89 and 96 of Central Goods and Services Tax Rules, 2017?
- Interpretation of duty drawback rates and conditions under Notification No.131/2016-Cus (N.T) dated 31.10.2016.
- Applicability of Circular No.37/2018-Cus, dated 09.10.2018 in relation to duty drawback and IGST refund claims.
- Comparison with a previous judgment by the Gujarat High Court regarding IGST refunds.

Analysis:
1. The petitioner sought direction for settling pending refund claims on specific shipping bills. The petitioner exported goods under Customs Heading No.8483-40-00 and claimed duty drawback under Customs Act, 1962, and refund of input tax credit under the Integrated Goods and Services Tax Act, 2017.
2. The main issue was whether exports without IGST payment but with claimed duty drawback entitle the exporter to input tax credit refund. The court examined relevant notifications, concluding that the petitioner is entitled to the refund under the relevant Acts.
3. The court analyzed duty drawback rates under Notification No.131/2016-Cus (N.T) and clarified that the petitioner, irrespective of availing input tax credit, was entitled to a fixed 2% duty drawback.
4. The court addressed Circular No.37/2018-Cus, dated 09.10.2018, emphasizing that only higher duty drawback rates would affect IGST refunds, which are system-driven and not subject to manual intervention.
5. A Gujarat High Court judgment was referenced, highlighting the entitlement of exporters to IGST refunds for zero-rated supplies, supporting the petitioner's claim for refunds and interest.
6. The court allowed the writ petition, directing the respondents to scrutinize and refund the petitioner's claims under relevant Acts within three months, emphasizing compliance with applicable rules and provisions.

This detailed analysis of the judgment provides insights into the legal intricacies surrounding duty drawback, IGST refunds, and the interplay between different statutory provisions and notifications.