2022 (5) TMI 1021 - HC - GST

Refund of unutilized balance of input tax credit - nil rate of tax/exempt supply - rejection on ground that levy of Nil Rate of Tax on exported goods i.e. Iron Ore Fines falling within the fold of Code No.26011142 specified under Second Schedule of the Export Tariff appended to the Customs Tariff Act 1975 does not qualify for refund of GST paid in view of Clause (i) of Proviso to sub-section (3) of Section 54 of the OGST/CGST Act - Section 54 of the Odisha Goods and Services Tax Act 2017 - period 1st June 2019 to 31st October 2019 - HELD THAT - The export of Iron Ore Fines even though attracts Nil Rate of Tax in view of Second Schedule to the Customs Tariff Act 1975 the Petitioner would be entitled to refund on such export transactions. In view of Section 16 of the IGST Act read with Section 54(3) of the OGST/CGST Act export of goods or services or both is levied with zero-rate. NIL rate of Tax falls within the ken of the term exempt supply defined under Section 2(47) of the OGST/CGST Act. Reliance can be placed in the case of M/S. B.S. MINERALS VERSUS STATE OF ODISHA AND OTHERS 2021 (11) TMI 1013 - ORISSA HIGH COURT where it was held that it is 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) from availment of refund of accumulated ITC. Goods which are not subject to any export duty and in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act 1975 would not be covered by the restriction imposed under the first proviso to section 54 (3) of the CGST Act for the purpose of availment of refund of accumulated ITC. T his Court deems it proper to set aside the order dated 13th July 2021 of the Appellate Authority passed by the Additional Commissioner of State Tax (Appeal) Bhubaneswar and remand the matter to the said Appellate Authority for deciding the appeal afresh - petition allowed by way of remand.

Summary

Issues:
Challenge against rejection of refund application under Section 54 of the OGST Act for unutilized input tax credit. Interpretation of provisions related to refund eligibility for exported goods under the OGST/CGST Act. Applicability of the Division Bench judgment dated 25th November, 2021. Error in rejecting refund application based on a clarificatory circular dated 20th September, 2021. Admission by the CT & GST Organization regarding erroneous rejection of refund application.

Analysis:
The case involves a challenge against the rejection of a refund application under Section 54 of the Odisha Goods and Services Tax Act, 2017 (OGST Act) for unutilized input tax credit related to exported goods. The Petitioner contested the rejection, arguing that the decision was arbitrary and lacked proper application of mind. The Adjudicating Authority's decision was based on the interpretation of provisions under the IGST Act and CGST/OGST Act, specifically regarding the entitlement to claim a refund against the export of "Iron Ore Fines." The Petitioner appealed this decision before the Additional Commissioner of State Tax (Appeal), who upheld the rejection, leading to the current challenge in the High Court.

The Petitioner highlighted a Division Bench judgment dated 25th November, 2021, which was deemed relevant to the present case. The Court observed that the matter in question was covered by the said judgment, indicating a potential impact on the subject under dispute. The CT & GST Organization, represented by Mr. S.S. Padhi, admitted the erroneous nature of the rejection of the refund application. It was acknowledged that the Petitioner should be entitled to a refund for the export of "Iron Ore Fines," despite the Nil Rate of Tax applicable to such goods, as per the Second Schedule of the Customs Tariff Act, 1975.

Referring to the judgment in the case of M/s. B.S. Minerals v. State of Odisha & Others, the Court emphasized that the export of goods at Nil Rate of Tax falls under the definition of "exempt supply" as per the OGST/CGST Act. The Court cited a circular dated 20th September, 2021, issued by the Central Board of Indirect Taxes and Customs, which clarified the applicability of the first proviso to Section 54(3) of the CGST Act. The circular specified that goods not subjected to export duty, including those with a Nil Rate under the Customs Tariff Act, should not be restricted from refund of accumulated input tax credit.

In light of the conceded position by the CT & GST Organization and the legal interpretations provided, the Court set aside the order of the Appellate Authority and remanded the matter for a fresh decision. The Appellate Authority was directed to rehear the appeal, considering the views expressed in the earlier judgment, and to dispose of the appeal promptly. The writ petition was thus disposed of with the aforementioned observations and directions.