2022 (12) TMI 342 - HC - GST

Refund of IGST paid - goods exported under Advance Authorizations/EOU Scheme - availment of of full exemption of Integrated Goods and Service Tax in the course of import of raw materials which have been imported for use in the manufacture of export goods - HELD THAT - In the enquiry pursuant to the notice, various factual aspects arise such as whether the Petitioner s products are entirely made from imported raw material or not, whether they are manufacturing products made partly out of imported raw material, partly out of domestically procured raw material and whether the Petitioner is purchasing packing material locally would be ascertained and whether petitioner then is entitled to input tax credit on the said purchase locally. This enquiry as regards entitlement of the Petitioner to receive any refund is already under way. Letters have been issued to the Petitioner, which the Petitioner has responded. In these circumstances to give declarations of law as sought by the Petitioner would be not only academic but also premature. Learned counsel for the Petitioner states that on the limited aspect regarding the power of the Respondent CGST Authorities to issue instructions dated 30 June 2021 to Customs Authorities, Petitioner will file a separate Writ Petition and the other challenges raised by the Petitioner would be raised at the appropriate time. Petition disposed off.

Issues:
1. Interpretation of Rule 96(10) of the Central Goods and Service Tax Rules, 2017.
2. Validity of various circulars in relation to the Integrated Goods and Service Tax Act, 2017.
3. Withholding of refund of Integrated Goods and Service Tax.
4. Power of CGST Authorities to issue instructions to Customs Authorities.

Analysis:
1. The Petitioner received a notice from the Office of the Commissioner, Central Goods and Service Tax alleging double benefit availed by the Petitioner. The notice raised concerns about the Petitioner claiming a refund on duty paid for exports while also availing full exemption of Integrated Goods and Service Tax during the import of raw materials. The authorities contended that availing exemption during import should negate the refund claim on exports, suggesting double benefits were obtained. The Petitioner responded to the notice by providing requested documents.

2. The Petitioner filed a Petition seeking declarations on the legality of Rule 96(10) of the CGST Rules, 2017, along with various circulars. The Petitioner argued that these provisions were ultra vires of the IGST Act, 2017, and violated constitutional articles. The Petition also sought a Writ of Mandamus to prevent the application of Rule 96(10) in cases involving Input Tax Credit (ITC) on capital goods. Additionally, the Petitioner challenged the withholding of a substantial amount of Integrated Goods and Service Tax refund as arbitrary and illegal.

3. The Court noted ongoing inquiries into the Petitioner's manufacturing processes to determine the eligibility for refunds. The authorities were investigating whether the products were entirely made from imported raw materials, partially from imported and domestically procured materials, and if the Petitioner was entitled to input tax credit on locally purchased packing materials. Given the active inquiry, the Court deemed premature any declarations sought by the Petitioner at that stage.

4. The Petitioner's counsel argued that the CGST Authorities lacked the power to instruct Customs Authorities not to sanction refunds or Draw Back. However, as the specific communication in question was not on record, and there was no challenge to it, the Court could not address this issue. The Petitioner indicated the intention to file a separate Writ Petition on this specific matter while reserving other challenges for a later time. Consequently, the Petition was disposed of based on the Petitioner's future course of action.

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