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2023 (10) TMI 306 - HC - GSTRefund of accumulated unutilised Input Tax Credit - Relevant date for filing refund claim - Export of goods - constitutional validity of Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017 - rejection of refund on the ground that petitioner had not produced the relevant Foreign Inward Remittance Certificates (FIRCs) and co-related them with the exports made - rejection also on the ground that computation of the eligible export turnover was not compliant with Rule 89(4)(C) of the Rules. The petitioner contends that Sub-rule (4)(C) of Rule 89 of the said Rules, which was substituted by the Central Goods and Services Tax Act (Third Amendment) Rules, 2020 with effect from 23.03.2020, has no application for refund in respect of exports made prior to the said date. HELD THAT - The maximum amount of refund of ITC admissible is the fraction of the amount of ITC (as adjusted by ITC refundable under Sub-rules (4A) and (4B) of Rule 89 of the Rules) in proportion of the export turnover to the total turnover, as adjusted by excluding exempt supplies and supplies in respect of which the refund is claimed under Sub-rules (4A) and (4B) of Rule 89 of the Rules - Clause (C) of Sub-rule (4) of Rule 89 of the Rules, defines the expression turnover of zero rated supply of goods . There is no dispute that the amended Sub-rule (4) of Rule 89 of the Rules applies prospectively; that is, with effect from 23.03.2020, being the date when the Central Goods and Services Tax Act (Third Amendment) Rules, 2020 came into force. However, according to the Revenue, it has a retroactive operation for computing the refund of ITC in respect of exports made prior to the date of the amendment (23.03.2020) but applied for after the amendment. And, the applications filed after 23.03.2020 are required to be processed in accordance of the amended rules - The right for refund of the accumulated ITC stands crystalised on the date when the subject goods are exported. This is also reflected in Section 54 of the CGST Act. In terms of Section 54(1) of the CGST Act, the application for refund is required to be made before the expiry of two years from the relevant date in such form and manner as may be prescribed . It is important to note that in terms of Sub-clause (a) of Clause (2) of the Explanation to Section 54 (1) of the CGST Act, the limitation for applying for refund in respect of the export of goods and/or services is reckoned from the date when the goods and/services are exported - the appellate authority erred in applying Rule 89(4)(C) of the Rules as amended with effect from 23.03.2020 for computing the export turnover for the purposes of determining the refund as claimed by the petitioner The petitioner s claim for refund of the accumulated ITC in respect of its exports for the period of 01.10.2018 to 30.09.2019 is liable to succeed. The impugned refund rejection orders (dated 15.09.2020, 24.09.2020, 22.10.2020 and 05.11.2020) and the orders in appeal (Order-in-Appeal No. 106-108 dated 18.06.2021) are, accordingly, set aside - Petition disposed off.
Issues Involved:
1. Refund of accumulated unutilised Input Tax Credit (ITC) on export of goods. 2. Constitutional validity of Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017. 3. Applicability of Rule 89(4)(C) for exports made prior to its amendment on 23.03.2020. Summary: Issue 1: Refund of accumulated unutilised Input Tax Credit (ITC) on export of goods The petitioner sought a refund of accumulated unutilised ITC for the period 01.10.2018 to 30.09.2019, which was rejected by the authorities on two grounds: non-submission of Foreign Inward Remittance Certificates (FIRCs) and non-compliance with Rule 89(4)(C) of the Rules. The appellate authority upheld the rejection based on non-compliance with Rule 89(4)(C), despite the petitioner succeeding on the issue of FIRCs. Issue 2: Constitutional validity of Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017 The petitioner challenged Rule 89(4)(C) as ultra vires Section 54 of the CGST Act, Section 2(5) and Section 16 of the IGST Act, and Article 14 of the Constitution of India. The court noted that the amendment to Rule 89(4)(C) was struck down by the Karnataka High Court in M/s Tonbo Imaging India Pvt. Ltd. v. Union of India and Ors., making the amended provisions non-existent. Hence, the court did not find it necessary to examine this challenge further. Issue 3: Applicability of Rule 89(4)(C) for exports made prior to its amendment on 23.03.2020 The court found that the amended Rule 89(4)(C) applies prospectively from 23.03.2020 and cannot be applied retrospectively to exports made prior to this date. The right for refund of accumulated ITC crystallizes on the date of export, and the relevant rules at that time should apply. The appellate authority erred in applying the amended rule for computing the export turnover for the refund claim. Conclusion: The court set aside the impugned refund rejection orders and directed the concerned officer to process the petitioner's claim for refund of accumulated ITC along with applicable interest for the period 01.10.2018 to 30.09.2019. The petitions were disposed of accordingly.
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