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2019 (12) TMI 1268 - HC - GSTDuty Drawback - Refund of IGST - transitional credit - Vires Section 16 of the IGST Act, 2017 read with Section 54 of CGST Act, 2017 and Rule 96 of CGST Rules, 2017 - Circular No. 37/2018- CUSTOMS dated 09.10.2018 - HELD THAT - Though, the challenge in the present petition is also to the vires of the circulars enumerated above, however, Petitioners are primarily concerned with the refund of IGST paid on goods exported by them during the transitional period. The Respondents concern is well founded that the Petitioners should not take undue advantage of the drawback scheme. The purpose behind impugned circular is to ensure that the exporters do not claim AIRs of duty drawback and simultaneously avail tax neutralization under GST as this would amount to exporter availing double benefits of neutralization of taxes. However, the fact remains that at no point of time, the petitioners declared that they would forego the claim of IGST refund. During the transitional period, Petitioners have inadvertently claimed benefit under a wrong provision, since there was lack of clarity with respect to the refund of IGST. Should we deny the benefit simply for this mistake when the cardinal rule is that taxes should not exported? Government would have to embrace initiatives that would help the taxpayers in the transformation to the new regime. This would require understanding the difficulties faced by the industry which would be crucial step for success of GST law. Instant case is one such example where Petitioners have been victim of technical glitches on account of confusion during transitional phase. We are thus of the view that taxpayers like the Petitioners should not be denied the substantive benefit of the IGST paid by them on exports. The Petitioners have enclosed the cost analysis which captures the denial of IGST refund causing severe financial crunch to the exporters business. The impact is significant. To us such an error, that is purely inadvertent and not intentional, should not come in the way of calming refund of IGST. The respondents have also been alive to the situation and in matters relating to technical glitches, they have constituted IT Redressal Grievance Committees to address the grievances of the taxpayers - there is no reason as to why the Petitioners should not be extended similar benefit. Since the Respondents have expressed their apprehension about double benefit of neutralisation of taxes, it would be appropriate that before issuing final directions, Respondents verify the extent of the duty drawback availed by the Petitioners and also whether they have availed duty drawback / CENVAT credit of Central Excise and Service Tax component in respect of the exports made by them. List on 27th April, 2020.
Issues Involved:
1. Validity of Paragraph 11(d) read with 12A(a)(ii) of Notification No. 131/2016-Cus. (N.T.) and its amendments. 2. Validity of Circular No. 37/2018-CUSTOMS dated 09.10.2018. 3. Entitlement of the petitioners to refund of IGST paid on goods exported during the transitional period. Issue-wise Detailed Analysis: 1. Validity of Paragraph 11(d) read with 12A(a)(ii) of Notification No. 131/2016-Cus. (N.T.) and its amendments: The petitioners challenged the aforementioned provisions on the grounds that they are ultra vires Section 16 of the IGST Act, 2017, Section 54 of the CGST Act, 2017, and Rule 96 of the CGST Rules, 2017. They argued that these provisions are unconstitutional and violative of Articles 14, 19, and 21 of the Constitution of India. The court acknowledged the petitioners' grievances but focused primarily on the denial of IGST refunds during the transitional period. 2. Validity of Circular No. 37/2018-CUSTOMS dated 09.10.2018: The petitioners contended that the Circular No. 37/2018 was issued without authority and contradicted the provisions of Section 16 of the IGST Act and Rule 96 of the CGST Rules. The circular declared that exporters who opted for higher drawback rates under Column A were not entitled to IGST refunds to avoid multiplicity of refunds. The court examined this circular and noted that the petitioners inadvertently claimed higher drawback rates due to confusion during the transitional phase. The court also considered previous judgments from the Gujarat High Court, Madras High Court, and Kerala High Court, which supported the petitioners' stance that such inadvertent errors should not deprive them of IGST refunds. 3. Entitlement of the petitioners to refund of IGST paid on goods exported during the transitional period: The petitioners argued that they should be entitled to IGST refunds despite claiming higher drawback rates under Column A, as the rates in Columns A and B were identical for their exported goods, meaning no additional benefit was accrued. The court found merit in this argument, noting that denying the refund due to a technical error would be unjust. The court emphasized that the petitioners should not be penalized for confusion during the GST transition and highlighted the principle that taxes should not be exported. The court directed the respondents to verify the extent of duty drawback availed by the petitioners and whether they had claimed CENVAT credit or duty drawback of Central Excise and Service Tax components. The respondents were given twelve weeks to complete this verification process. Conclusion: The court recognized the petitioners' right to claim IGST refunds despite the inadvertent error in claiming higher drawback rates. It directed the respondents to verify the petitioners' claims and issue necessary directions based on the findings. The case was listed for further hearing on 27th April 2020.
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