2022 (10) TMI 1259 - HC - GST

Refund of IGST - goods exported to the countries mentioned in the respective shipping bills - Zero Rated Supplies - HELD THAT - On conjoint reading of section 16 of the IGST Act 2017, section 154 of the CGST Act, 2017 and Rule 96 of the CGST Rules 2017, for the exports made by the petitioner in the month of July and August 2017, the petitioner was entitled to receive the refund of IGST paid at the time of export supply. Notification No. 131/2016 provides for denial of drawback specified in the schedule which is amended by Notification no.59/2017 on enactment of CGST Act, 2017 which includes exporters claiming refund of integrated goods and service tax on such exports. Notification No.37/2018 provided for denial of refund of IGST, however, such notification was issued subsequent to the date of exports made by the petitioner. The facts of the present case are squarely covered by the decision in case of Amit Cotton Industries 2020 (7) TMI 455 - GUJARAT HIGH COURT wherein reliance is placed upon the decision of Supreme Court in case of Commissioner v. Ratan Melting and Wire Industries 2008 (10) TMI 5 - SUPREME COURT wherein it is held that circulars and instructions issued by the Board are merely instructions for understanding of statutory provisions and are not binding on the Court. It was further held that circulars which are contrary to the statutory provisions has no existence in eye of law. The petitioner was holding valid registration number under the CGST Act, 2017 and was exporter entitled to benefit under the provisions of IGST Act, 2017, the petitioner is entitled to refund of IGST paid as per the provisions of section 16(3)(b) of the IGST Act, 2017 read with section 54 of the CGST Act, 2017 and Rule 96 of the CGST Rules, 2017 as the shipping bill filed by the petitioner shall be deemed to be an application for refund of IGST integrated tax paid on the goods exported outside India and such application shall be deemed to have been filed as per the procedure prescribed under Rule 96 of CGST Rules, 2017. The petitioner is even otherwise entitled to refund of IGST as envisaged under the relevant provisions of IGST Act, 2017 CGST Act, 2017 and CGST Rules, 2017 - Petition allowed.

Summary

Issues Involved:
1. Entitlement to refund of IGST on exported goods.
2. Legality of withholding IGST refund due to higher rate of drawback claimed.
3. Applicability and binding nature of Circular No. 37/2018-Customs.
4. Entitlement to interest on delayed IGST refund.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of IGST on Exported Goods:
The petitioner, a registered partnership firm under the GST regime, exported goods in July and August 2017 and paid IGST amounting to Rs. 2,26,087/-. As per Section 16 of the IGST Act, 2017, these exports qualify as 'Zero Rated Supply', entitling the petitioner to claim a refund of the IGST paid. Rule 96 of the CGST Rules, 2017, deems the shipping bill filed by an exporter as an application for refund of IGST, provided the exporter has filed a valid return in Form GSTR-3 or GSTR-3B. The petitioner complied with all necessary requirements and was, therefore, entitled to an immediate refund of the IGST paid.

2. Legality of Withholding IGST Refund Due to Higher Rate of Drawback Claimed:
The respondent authorities withheld the IGST refund, citing that the petitioner claimed a higher rate of drawback by selecting "Category-A" instead of "Category-B" on the shipping bills. The authorities referenced Circular No. 37/2018-Customs and Notification 131/2016, as amended by Notification 59/2017, which they argued justified withholding the refund. However, the court found this stance untenable, noting that the circular was issued after the date of the petitioner's exports and could not retroactively apply. Additionally, the higher rate of drawback claimed did not contravene the statutory provisions, and the petitioner had not received any undue benefit.

3. Applicability and Binding Nature of Circular No. 37/2018-Customs:
The court referenced its earlier decision in Amit Cotton Industries v. Principal Commissioner of Customs, where it was held that Circular No. 37/2018-Customs, which restricts IGST refunds if higher duty drawback is claimed, has no legal force as it conflicts with statutory rules. The court reiterated that circulars are merely instructions for understanding statutory provisions and are not binding on the court. Circulars that contradict statutory provisions have no legal existence. Therefore, the petitioner's claim for IGST refund could not be denied based on this circular.

4. Entitlement to Interest on Delayed IGST Refund:
The petitioner also sought interest on the delayed refund of IGST. The court, referencing multiple precedents, including Amit Cotton Industries, held that the petitioner was entitled to interest on the delayed refund. The court directed the respondent authorities to pay interest at the rate of 9% per annum from the date of filing the shipping bills until the actual realization of the refund amount.

Conclusion:
The court concluded that the petitioner was entitled to a refund of Rs. 2,26,087/- towards IGST paid on exported goods, as these were 'Zero Rated Supplies'. The court directed the respondent authorities to immediately sanction the refund and pay interest at the rate of 9% per annum from the date of filing the shipping bills until the actual realization of the refund. The rule was made absolute to this extent, with no order as to costs.