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TMI Blog2024 (11) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... which compelled those amendments to examine whether the provisions as they presently stand are ultra vires the provisions of Section 16 of the IGST Act. A reference to the provisions of Section 16 of the IGST Act both before and after its amendment suggests that the Section itself has not imposed any restriction in the matter of availing either refund of taxes paid on input goods and input services or claiming refund of IGST after payment of IGST on the exports. While, on the authority of the judgment of the Supreme Court in VKC Footsteps [ 2021 (9) TMI 626 - SUPREME COURT] , it may be possible for the Revenue to contend that the Parliament has a right to impose restrictions on the right to refund, it must be noticed that in VKC Footsteps, the Supreme Court was considering a question as to whether the word inputs used in sub-section (3) of Section 54 of the CGST Act includes input goods and input services or input goods only . On a consideration of the matter and having regard to the definition of the word input in Section 2(59) of the CGST Act, the Supreme Court came to the conclusion that the word inputs used in sub-section (3) of Section 54 insofar it applies to a refund of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med, Akhil Philip Manithottiyil, Daniya Rasheed Palliyalil, By Adv Akhil Suresh, Anil D. Nair (Sr.), Telma Raju, Aditya Unnikrishnan, R. Devika, Anjali Menon, For the Respondent : By Advs., Sreelal N. Warrier (Sr. SC) (For R3), P.G. Jayashankar (Sr. SC) (For R4), Mohammed Rafiq (Spl. Gp). Rajesh. K. Raju (SC), Vishnu Rajagopal (SC), V. Girishkumar, (SC), Girish Kumar V. (Sr. SC) (For R3), Suvin R. Menon (SC), M/s. Sance Laboratories Private Limited, Coco Latex Exports Pvt. Ltd., Crust N Crumb Food Ingredients P. Ltd., Sadha Exports, Kerala Balers Pvt. Ltd., William Goodacre Sons India (P) Ltd., M/s. Floor Gardens, Mini Jobson, Proprietrix, M/s. ST. George Foods, M/s. Sree Lekshmi Cashew Company, M/s. Choice Cashew Industries Cashew Exporter, M/s. Associated Cashew Industries, M/s. Bismi Cashew Company, M/s. Southern Cashew Exporters, M/s. Five Star Cashew Exporters Importers, Souparnika Export Enterprises, Jobrun Geevarghese, Prasanthi Cashew Company Private Limited, South Kerala Cashew Exporters, AF Cashews, Vizag Exports, Diamond Nuts, Prasanthi Cashew Company, Tasty Nuts Industries, Global Foods, M/s. N.C. John Sons Pvt. Ltd., Jose Joseph. Versus Union Of India, The State Of Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -rated supply in the provisions of Section 16 of the IGST Act, 2017, read with the provisions of Section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) indicate that there is to be no export of taxes and on the goods being exported the exporter is entitled to a refund of the IGST paid on the export of goods or to the refund of taxes paid on input goods and input services used in the manufacture of goods or provision of services that are ultimately exported. Section 16 of the IGST Act (as it stood till amendment by Act 13 of 2021 (Brought into force w.e.f. 01-10-2023 vide Notification No. 27/2023-C.T., dated 31-07-2023)) contemplated two methods to enable the exporter to claim a refund of taxes on input goods and input services used in the manufacture of goods exported or services exported. The two methods were:- (a) Through the supply (export) of goods or services (or both) under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and a resultant claim for refund of unutilised input tax credit arising from the payment of tax on goods or services used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 96 (10) of the CGST Rules. 3. I have heard Sri. G. Shivadas, the learned Senior Counsel appearing for the petitioner in W.P (C) No. 17447/2023 on the instructions of Sri. Shaji Thomas, Sri. K. Srikumar, the learned Senior Counsel, appearing for the petitioners in W.P(C) Nos. 26040/2023 and 25969/2023 on the instructions of Smt. Ammu Charles, Sri. Anil D. Nair, the learned Senior Counsel, appearing for the petitioners in W.P (C) Nos. 4389/2024, 6653/2024 and 25134/2024 on the instructions of Smt. Aditya Unnikrishnan, Sri. M. Balagopal, the learned counsel appearing for the petitioner in W.P (C) No. 20672/2024, Sri. K.N. Sreekumaran, the learned counsel appearing for the petitioners in W.P (C) Nos. 20442/2023 and W.P (C) Nos.22051/2023, Sri. Sherry Samuel Oommen, the learned counsel appearing for the petitioners in W.P (C) Nos.39776/2023, 148/2024, 3065/2024, 3124/2024, 3250/2024, 3503/2024, 5412/2024 and 9516/2024, Sri. Sergi Joseph Thomas, the learned counsel appearing for the petitioner in W.P (C) No.41106/2023, Sri. Shameem Ahamed, the learned counsel appearing for the petitioners in W.P (C) Nos.42356/2023, 42395/2023 and 21909/2024, Smt. Krishna K, the learned counsel appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sri. G. Shivadas, the learned Senior Counsel appearing for the petitioner in W.P (C) No. 17447/2023 referred to paragraph 28 of the judgment of the Supreme Court in Ispat Industries Ltd. v. Commissioner of Customs, Mumbai; (2006) 12 SCC 583 , to the decision of the Supreme Court in Cellular Operators Association of India and Ors. v. TRAI and Ors., (2016) 7 SCC 703 and to the decision of the Supreme Court in Shayara Bano (supra) to contend that subordinate legislation has to be subservient to plenary legislation and the introduction of restrictions as now contended in Rule 96 (10) of the CGST Rules goes contrary to the express provisions of Section 16 of the IGST Act. He also referred to paragraph Nos. 28 to 31 of the judgment of the Supreme Court in Union of India v. Intercontinental Consultants and Technocrats (P) Ltd.; (2018) 4 SCC 669 in support of his contention. The learned Senior Counsel has also referred to the judgment of the Supreme Court in Union of India v. VKC Footsteps India Pvt. Ltd.; (2022) 2 SCC 603 to contend that a restriction on the right to claim a refund of IGST paid can only be justified if it is explicitly contemplated by the plenary law. Sri. K. Srikumar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) and 54 (6) of the CGST Act also do not authorize the imposition of a restriction as contemplated by the provisions of Rule 96 (10) of the CGST Rules. The learned counsel appearing on behalf of the petitioners in the other Writ Petitions made submissions substantially along the same lines. Therefore, for the sake of brevity and to avoid repetition, those submissions are not recorded. Submissions for the Revenue:- 5. The learned Senior Standing Counsel appearing for the Central Revenue refers to the counter affidavit filed in W.P (C) No. 17447/2023 to explain the genesis of the provisions in Rule 96 (10) of the CGST Rules. He submits that the right of refund under Section 16 of the IGST Act is always subject to the provisions of Section 54 of the CGST Act and sub-section (3) of Section 54 permits the imposition of conditions in claiming refund. The learned counsel has extensively referred to the judgment of the Supreme Court in VKC Footsteps (supra) to contend that the said judgment covers the issue raised (against the petitioners) and the Supreme Court has categorically found that the right to refund is not absolute and the State may, in contemplation of its fiscal objectives, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rule 89 and Rule 96 of the CGST Rules to show that while a person opting to claim refund of IGST in terms of the provisions contained in Rule 96 of the CGST Rules will be entitled to claim the benefit of credit arising out of the purchase of capital goods such right is not available to persons who may opt to file a letter of undertaking/bond and seek a refund of taxes paid on input goods and inputs services by following the procedure contemplated by Rule 89 of the CGST Rules. It is therefore submitted that it is at the option of the exporter to adopt either of the Rules contemplated by the provisions of Section 16 and it is for him to decide which is the method more beneficial to him. 6. Sri. G. Shivadas, the learned Senior Counsel appearing for the petitioner in W.P (C) No. 17447/2023 would submit, in reply, that the judgment of the Gujarat High Court in Zenith Spinners v. Union of India, 2005 SCC OnLine Guj 601 which was affirmed by the Supreme Court in Union of India Ors v. Zenith Spinners, (2020) 14 SCC 520 is authority for the proposition that the phrase conditions, safeguards and procedures mentioned in Section 16 (3) (b) of the IGST Act read with the phrase conditions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper or a Special Economic Zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. (3) A registered person making zero-rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or letter of undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed: Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999) for receipt of foreign exchange remittances, in such manner as may be prescribed. (4) The Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permitted to be exported on payment of IGST. Though it is not relevant for the purposes of this case, it may be noted that none of the goods or services that are subject matter of these writ petitions find a place in the notifications referred to above. 9. Section 54 of the CGST Act, to which reference is made by Section 16 of the IGST Act, to the extent relevant 1 , reads thus: 54. Refund of tax. (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: Provided . (2)...... (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than-- (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The shipping bill filed by an exporter of goods shall be deemed to be an application for refund of Integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:- (a) the person in charge of the conveyance carrying the export goods duly files a departure manifest or an export manifest or an export report covering the number and the date of shipping bills or bills of export; and (b) the applicant has furnished a valid return in Form GSTR-3B: Provided that if there is any mismatch between the data furnished by the exporter of goods in Shipping Bill and those furnished in statement of outward supplies in Form GSTR-1, such application for refund of integrated tax paid on the goods exported out of India shall be deemed to have been filed on such date when such mismatch in respect of the said shipping bill is rectified by the exporter, (c) the applicant has undergone Aadhaar authentication in the manner provided in rule 10-B: (2) The details of the relevant export invoices in respect of export of goods contained in Form GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then, such claim shall be transmitted to the proper officer of Central tax, State tax or Union territory tax, as the case may be electronically through the common portal in a system generated Form GST RFD-01 and the intimation of such transmission shall also be sent to the exporter electronically through the common portal, and notwithstanding anything to the contrary contained in any other rule, the said system generated form shall be deemed to be the application for refund in such cases and shall be deemed to have been filed on the date of such transmission. (5-C) The application for refund in Form GST RFD-01 transmitted electronically through the common portal in terms of sub-rules (5-A) and (5-B) shall be dealt in accordance with the provisions of rule 89. (8) The Central Government may pay refund of the Integrated tax to the Government of Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the Integrated tax. (9) The application for refund of integrated tax paid on the services exported out of India shall be filed in Form GST RFD-01 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 16 of the IGST Act. 11. A reference to the provisions of Section 16 of the IGST Act both before and after its amendment suggests to me that the Section itself has not imposed any restriction in the matter of availing either refund of taxes paid on input goods and input services or claiming refund of IGST after payment of IGST on the exports. While, on the authority of the judgment of the Supreme Court in VKC Footsteps (supra), it may be possible for the Revenue to contend that the Parliament has a right to impose restrictions on the right to refund, it must be noticed that in VKC Footsteps (supra), the Supreme Court was considering a question as to whether the word inputs used in sub-section (3) of Section 54 of the CGST Act includes input goods and input services or input goods only . On a consideration of the matter and having regard to the definition of the word input in Section 2(59) of the CGST Act, the Supreme Court came to the conclusion that the word inputs used in sub-section (3) of Section 54 insofar it applies to a refund of duties/tax arising out of an inverted duty structure contemplates refund of taxes paid on input goods alone and not input servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules 18 and 19 of the Central Excise Rules, 2002. It was contended that the right to a rebate of excise duty available to an exporter (in relation to duty paid on final products which are excisable goods, or in relation to duty paid on raw material used as inputs in manufacture or processing of such final products) on export of goods was taken away completely by the terms of the impugned notifications. When dealing with a contention on behalf of the Revenue that the right to rebate was subject to approval by the commissioner it was held:- 14. There is one more reason. As can be seen from reading of sub-rule (1) and Rule (2) of Rule 19 of the Rules the opening portion grants an option to the exporter by virtue of the language used. In sub-rule (1) it is stated Any excisable goods may be exported , and in sub-rule (2) it is stated Any material may be removed . Therefore, the exporter has an option to export the final products without payment of duty or use inputs which are procured without payment of duty in the manufacture or processing of goods which are to be exported. At the other end, the later portion of sub-rules (1) and (2) of Rule 19 of the Rules grants discretion to the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ( ITC ) in respect of inputs and input services in case zero-rated supplies are undertaken without payment of taxes, under a Letter of Undertaking ( LUT ) or bond. Rule 96 provides for refund of output IGST paid on export of goods and services. Note : This payment of tax is essentially from the accumulated ITC, which is a basket of ITC availed on inputs, input services and capital goods with no one-to-one correlation between the usage of inputs and usage of credit so long as the inputs satisfy the requirements under Section 16 (1) of the CGST Act. 3. Procedure i. Section 54 (4) of the CGST Act provides that the refund application must be accompanied with the documents specified in Rule 89 (2), in Annexure 1 of the Form GST RFD-01 to establish that refund is due to the applicant. ii. Rule 89(1) provides that an application in Form GST RFD-01 must be filed along with the necessary documents through the common portal for claiming refund of unutilized ITC. iii. Refund to be calculated as per the formula provided in Rule 89(4), which is: Refund=(Turnover of zero-rated supply of goods and services) Net ITC Adjusted Total Turnover. Note : (a) Net ITC is defined as ITC availed on inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form GST RFD-07 shall be passed. According to Rule 96 (4), claim for refund shall be withheld in the following circumstances: ● a request has been received from the jurisdictional Commissioner to withhold the payment of refund in accordance with Section 54 (10) or (11) of the CGST Act; or ● the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962; or ● the Commissioner or an officer authorised by the Board, is of the opinion that verification of credentials of the exporter, including the availment of ITC by the exporter, is considered essential before grant of refund, in order to safeguard the interest of revenue. 5. Provisional refund i. The proper officer must give an acknowledgement in Form GST RFD-02, in terms of Rule 90, within fifteen (15) days of filing of the refund application and indicate the date of filing and time period remaining to file an order under Section 54 (7) of the CGST Act. ii. Section 54 (6) of the CGST Act provides that, in case of zero-rated supplies, 90% of the total refund amount claimed shall be refunded on a provisional basis. 6. Processing of refund and sanction, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 (10) (i) provides that persons claiming refund of IGST on export of goods or services, should not have received supplies under the following notifications: ● Notification No. 48/2017-CT dated 18.10.2017 (nil rate of tax deemed exports), except so far as it relates to receipt of capital goods against Export Promotion Capital Goods (EPCG) Scheme; ● Notification No. 40/2017-CT(R) dated 23.10.2017 (reduced rate of tax merchant exporters; or ● Notification No. 41/2017-IT(R) dated 23.10.2017 (reduced rate of tax merchant exporters). Under clause (a) Rule 89(4B) In case the applicant has received supplies from a supplier who has availed the benefit of Notification No. 40/2017-CT(R) dated 23.10.2017 or Notification No. 41/2017-IT(R) dated 23.10.2017 (reduced rate of tax merchant exporters), the following refund shall be granted: ● ITC availed in respect of inputs received under the said Notifications for export of goods, and ● ITC availed in respect of other inputs and input services used in making export of goods. 3. Under clause (b) of Rule 89 (4B) In case the applicant has availed the benefit of Notification No. 78/2017-Cus dated 13.10.2017 or Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the authority for the proposition that where even the provisions of a plenary legislation produce a manifestly absurd and unjust result, that could never have been intended by the Legislature, the Court may modify the language used by the Legislature or even do some violence to it so as to achieve the obvious intention of the Legislature and produce a rational construction. It was held in K.P Varghese (supra):- 6 It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but they can certainly help to fix its meaning. It is a well-recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature . The above comparative table clearly indicates that the working of Rule 96 (10) of the CGST Rules as presently worded creates a restriction not contemplated by Section 16 of the IGST Act, on the right to refund. Therefore, I am constrained to hold that Rule 96 (10) of the CGST Rules a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst such orders and on such issues other than those arising out of the application of Rule 96 (10) of the CGST Rules within a period of two weeks from the date of receipt of a certified copy of this judgment. Since these Writ Petitions have been pending before this Court along with interim orders of protection such appeals shall be deemed to have been filed on time provided they are filed within the time permitted; v. In cases where a show cause notice has been issued, on issues other than those arising under Rule 96 (10) of the CGST Rules, the petitioners shall file their replies in response to such notices within a period of two weeks from the date of receipt of a certified copy of this judgment and all issues other than those arising out of the application of Rule 96 (10) of the CGST Rules shall be adjudicated by the proper officer. -------------- Notes: 1. Though Sub-Section (6) of Section 54 does not appear to be relevant for the purposes of this case, that provision is also extracted as reliance was placed on that sub-section also by the learned counsel appearing for the respondents. 2. Sub-section (15) of Section 54 introduced by Finance (No. 2) Act of 2024. - - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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