ATC Tires Private Limited Vs Joint Commissioner of GST & Central Excise (Appeals) (Madras High Court)
The purpose of granting refund on zero rated supply is to ensure that the exports are competitive in the international market and such transactions are not burdened with taxes.
The export by the petitioner from its SEZ unit in Tirunelveli is a zero rated supply within a meaning of Section 2 (23) of the IGST Act, 2017 r/w Section 16of the IGST Act, 2017. Once, it is concluded that it was a zero rated supply, refund in terms of Section 16 (3)(a) of the IGST Act, 2017 cannot be denied. Sub Section (3) and (10) of Section 54 of the Central Goods and Services Tax Act, 2017 complement Section 16 of the IGST, 2017.
Section 54 of the Central Goods and Services Tax Act, 2017 allows the refund of tax and includes refund in case of zero rated supply made without payment of tax. Proviso to Section 54 (3) of the Central Goods and Services Tax Act, 2017 allows refund of unutilized input tax credit of zero-rated supplies made without payment of tax.
No refund of input tax credit is allowed only if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies. This is admittedly not the case here.
The petitioners export specifically falls under such category in proviso to Section 54(2) of the Act. Proviso to Rule 89(1) is only an exception to Rule 89 (1) of the Central Goods and Service Tax Rules, 2017. There is no bar under Rule 89 (1) of the Central Goods and Service Tax Rules, 2017 for refund of unutilized input tax credit.
As mentioned above, a very purpose of granting this refund is only to give incentive for exports and to reduce the burden of tax to make the exports more competitive in the international markets.
Rule is not intended to deny the legitimate benefit available to an exported effecting zero rated supplies. In this connection, reference is made to the decision of the Hon’ble Supreme Court in Unichem Laboratory Vs Collector of Central Excise, Bombay reported in 2002 (145) ELT 502 (SC), wherein the Hon’ble Supreme Court held as follows:-
12. For the aforementioned reasons, we are of the view that denial of benefit of the notification to the appellant was unfair. There can be no doubt that the authorities functioning under the Act must, as are in duty bound, protect the interest of the Revenue by levying and collecting the duty in accordance with law — no less and also no more. It is no part of their duty to deprive an assessee of the benefit available to him in law with a view to augment the quantum of duty for the benefit of the Revenue. They must act reasonably and fairly.
The impugned order proceeds on the assumption that application for refund in respect of supplies to a Special Economic Zone or a Special Economic Zone Developer, can be filed only by a supplier of the goods or services in terms of second proviso to Rule 89 (1) of Central Goods and Service Tax Rules, 2017.
Therefore, there is no merit in the impugned order passed by the respondent denying the benefit of refund of unutilized input tax credit of zero rated supplies effected by the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner herein has challenged the impugned Order-in-Appeal No.151/2021-JC [GSTA] dated 07.10.2021 passed by the first respondent Joint Commissioner of GST and Central Excise [Appeals].
2. By the impugned order, the Joint Commissioner of GST and Central Excise [Appeals], has dismissed the appeal filed by the petitioner against order in Refund Order No.16/2021-2022, dated 16.08.2021, passed by the second respondent herein.
3. The brief facts of the case are that the petitioner has two manufacturing units in India. One of the units of the petitioner is the Special Economic Zone Unit (SEZ), at Gangaikondan Village,
Tirunelveli District in respect of which we are concerned in the present writ petition and the other an Export Oriented Unit [EOU], at Dahej in the State of Gujarat.
4. The petitioner’s SEZ Unit is engaged in the manufacture of Tyres, Flaps, and Tubes at Gangaikondan Village, Tirunelveli District. It is submitted that in addition to physical export of goods, the SEZ Unit of the petitioner also made few domestic supplies in the Domestic Tariff Area [DTA].
5. It is the case of the petitioner that the exports made from its SEZ unit amounts to ‘Zero-rated supply’ within the meaning of Section 2(23) of the Integrated Goods and Services Tax Act, 2017 [hereinafter referred to as “IGST Act”] and therefore the petitioner was entitled for refund of tax paid on input and input services under Section 16(3)(i) of the IGST Act.
6. It is submitted that certain categories of common services were purchased at the petitioner’s Head Office in Mumbai and distributed the proportionate credit as an input service distributed by its head office as an input service distributor within the meaning of Section 2(61) of the Central Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act] to petitioner SEZ unit. This credit was claimed as refund by the petitioner under Section 16(3)(i) of the IGST Act.
7. It is submitted that petitioner’s Head Office in Mumbai has distributed proportionate input tax on the services, which were commonly used for the petitioner’s Head Office, petitioner’s SEZ unit and the EOU unit.
8. The learned counsel for the petitioner submits for the exports made by the petitioner from its SEZ Unit in Gangaikondan, Tirunelveli District, the Petitioner filed refund claims of accumulated input tax credit which was transferred/distributed by the petitioner’s Head Office as Input Service Distributor.
9. Under these circumstances, the petitioner filed six different refund claims under Section 54(3) of the CGST Act read with Rule 89 of the Central General Services Tax Rules 2017 [hereinafter referred to as “the CGST Rules”], as detailed below:-
