Assistant Commissioner of Customs Vs Modern India Products (Madras High Court)
The Hon’ble Madras High Court of Madurai Bench in the case of M/s Modern India Products v. The Assistant Commissioner of Customs House IGST Section & Ors. [Writ Appeal (MD) No. 1559 of 2021 dated February 21, 2025], allowed refund claim by the assessee of the Integrated Goods and Services Tax (“the IGST”) refund for exports that would qualify as zero -rated supply. While Circular No. 37/2018-Customs dated October 09, 2018 (“the Circular”) relied upon by Standing Counsel to state that if duty drawback is claimed, refund of IGST amount cannot be sought. The Court relied on the Hon’ble Gujarat High Court case wherein it was held that the Circular cannot prevail over Rule 96 of the CGST Rules.
Facts:
M/s Modern India Products (“the Petitioner”) is an exporter of goods known as “absorbent gauze roll”. The export was made on September 26, 2017. The goods were valued at Rs.12,72,827/- and the Petitioner paid a sum of Rs.2,54,449/- towards IGST.
The Petitioner contends that the exports would come under zero rated supply and they are entitled to refund of the IGST amount in terms of Sections 16 and 54 of the IGST Act read with Rule 96 of CGST Rules.
When the Petitioner applied for refund, it was not acted upon. Hence the Petitioner filed W.P. (MD) No.9796 of 2020. The writ petition was allowed by the learned single bench on April 17, 2021.Hence, aggrieved by the circumstances, the present intra-court appeal has been filed by the Petitioner.
Issue:
Whether refund of IGST can be sought if duty drawback is claimed?
Held:
The Hon’ble Madras High Court of Madurai Bench in Writ Application (MD) No. 1559 of 2021 held as under:
- Noted that, the Circular states that if duty drawback is claimed, refund of IGST amount cannot be sought.
- Relied on, M/s. Amit Cotton Industries v. Principal Commissioner of Customs [R/Special Civil Application No. 20126 of 2018 dated June 27, 2018] wherein the Division Bench of the Hon’ble High Court held that the Circular cannot prevail over Rule 96 of the CGST Rules. The Hon’ble Division Bench observed that the circular will not save the situation for the Department. This decision was followed by the Madras High Court in the decision reported in M/s. Precot Meridian Limited v. The Commissioner of Customs, The Assistant Commissioner of Customs[W.P. (MD) No. 20504 of 2019 dated November 19, 2019].
- Held that, several other High Courts have taken the very same view. Since the single Judge bench granted relief to the Petitioner only by following the existing legal position, interference with the said order is not warranted.
Our Comments:
Duty Drawback scheme was introduced by the Ministry of Finance as a rebate for duty chargeable on any imported materials or excisable materials used in manufacture or processing of goods, manufactured in India and exported. The exported products are revenue natural. The Central Government is empowered to grant Duty Drawback under section 74 and 75 of the Customs Act, 1962 (“the Customs Act”). Section 74 of the Customs Act discusses about drawback allowable on re-export of duty-paid goods, wherein duty drawback to the extent of 98% of the duty paid on imported goods can be claimed for re-export, provided the goods are re-exported within two years of payment of import duty. Further, Section 75 of the Customs Act discusses about drawback on imported materials used in the manufacture of goods which are exported, it empowers duty drawback on export of manufactured articles.
The Duty Drawback are of three types:
- All Industry Rates
- Brand Rates
- Special Brand Rates
No amendments have been made to the drawback provisions under the Customs Act in the GST regime.
In the Pari Materia case of Intec Export India Pvt. Ltd. v. Union of India [W.P. (C) 9065/2023 dated October 30, 2023], the Hon’ble Delhi High Court directed the Revenue to refund IGST despite higher duty drawback selection where column A and B provided identical rates.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Heard both sides.
2. The writ petitioner is an exporter of goods known as “absorbent gauze roll”. The export was made on 26.09.2017. The goods were valued at Rs.12,72,827/- and the writ petitioner paid a sum of Rs.2,54,449/- towards Integrated Goods and Service Tax (IGST). The case of the writ petitioner is that the exports would come under what is known as zero rated supply and they are entitled to refund of the said IGST amount in terms of Sections 16 and 54 of the IGST Act read with Rule 96 of CGST Rules. When the petitioner applied for refund, it was not acted upon. Hence the petitioner filed W.P(MD)No.9796 of 2020. The writ petition was allowed by the learned single Judge on 17.04.2021. Questioning the same, this intra-Court appeal has been filed.
3. The learned Standing Counsel relied on Circular No.37 / 2018 – Customs dated 09.10.2018 which states that if duty drawback is claimed, refund of IGST amount cannot be sought. Paragraph Nos.2.4, 2.5 and 3 of the said circular read as follows:
“2.4 The declarations required in terms of above Notes and Conditions and provisions of the Drawback Rules are made electronically in the ED! System. When composite drawback rate was claimed (by declaring suffix A or C with Drawback serial number), exporter was required to tick DBK002 and DBK003 declarations in the shipping bills. In fact, for period 1.7.2017 to 26.7.2017, a manual declaration was also required to be given as the changes made on 26.7.2017 were made applicable for exports made from 1.7.2017 onwards.
2.5 By declaring drawback serial number suffixed with A or C and by making above stated declarations, the exporters consciously relinquished their IGSTIITC claims.
3. It has been noted that exporters had availed the option to take drawback at higher rate in place of IGST refund out of their own volition. Considering the fact that exporters have made aforesaid declaration while claiming the higher rate of drawback, it has been decided that it would not be justified allowing exporters to avail lOST refund after initially claiming the benefit of higher drawback. There is no justification for re-opening the issue at this stage.”
The Hon’ble Division Bench of Gujarat High Court in the decision reported in 2019 (7) TMI 472 (M/s. Amit Cotton Industries Through Partner, Veljibhai Virjibhai Ranipa Vs Principal Commissioner of Customs) had categorically held that the aforesaid circular cannot prevail over Rule 96. The Hon’ble Division Bench observed that the circular will not save the situation for the Department. This decision was followed by the Madras High Court in the decision reported in 2020 (1) TMI 90 (M/s. Precot Meridian Limited Vs The Commissioner of Customs, The Assistant Commissioner of Customs). We are also informed that several other High Courts have also taken the very same view. Since the learned single Judge granted relief to the writ petitioner only by following the existing legal position, interference with the said order is not warranted.
4. This Writ Appeal stands dismissed. No costs. Consequently, connected miscellaneous petition is closed.
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