1. It is ruled by Hon’ble HIGH COURT OF MADRAS in case of Precot Meridian Ltd that the department cannot refuse the refund of IGST for goods exported from India by relying on a circular which are issued only to clarify statutory provision and it cannot alter or prevail over statutory provision.
2. Statutory Provisions: – Section 16(3) of the IGST Act 2017 prescribes that a registered person making zero rated supply shall be eligible to claim a refund under either of the following options, namely:-
(a) He may supply 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 claim a refund of the unutilized input tax credit; or
(b) He may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim a refund of such tax paid on goods or services or both supplied.
3. Brief Facts of the Case:- The petitioner is an exporter of cotton. During September 2017, he exported cotton by way of seven shipping bills and paid Rs. 4,80,355/- towards IGST.
He has wrongly availed the higher duty drawback to the tune of Rs. 75,454/- on 2-3-2018. Thereafter, he rectified the mistake by repaying it along with interest to the tune of Rs. 81,891/- and sought a refund of IGST paid by him.
4. The authorities rejected his claim relying on the circular No. 37/2018-Customs, dated 9-10-2018. As per the said circular, if the benefit of the drawback claimed then no refund of IGST paid on the export product shall be claimed.
5. The contention of the Respondent:- The respondent contented following points while denying the refund claimed:-
(a) A person, who has made request consciously for a refund of duty drawback, is not entitled to IGST/ITC claims and treated that exporter has consciously relinquished the same.
(b) The petitioner has wrongly claimed higher duty drawback and thereafter, on his own volition, but, without any sanction from the department, has paid it back. Having relinquished his right to get a refund of IGST, he is not entitled to refund.
(c) The entire refund is system-managed and it cannot be manually operated. Once the exporter draws a higher duty drawback, the system automatically scrolls out IGST refund. Therefore, the petitioner is not entitled to refund.
4. Aggrieved by the decision of the respondent a Writ Petition has been filed seeking for a Writ of Mandamus, directing the second respondent to sanction and to refund the amount of Rs. 4,80,355 of IGST paid by the petitioner for the goods exported from India, i.e. ‘Zero Rated Supplies’ (A writ of mandamusis a court order compelling someone to execute a duty that they are legally obligated to complete)
5. Findings & Discussions
(a) It is not in dispute that the petitioner exported cotton through seven shipping bills and paid a sum of Rs. 4,80,355/- towards IGST
(b) It is also not in dispute that the statute provides for refund of IGST on the export of materials
(c) The petitioner has complied with the requirements of Sub-Clauses (a) and (b) of Sub-Rule (1) of Rule 96 of CGST Rules, 2017 The only condition is that if the export is made after payment of tax, he is entitled to get refund Accordingly, he is entitled to a refund and it cannot be ignored by citing the circular.
7. Ruling: It is held by the Hon’ble Madras High Court that circulars cannot prevail over the statute. Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision.
The clarifications/circulars issued by the Central Government and of the State Government represent merely their understanding of the statutory provisions. A circular which is contrary to the statutory provisions has really no existence in law.”
In that circumstance, it is clear that the explanation of provisions of drawback has nothing to do with the IGST refund
When the above circular was dealt with by the Hon’ble Division Bench of Gujarat High Court at Ahmedabad in M/s. Amit Cotton Industries Through Partner, Veljibhai Virjibhai Ranipa v. Principal Commissioner of Customs, in R/Special Civil Application No. 20126 of 2018, dated 27-6-2019, the Division Bench has held that it has nothing to do with the IGST refund and it is incumbent on the respondents to refund the IGST as claimed by the petitioner therein. The respondents have already passed a circular when they were facing a lot of problems because of the fact that the refunds are completely system-managed and they have taken a conscious decision to refund the amount vide Circular No. 40/2018-Customs, dated 24-10-2018
In view of the above discussion, the respondents are directed to refund the amount of Rs. 4,80,355/- [Rupees Four Lakhs and Eighty Thousand and Three Hundred and Fifty Five only] of IGST paid by the petitioner for the goods exported from India which are zero-rated supplies, within a period of six weeks from the date of receipt of a copy of this order.
The author can be approached at caanitabhadra@gmail.com
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