Refund of IGST allowed on exported goods after deduction of drawback duty

Kishan Lal Kuria Mal International Vs Union of India (Delhi High Court)

The Hon’ble Delhi High Court in M/S Kishan Lal Kuria Mal v. Union of India & ors. [W.P. (C) 10822/2022 dated October 06, 2022] allowed the present writ petition and directed the assessing authority to grant refund of Integrated Goods and Services Tax (“IGST”) paid on the goods exported by the assessee during the transitional period (July- September, 2017), after deducting the differential amount of duty drawback, if the said differential amount has not already been returned by the assessee. Also, the Court directed the assessing authority to complete the refund process within twelve weeks along with appropriate interest at the rate of 7% per annum on such refund from the date of the shipping bill till the date of actual refund.

Facts:

M/S Kishan Lal Kuria Mal (“the Petitioner”) filed the present writ petition contending that Circular No. 37/2018 (customs) dated October 09, 2018, is ultra vires Section 16 of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) read with Section 54 of Central Goods and Services Tax Act, 2017 (“the CGST Act”) as well as Rule 96 of Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) and violative of Articles 14, 19 and 21 of the Constitution of India.

Further, the Petitioner also contended to issue direction to the assessing authority (“the Respondent”) to grant refund of IGST paid on goods exported by the Petitioners during the Transitional Period (July- September, 2017) after deducting the differential amount of duty drawback, along with appropriate interest on such refund from the date of the shipping bill till the date of actual refund.

Furthermore, the Petitioner was of the view that even though drawback rates prescribed in respect of goods exported by the Petitioners were higher in column A (1%) than the rates prescribed in column B (0.15%), yet the rate at which IGST (18%) was paid on the goods exported was even much higher than the said rate in column A. Petitioners did not have any benefit in claiming drawback under Column A at the cost of forgoing their IGST refund and the drawback was claimed under Column A because of the confusion and lack of technical knowledge prevalent during the transitional phase about working of the new indirect tax laws.

Issue:

Whether or not refund of IGST on exported goods will be allowed in the present petition after deduction of the drawback duty?

Held:

The Hon’ble Delhi High Court in W.P. (C) 10822/2022 dated October 06, 2022 held as under:

• Held that the present cases are pari materia to the case in M/s Amit Cotton Industries v. Principal Commissioner of Customs, [2019 (29) G.S.T.L.200 (Guj.)], therefore, allowed the present writ petition and directed the Respondent to grant refund of IGST paid on the goods exported by the Petitioners during the transitional period, after deducting the differential amount of duty drawback, if the said differential amount has not already been returned by the petitioner, within twelve weeks along with appropriate interest at the rate of 7% p.a. on such refund from the date of the shipping bill till the date of actual refund.
• Stated that the Jurisdictional Commissionerate will be entitled to verify the extent of duty drawback availed by the Petitioners and also to verify whether they have availed duty drawback/CENVAT Credit of Central Excise & Service Tax component in respect of the exports made by them.
• Concluded by allowing the present writ petition and ordered that if any adjustment is to be made, the same shall be done by the Jurisdictional Commissionerate.

Relevant Provisions

Section 54(3) of the CGST Act

“Refund of tax

(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 notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, 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.”

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Present writ petitions have been filed seeking declarations that Paragraph 11(d) read with 12A(a)(ii) of the Notes and Conditions of the Notification dated 31^st October, 2016, [as amended by Notifications dated 29^th June, 2017 and 26^th July, 2017], Circular No. 37/2018 dated 09th October 2018, is ultra vires Section 16 of the IGST Act, 2017 read with Section 54 of CGST Act, 2017 as well as Rule 96 of CGST Rules, 2017 and violative of Articles 14, 19 and 21 of the Constitution of India. Petitioners also seek directions to the Respondents to grant refund of IGST paid on goods exported by the Petitioners during the Transitional Period (July-September, 2017) after deducting the differential amount of duty drawback, along with appropriate interest on such refund from the date of the shipping bill till the date of actual refund.

2. Learned Counsel for the Petitioners states that the cumulative effect of the impugned instruments is to deny refund of IGST paid by exporters like the Petitioners on export of goods, in cases where Drawback was claimed by the exporter at the higher rates under column A of the Drawback Schedule prescribed in the said notification.

3. Learned counsel for the Petitioners states that in the present cases, even though drawback rates prescribed in respect of goods exported by the Petitioners were higher in column A (1%) than the rates prescribed in column B (0.15%), yet the rate at which IGST (18%) was paid on the goods exported was even much higher than the said rate in column A. Therefore, she states that Petitioners did not have any benefit in claiming drawbackunder Column A at the cost of forgoing their IGST refund and the drawback was claimed under Column A because of the confusion and lack of technical knowledge prevalent during the transitional phase about working of the new indirect tax laws.

4. Learned Counsel for the Petitioners submits that the issue raised in the present writ petition is no longer res integra and is squarely covered by the judgment of this Court in Maxam India Private Limited v. Union of India & Ors., W.P. (C) No. 6172 of 2022, wherein refund of IGST paid on goods exported by the Petitioner during the Transitional Period was allowed, which had been withheld by the department on the ground that duty drawback was claimed by the Petitioner at higher rate under column A of the Drawback Schedule instead of claiming drawback at lower rate under column B of the Drawback Schedule.

5. On the last few dates of hearing, learned counsel for the Respondents had taken time to obtain instructions. She, however, states that as no instructions have been received from the Board (‘CBIC’), she has instructions to defend the actions of the Respondents as the same are in accordance with paragraph no. 3 of Circular dated 09^th October, 2018. Learned counsel for the Respondents also submits that the present writ petitions are liable to be dismissed on account of non-joinder of necessary and proper parties as various Jurisdictional Commissionerates dealing with the separate refund claims of the Petitioners have not been impleaded as parties to the writ petitions.

6. A perusal of the paper book reveals that the matter in issue is covered by the judgment of Gujarat High Court in M/s Amit Cotton Industries v. Principal Commissioner of Customs, 2019 (29) G.S.T.L.200 (Guj.). The relevant portion of the said judgment is reproduced hereinbelow:-

“34. We take notice of two things so far as the circular is concerned. Apart from being merely in the form of instructions or guidance to the concerned department, the circular is dated 9th October 2018, whereas the export took place on 27th July 2017. Over and above the same, the circular explains the provisions of the drawback and it has nothing to do with the IGST refund. Thus, the circular will not save the situation for the respondents. We are of the view that Rule 96 of the Rules, 2017, is very clear.

35. In view of the same, the writ-applicant is entitled to claim the refund of the IGST.

36. In the result, this writ-application succeeds and is hereby allowed. The respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. ‘zero-rated supplies’, with 7% simple interest from the date of the shipping bills till the date of actual refund.”

(emphasis supplied)

7. Even a Special Leave Petition filed against the said judgment titled Principal Commissioner of Customs & Ors. v. M/s Amit Cotton Industries, SLP (C) Diary No. 5502/2021 has already been dismissed by the Supreme Court of India on 22^nd March, 2021.

8. Since the facts in the present cases are pari materia to the case in M/s Amit Cotton Industries (supra), the present writ petitions are allowed directing the Respondent authorities to grant refund of IGST paid on the goods exported by the Petitioners during the transitional period, after deducting the differential amount of duty drawback, if the said differential amount has not already been returned by the petitioner, within twelve weeks along with appropriate interest at the rate of 7% p.a. on such refund from the date of the shipping bill till the date of actual refund.

However, the Jurisdictional Commissionerates shall be entitled to verify the extent of duty drawback availed by the Petitioners and also whether they have availed duty drawback/CENVAT Credit of Central Excise & Service Tax component in respect of the exports made by them. If any adjustment is to be made, the same shall be done by the Jurisdictional Commissionerate.

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