Subhajit Leather Works Vs Kamal Puggal (GSTAT Kolkata)
Summary : The Goods and Services Tax Appellate Tribunal (GSTAT), Kolkata Bench, in Subhajit Leather Works Vs Kamal Puggal, Joint Commissioner CGST & CX, set aside an appellate order rejecting a refund claim of ₹9,06,045 relating to zero-rated supplies for FY 2021-22 and remanded the matter to the jurisdictional Proper Officer for fresh examination. The dispute arose because the taxpayer claimed a refund of accumulated input tax credit (ITC) on supplies made to Special Economic Zone (SEZ) units or developers without payment of tax, but the corresponding supplies had not been separately disclosed as SEZ supplies in the statutory GST returns. The Tribunal held that the discrepancies in turnover classification and the conflicting claims regarding supporting documents required factual verification and reconciliation before the refund claim could be decided. It did not grant the refund outright.
The taxpayer had filed Form GST RFD-01 on 28 February 2024, declaring zero-rated turnover of ₹1,40,95,971.65 and net ITC of ₹9,06,045. The Proper Officer rejected the refund because no SEZ supplies were disclosed in GSTR-1 for the relevant period and consequently treated the zero-rated turnover as nil for the purpose of the refund formula under Rule 89(4) of the CGST Rules, 2017. The First Appellate Authority upheld the rejection, observing that the taxpayer’s explanations were inconsistent with the figures reported in GSTR-1, GSTR-3B and GSTR-9.
The First Appellate Authority particularly noted that the taxpayer had initially stated that only one invoice related to SEZ supplies, whereas a subsequent communication dated 17 October 2025 claimed SEZ turnover of ₹1,40,95,971.65 and export sales of ₹1,69,37,571.07. The combined turnover of ₹3,10,33,542.72 had allegedly been incorrectly reported under Table 6A of GSTR-1, relating to exports without payment of tax. The appellate authority also recorded that essential documents prescribed under Rule 89(2), including export invoices, shipping bills, SEZ endorsements, LUT/Bond and reconciliation statements, had not been submitted. It referred to CBIC Circular Nos. 125/44/2019-GST and 37/11/2018-GST regarding documentary substantiation of refund claims.
Before the Tribunal, the taxpayer maintained that the required invoices, SEZ endorsements, Bills of Export and supporting documents were available and had been furnished. The taxpayer also alleged that the authorities had accepted one invoice as an SEZ supply while treating others as exports without adequate reasons. The Department opposed the appeal, contending that the discrepancies were not merely clerical errors but involved substantial misclassification of turnover. According to the Department, consistency in aggregate turnover across GST returns could not establish the nature of individual supplies, which required independent verification of invoices, recipient status, SEZ endorsements and corresponding ITC.
The Tribunal examined Section 16 of the IGST Act, 2017, which recognises exports and supplies for authorised operations to SEZ units or developers as zero-rated supplies, together with the refund mechanism under Section 54 of the CGST Act and Rule 89(4) of the CGST Rules. It emphasised the importance of correct reporting of zero-rated supplies in GSTR-3B and their proper classification in GSTR-1. Table 6A of GSTR-1 covers exports, Table 6B covers SEZ supplies, and Table 6C covers deemed exports. The Tribunal also noted that supplies to SEZs without payment of tax must be separately disclosed in GSTR-9. It observed that the taxpayer had omitted the purported SEZ supplies from the relevant classifications in both GSTR-1 and GSTR-9.
However, the Tribunal found that the controversy involved disputed questions of fact, particularly whether the taxpayer had submitted the necessary documentary evidence and whether the turnover discrepancies could be reconciled. It therefore considered a fresh examination appropriate instead of conclusively determining refund eligibility on the existing record. The Tribunal set aside the First Appellate Authority’s order and directed the taxpayer to submit invoice-wise reconciliations of zero-rated supplies across GSTR-1, GSTR-3B, RFD-01 and GSTR-9, copies of tax invoices and shipping bills, endorsements from the SEZ Specified Officer, and the Letter of Undertaking within four weeks of communication of the order.
The Proper Officer was directed to provide a reasonable opportunity of hearing and pass a reasoned, speaking order under Rule 92 of the CGST Rules within four weeks from the conclusion of the hearing. The officer was also permitted to seek further documents or information relevant to the refund claim. The decision establishes that the taxpayer’s refund entitlement remained subject to documentary verification and reconciliation; the remand was not an approval of the refund claim. No judicial precedents were cited in the Tribunal’s order, although two CBIC circulars were referred to in the reproduced findings of the First Appellate Authority.
FULL TEXT OF THE ORDER OF GSTAT KOLKATA
[1] This appeal has been filed by M/s Subhajit Leather Works (GSTIN 19AARPH1972K1Z4), 196-E/2, Picnic Garden Road, Kasba, Kolkata, West Bengal, 700039 under section 112(1) of CGST Act, 2017, against the Appellate Order passed by Joint Commissioner, CGST and CX Appeal-I Commissionerate confirming the rejection of his refund claim.
[2] FACTS IN BRIEF
[2.1] On 28/02/2024, the appellant filled a refund application in FORM GST RFD 01 claiming refund of Rs. 9,06,045/- for the tax period April 2021 to March 2022 “on account of supplies made to SEZ unit/SEZ Developer (without payment of tax)”. In RFD-01, the turnover of Zero-rated supply of goods and services was declared at Rs. 1,40,95,971.65/- the adjusted total turnover, at Rs. 1,40,95,971 and net ITC at 9,06,045/-.
[2.2] The Proper Officer found that supplies made to SEZ unit/SEZ Developer (without payment of tax) had nowhere been disclosed in GSTR-1 filed for the period of claim. So, while calculating the refund amount as per the formula in rule 89(4) of CGST rules, the zero-rated turnover of goods had to be treated as nil. Therefore, no refund was admissible to the tax payer.
[2.3] The taxpayer filed appeal against the rejection of his refund application. However, the First Appellate Authority rejected the appeal.
[2.4] The First Appellate Authority noted his order:
(i) From the above discussions I find that the appellant’s submissions suffer from significant contradictions which undermine the credibility of the refund claim. While during the Personal Hearing the appellant stated that only one invoice pertained to SEZ supply in FY 2021-22 and the rest were exports under LUT, their letter dated 17.10.2025 claims SEZ supplies amounting to 1,40,95,971.65/-, indicating a substantial volume far beyond a single invoice. Further, although the appellant now asserts that SEZ supplies were wrongly reported due to a columner error, the statutory returns-GSTR-1, GSTR-3B, and GSTR-9—contain no reporting whatsoever of SEZ supplies. Instead in Table 5A of GSTR-9 the turnover of around Rs.3,04,50,908/- was reported as exports without payment of tax and in Table 4C of the same return, the turnover of Rs.5,82,634/- was reported as export with payment of tax whereas in summary of GSTR-1 of the relevant period, value of export shown as Rs.31033542/- in Table 6A. Additionally, the turnover declared in the refund application (RFD-01) does not match any figure in the statutory returns, creating further inconsistency. These conflicting statements and misaligned declarations demonstrate that the appellant has failed to present a coherent, consistent, and reliable account of the alleged SEZ supplies, thereby weakening the basis of the refund claim.” (para 5.8)
(ii) The appellant mentioned in their letter dated 17.10.2025 that their SEZ Supplies, amounting to 1,40,95,971.65/-, and Export Sales, amounting to 1,69,37,571.07/-, were erroneously reported. The cumulative turnover of Rs. 3,10,33,542.72/ was incorrectly submitted under Column/Table 6A (Export Without Payment of Taxes) but, the appellant did not submit any of the mandatory documents prescribed under Rule 89(2) of the CGST Rules, 2017, including copies of export invoices, shipping bills, EGM details, SEZ endorsement, LUT/Bond, and reconciliation statements. Further, as clarified in Circular No. 125/44/2019-GST dated 18.11.2019 and Circular No. 37/11/2018-GST dated 15.03.2018, documentary evidence is essential to establish the nature of supplies as “exports” or “SEZ supplies without payment of tax.” In absence of these documents, the appellant’s claim cannot be substantiated.” (para 5.9)
On the above grounds, the First Appellate Authority upheld the order rejecting refund.
[3] GROUNDS OF APPEAL IN THE TRIBUNAL AND THE CROSS OBJECTION:-
[3.1] The tax payer has urged this Tribunal to set aside the impugned appellate order and declare him entitled to the refund of ITC amounting to Rs. 9,06,045.00/-.
[3.2] In the cross objection, the Department submitted that “these are not merely clerical errors but substantially misclassified turnover amounting to Rs. 3,10,33,542.72, failing to report supplies to SEZS in their statutory returns namely GSTR-1 and GSTR-9 and have sought refund for this misreported turnover. The appellant relies heavily upon the fact that the aggregate turnover appearing in GSTR-1, GSTR-3B and GSTR-9 is substantially consistent. The Department respectfully submits that consistency of aggregate turnover does not by itself establish the character of each individual supply. Therefore, reconciliation of aggregate turnover cannot substitute verification of the individual invoices, recipient status, nature of supply, endorsement by the Specified Officer, export/SEZ documentation and corresponding ITC” (reply to Para V to VII)
[4] ANALYSIS AND DECISION
(4.1) We have heard the Revenue and the Counsel for the taxpayer and perused the records.
(4.2) Before dealing with the claims, an examination of the related statutory provisions is in order.
[5] Zero-rated supply has been defined in Section 16 of IGST Act, 2017 which reads as under:
“16.1 zero rated supply” means any of the following supplies of goods or services or both, namely:-
(a) Export of goods or services or both; or
(b) Supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit. (emphasis added)”
(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:
………………”
[6] The formula of quantification of refund of accumulated ITC in case of zero-rated supply of goods or services or both is laid down in rule 89(4) of the CGST rules, 2017 which reads as under:
“ refund of input tax credit shall be granted as per the following formula:
Refund Amount= (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷ Adjusted Total Turnover
Where
(A) “Refund amount” means the maximum refund that is admissible;
(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;
(C) “Turnover of zero-rated supply of goods means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less
(D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely: –
Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period;
(E) “Adjusted Total Turnover” means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services, and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services, excluding the value of exempt supplies other than zero-rated supplies during the relevant period
(F) “Relevant period” means the period for which the claim has been filed.
[Explanation: For the purposes of this sub-rule, the value of goods exported out of India shall be taken as-
(i) The Free on Board (FOB) value declared in the Shipping Bill or Bill of Export form, as the case may be, as per the Shipping Bill and Bill of Export (Forms) Regulations, 2017; or
(ii) The value declared in tax invoice or bill of supply, whichever is less”]
The formula contained in rule 89(4) of the CGST Rules, 2017 makes it abundantly clear that a taxpayer needs to correctly report ‘zero rated supply’ in the return in GSTR 3B and also provide a correct break up in the statement of outward supply in GSTR-1.
[7] In this context, we may also note the required details of outward supplies which a taxpayer has to disclose in statutory monthly statement of outward supply in FORM GSTR-1. Table 6 of GSTR-1 provides details of zero-rated supplies and deemed exports. 6A is for exports, 6B is for suppliers made SEZ unit or SEZ developer and 6C is for Deemed Exports. GSTR-9 is an annual return and a taxpayer is required to disclose in Serial No. 5(B), the details of supply to SEZs without payment of tax. The appellant has shown gross negligence in omitting the purported SEZ supplies not only from GSTR-1 but also from GSTR-9.
[8] The present case involves disputed questions of fact. The taxpayer argues that he is in possession of all tax invoices in respect of his supply to SEZ and other export related documents. “It is further submitted that the Appellant had duly furnished invoices, SEZ endorsements, Bills of Export, and supporting documents evidencing supplies to SEZ units. Despite this, the Respondent arbitrarily accepted one invoice as SEZ supply while treating others as exports without assigning any cogent reasons, rendering the impugned order non-speaking and violating the principles of natural justice.” (Source: Synopsis of Grounds of Appeal)
[9] On the contrary, the First Appellate Authority has recorded in para 5.9 of his order that “the appellant did not submit any of the mandatory documents prescribed under Rule 89(2) of the CGST Rules, 2017, including copies of export invoices, shipping bills, EGM details, SEZ endorsement, LUT/Bond, and reconciliation statements.”
Moreover, the present case requires reconciliation of the discrepancies in the turnover of supply to SEZ.
[10] Therefore, we are of the considered view that the ends of justice shall be met if the impugned appellate order is set aside and the case is remanded to the jurisdictional Proper Officer for re-examination of the refund claim of the taxpayer. Accordingly we set aside the impugned order passed by the First Appellate Authority and remand back the matter to the Proper Officer with the following directions:-
The taxpayer shall submit, inter alia, the following material documents/ reconciliations, within 4 weeks from the date of communication of this order, prepare a list thereof and obtain receipt from the office of the proper officer.
(i) Invoice-wise reconciliation of different categories of zero-rated supply as per GSTR-1, GSTR-3B, RFD-01 and GSTR -9.
(ii) Copies of all tax invoices, shipping bills in respect of export and supply of goods to SEZ
(iii) Endorsements by the Specified officer as required under the first proviso to rule 89 of CGST Rules, 2017.
After giving the taxpayer reasonable opportunity of being heard, the Proper Officer shall pass a speaking order in accordance with Rule 92 of CGST Rules, 2017, within four weeks from the date of conclusion of the hearing. It is made clear that the Proper Officer shall be at liberty to call for any other material document or information having a bearing on the claim of refund.
Communicate copies of this order to the appellate and the respondents immediately.
