Allowed refund of IGST along with interest on export made during July -September, 2017 period

The Hon'ble Delhi High Court in TMA International Pvt. Ltd. &Ors. v. Union of India &Anr. [W.P.(C) 2694/2019 & CM No. 26556/2020, dated March 26, 2021] directed to Revenue Authorities to grant refund claim of Integrated Goods and Services Tax ('IGST') to the assessee by April 26, 2021 along with interest @7% for delayed remittance of refund on account of IGST.

Facts

The collective grievance of the TMA International Pvt. Ltd., M/s Inter Trade and others ('the Petitioners') for filing the present petition is the denial ofIGST refund by the Revenue Authorities ('the Respondent') in accordance with Section 16(3) of the Integrated Goods and Services Tax Act, 2017 ('IGST Act'), paid by the Petitioners on goods exported during the transitional period after introduction of GST Regime i.e., from July 1, 2017 to September 30, 2017, on the ground that the Petitioners had availed the option to take drawback at higher rate in place of IGST refund.

The Petitioners contended that the drawback schedule prescribed identical tariff rates under Column A as well as Column B of the Duty Drawback Schedule annexed to Notification No. 131/2016- Customs dated October 31, 2016, in respect of the goods exported. Further, there were no guidelines from the GST or Customs department in respect of procedure to be followed in such cases. Therefore, the Petitioners inadvertently claimed drawback under Column A ibid, as a mere technical glitch, due to confusion prevailing during the transitional phase.

On November 26, 2019, a detailed order was passed by the Hon'ble Delhi High Court, wherein it agreed with the contention of the Petitioners and observed that such an error is purely inadvertent and not intentional and therefore, should not come in the way of claiming refund of IGST. Accordingly, directed the Respondent to verify as to whether duty drawback/CENVAT credit had been availed by the Petitioners, with regard to Central Excise and Service Tax component.

The Respondent filed an affidavit on March 24, 2021, stating as under:

• The Petitioners have availed duty drawback.
• None of the Petitioners have availed the Cenvat Credit of Central Excise.
• Out of all the Petitioners, only M/s Inter Trade, have availed the Cenvat Credit of Service Tax amounting to ₹ 1856/- during the Financial Year 2015-2016

Issues

Whether the Petitioners should be granted refund of IGST along with the interest on account of delayed remittance of refund.

Held

The Hon'ble Delhi High Court in W.P.(C) 2694/2019 & CM No. 26556/2020, dated March 26, 2021 held as under:

• Noted that, none of the Petitioners have availed of CENVAT credit qua central excise and have availed of CENVAT credit qua service tax component except M/s Inter Trade who have availed CENVAT credit qua service tax component of ₹ 1856/- pertaining to the Financial Year 2015-2016.
• Further noted that, in order to receive the refund of IGST, M/s Inter Trade will give up the 'input tax credit' to the extent of ₹ 1856/- pertaining to the Financial Year 2015-2016.
• Relied on the judgment passed by the Hon'ble Gujarat High Court on the similar facts, in M/s Amit Cotton Industries v. Principal Commissioner of Customs [R/Special Civil Application No. 20126 of 2018, dated June 27, 2019] wherein the department had rejected the refund of IGST paid in regard to the goods exported on the ground despite the reversal of excess duty drawback, there is no option available in the system to consider the claim and therefore, the Petitioner is not entitled to the refund of IGST. However, the Court rejected the department's contention and directed the department to immediately sanction the refund of the IGST paid in regard to the goods exported as the assesee had reversed the difference between higher duty drawback and lower duty drawback. Further, held that Circular No.37/2018- Customs dated October 9, 2018 has no legal force as it runs contrary to Rule 96 of the Central Goods and Services Tax Rules, 2017 ('CGST Rules'). Furthermore, granted simple interest @ 7% from the date of shipping bills till the date of actual refund.
• Agreed with the principle set forth in M/s Amit Cotton Industries ( supra ) and held that the Petitioners will be granted refund along with the interest at the rate of 7% simple, from the date when the shipping bills were filed by them, till the date of actual refund.
• Disposed of the writ petition and directed the Respondent to refund IGST to the Petitioners by April 26, 2021 along with interest.

Relevant Provisions

Section 16(3) of the IGST Act

'Zero rated 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:

Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999.) for receipt of foreign exchange remittances, in such manner as may be prescribed.'

Section 56 of the Central Goods and Services Tax Act, 2017

'Interest on delayed refunds.

56. If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under subsection (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax:

Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

Explanation.- For the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).'