Gujarat High Court sent case back to reconsider refund request as per CBIC's circular on adjusted total turnover calculation

The Hon'ble Gujarat High Court in the case of Kashi Exports v. Union of India (R/Special Civil Application No. 13480 of 2023 dated December 04, 2024) disposed of the petition where the Assessee was exporting goods under Letter of Undertaking ("LUT") was paid refund of unutilized accumulated Input Tax Credit ("ITC") as per the Rules 89(4)of theCentral Goods and Services Tax Rules, 2017 ("the CGST Rules"),during pendency of petition, clarification issued on manner of calculation of Adjusted Total Turnover consequent to Explanation (c) inserted in Rule 89(4) of the CGST Rules. Hence, the refund application was to be reconsidered.

Facts:

M/s Kashi Exports ("the Petitioner') was a proprietorship firm engaged in the business of export of fresh fruits and vegetables and duly registered under the provisions of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). The Petitioner was not having any domestic sales. The Petitioner generally exported the goods without payment of GST underLUT as per the provisions of Section 16(3)(a) of the Integrated Goods and Services Tax Act, 2017 ("the IGST Act").

The Petitioner made zero rated supply of the goods and was entitled to get the transaction value of unutilised accumulated ITC as per the provisions of Section 54(3) of the CGST Act read with Rule 89(4) of theCGST Rules.

In order to export the goods, an exporter ordinarily issued various documents including shipping bill and export invoice wherein, the details of the goods i.e. description and quantity, value, quality, etc. are stated, the price of the goods charged by the exporter and also the Fee on Board ("FOB") value or Cost Insurance Freight ("CIF") value as the case may be are also declared.

For the period July, 2017 till September, 2021, the Petitioner was granted transaction value under Rule 89(4) of the CGST Rules before the explanation was inserted amounting to Rs.22,55,96,206.85/- considering the price actually received by the Petitioner from the foreign customers. However, the FOB value of such goods shown in the shipping bills was Rs.12,34,04,096/- which is 56% of the actual transaction value.

The Petitioner accordingly filed a refund claim of Rs. 56,14,652/- and the refund was paid amounting to Rs. 35,31,021.90/- and rejected the claim of Rs. 20,20,803.80/- considering the Notification No.14/2022 dated July 5, 2022("the Notification"), more particularly, Explanation (c) inserted in Rule 89(4) of the CGST Rules.

Hence, aggrieved by the circumstances, the Petitioner filed the present petition.

Issue:

Whether the Court send case back to reconsider refund request as per CBIC's circular on adjusted total turnover calculation?

Held:

The Hon'ble Gujarat High Court in R/Special Civil Application No. 13480 of 2023 held as under:

• Observed that, during the pendency of the petition, the Central Board of Indirect Taxes and Customs ("CBIC") by Circular No.197/09/2023-GST dated July 17, 2023("the Circular") issued Clarification on Manner of calculation of Adjusted Total Turnover under Rule 89(4) of the CGST Rules consequent to the Explanation inserted in Rule 89(4) of the CGST Rules vide the Notification.
• Held that, in view of above the Clarification, the Petitioner is now entitled to the refund which was rejected by the Authorities. As per the Clarification, the value of the zero rated supply of goods is required to be calculated as per the amended definition of "Turnover of zero-rated supply of goods" by taking into consideration the turnover in the State or Union territory and accordingly, adjusted total turnover for the purpose of Rule 89(4) of the CGST Rules. In view of such Clarification, numerator and denominator would be the same and the Petitioner would be entitled to get the entire refund of Rs.56,14,652/- instead of Rs.35,31,021.90/- as sanctioned by the Respondent. Hence, the matter was remanded back to reconsider the refund application made by the Petitioner so as to grant the refund by applying the Circular.

Our Comments:

Chapter X of the CGST Rules governs 'Refund'. Section 89 of the of CGST Rules governs 'Application for refund of tax, interest, penalty, fees or any other amount'. Rule 89(4) of the of CGST Rules states that in the case of zero-rated supply of goods or services or both without payment of tax under bond or LUT in accordance with the provisions of section 16(3) of the IGST Act, refund of ITC 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."

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED