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

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, 2022held 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."