Facts of the case:

In this case, the petitioner challenged proceedings whereby the customs authorities rejected its claim for refund of Integrated Goods and Services Tax (IGST) paid on export of goods. The refund was denied solely on the ground that the petitioner had claimed the higher rate of duty drawback by suffixing “A” to the drawback scheme code in the shipping bills. The department relied upon CBIC Circular No. 37/2018 dated 09.10.2018, which directed that exporters claiming higher duty drawback would not be eligible for IGST refund, and the computerized refund module would automatically block such claims.

The petitioner contended that the said Circular had already been declared invalid by the Gujarat High Court in Amit Cotton Industries and that the same view had been consistently followed by the Madras High Court, including by a Division Bench in Precot Meridian Limited. Therefore, the rejection of the refund solely on the basis of the Circular was contrary to law.

Issue:

Whether an exporter’s claim for IGST refund can be rejected merely because the exporter claimed the higher rate of duty drawback by relying upon CBIC Circular No. 37/2018 dated 09.10.2018.

Held That:

The Madras High Court held that the impugned order rejecting the petitioner’s IGST refund claim was unsustainable since it was founded entirely on CBIC Circular No. 37/2018, which had already been declared invalid by the Gujarat High Court in Amit Cotton Industries.

The Court noted that the Gujarat High Court had struck down the Circular on the ground that it was inconsistent with the statutory provisions governing IGST refunds and the applicable Rules framed under the GST and Customs laws. The Court further observed that the same legal position had already been accepted and followed by the Madras High Court, including in its earlier single bench decision as well as by the Division Bench in Precot Meridian Limited.

Following the settled legal position, the Court held that the department could not deny IGST refund merely because the exporter had claimed the higher rate of duty drawback or because the automated processing system did not permit such refund based on the Circular. Administrative circulars and system-based validations cannot override the statutory entitlement available under the law.

Accordingly, the Court set aside the impugned proceedings dated 09.09.2022 and directed the third respondent to reconsider the petitioner’s IGST refund claim afresh in accordance with the statutory provisions, applicable Rules, and the judicial precedents governing the issue. The authority was directed to provide the petitioner with a reasonable opportunity of hearing and complete the exercise within four weeks from the date of receipt of the Court’s order.

Case Name:  M/s. Fives Call – KCP Ltd., “Ramakrishna Buildings” Versus The Chief Commissioner of Customs, The Commissioner of Customs (Export Commissionerate, Chennai-IV), The Deputy Commissioner of Customs (Chennai-IV), The Assistant Commissioner, (Chennai-IV), The GST Officer, Chennai dated 29.06.2026

To read the complete judgement 2026 Taxo.online 1841