Refund of IGST on Zero rated supply allowed when mistake committed was later on rectified

Facts: –

• The petitioner is a manufacturer and exporter of electrical connectors falling under Chapter 85 of the Central Excise Tariff and its factory is located at Dudhola, Palwal, Haryana.
• That in the present petition the Petitioner is claiming refund of IGST paid on two shipping bills bearing nos. 7837037, dated 05.08.2017 and 8697421, dated 16.09.2017.
• It is not in dispute that the petitioner had paid IGST i.e. local tax @28% of the export value. The refund amount for Shipping bill no. 7837037 is Rs. 8,00,621/- and for shipping bill no. 8697421 is Rs. 8,25,349/- and the refunds have been filed under Section 16 of the IGST Act, 2017 read with Rule 96 of the CGST rules, 2017.
• However, by mistake the petitioner had claimed duty drawback by referring to the code no. 853699“A” instead of 853699“B” and was granted duty drawback @ 2% of FOB value of exports amounting to Rs. 1,17,162/- and not the IGST paid on export of goods.
• That on realising the mistake, the petitioner made corrections as permitted by the respondents, with prescribed procedure on 25.10.2018 and ultimately the correct code was allowed to entered.
• Further despite the correction were permitted by the respondents, the refund of IGST was not granted. The Petitioner has been following up with the department for last 2 years but there was no movement in the matter.  Thus, the present writ petition has been filed by the petitioner.

It was submitted on the behalf of the petitioner that the issue involved is covered by the decisions in Amit Cotton Industries v. Principal Commissioner of Customs, 2020 SCC OnLine Guj 2717 and in M/s Shyam Textile Through Proprietor Rakesh Ram Swaroop vs. Principal Commissioner of Customs passed in SCA 13448/2020.

On the other hand, reliance was placed on paragraph 3 of CBIC Circular dated 09.10.2018 on behalf of the respondent/revenue wherein, it has been clarified: –

“3. It has been noted that exporters had availed the option to take drawback at higher rate in place of IGST refund out of their own volition. Considering the fact that exporters have made aforesaid declaration while claiming the higher rate of drawback, it has been decided that it would not be justified allowing exporters to avail IGST refund after initially claiming the benefit of higher drawback. There is no justification for re-opening the issue at this stage.”

Held: –

• The Hon’ble Court after considering the submissions made and the facts of the case, was of the view that the writ petition would have to be allowed for the following reasons: –
• There is no dispute that the IGST has been paid by the petitioner, for which it is clearly entitled to claim refund of Zero rated supplies in terms of Section 16 of IGST Act, Section 54 of CGST Act, 2017 and rule 96 of the CGST rules.
• The argument advanced on the behalf of the respondent, with reference to paragraph 3 of the said circular, that the petitioner claimed duty drawback at higher rate, and therefore, it cannot be permitted now to seek refund of IGST, is factually incorrect and not applicable to the present case, as the duty drawback against tariff entry no. 853699 with respect to Column A (drawback rate when CENVAT facility has not been availed) and Column B (drawback rate when CENVAT facility has been availed) is identical i.e., 2%.
• That despite the correction being made by the petitioner, and, the duty drawback code was amended, the refund of IGST was not granted.
• The Hon’ble Court found that it has been rightly argued by the petitioner that the issue involved is covered with the decisions of Amit Cotton Industries and M/s Shyam Textile proprietor through Proprietor Rakesh Ram Swaroop (Supra). It is to be noted that the Special Leave Petition filed against the ‘Shyam Textile’ case – SLP (C) No. 19911/2021 was dismissed on 03.01.2022.

The Hon’ble Court with the above findings directed the respondents to refund IGST paid against the aforementioned shipping bills, with interest @7% per annum from the date of correction made i.e., 25.10.2018.

To read the complete judgment 2022 Taxo.online 499