Refund of the IGST paid on the exports cannot be denied on the ground that the higher rate of duty drawback is claimed and circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision.

Facts: The petitioner is an exporter of cotton. During September, 2017, he exported cotton by way of seven shipping bills and paid Rs. 4,80,355/- towards IGST. The Petitioner exports the goods after paying the tax and as such, he is entitled to refund of input
tax credit as per Section 54 of the CGST Act, 2017. 

The Petitioner has wrongly availed the higher duty drawback to the tune of Rs. 75,454/- on 2-3-2018. Thereafter, he rectified the mistake by repaying it along with interest to the tune of Rs. 81,891/- and sought for refund of IGST paid by him.

However, relying on the circular issued by the Government vide Circular No. 37/2018-Customs, dated 9-10-2018, the repondents contended that a person, who has made request consciously for refund of duty drawback, is not entitled to IGST/ITC claims and treated that exporter has consciously relinquished the same. Also, contended that the petitioner has wrongly claimed higher duty drawback and thereafter, on his own volition, but, without any sanction from the department, has paid it back. Having relinquished his right to get refund of IGST, he is not entitled to refund. Further, the entire refund is system-managed and it cannot be manually operated. Once the exporter draws higher duty drawback, the system automatically scrolls out IGST refund. Therefore, the petitioner is not entitled to refund.

Issue:

Whether refund claim of ITC can be denied to the Petitioner on the basis of Circular No. 37/2018- Customs?

Held: The Hon'ble Madras High Court held as under-

• The Hon’ble Supreme Court, in a similar circumstance, in the case of Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries [2008 (12) S.T.R. 416 (S.C.)], has held as follows :
  “6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.”
• It is held that circulars cannot prevail over the statute. Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision. In that circumstance, it is clear that the explanation of provisions of drawback has nothing to do with the IGST refund. In view of that matter, Circular No. 37/2018-Customs, dated 9-10-2018 cannot have an application in the present case. Paragraph 2.5 reads as under :
  “By declaring drawback serial number suffixed with A or C and by making above stated declarations, the exporters consciously relinquished their IGST/ITC claims.”
•  Further, held that the refund of the IGST paid on the exports cannot be denied on the ground that the higher rate of duty drawback is claimed and circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision.
• Set aside the orders passed by the Respondent and the directed to refund the amount of Rs. 4,80,355/- of IGST, the sanctioned amount to the Petitioner within a period of 6 weeks from the date of receipt of a copy of this order.

To read the judgement 2019 Taxo.online 985