Facts of the Case:

In this case, the appellant filed a refund claim of ₹18,28,146/- under Section 54 of the CGST Act read with Rule 89(4) for the period 01.10.2021 to 31.12.2021, in respect of export of goods without payment of tax. The refund was sanctioned through RFD-06 dated 02.05.2023.

The Department, after review under Section 107(2), challenged the sanction on the ground that four shipping bills related to goods actually exported in January 2022, i.e. after the relevant refund period. It contended that their value of ₹89,57,823/- should be excluded from the zero-rated turnover. The Department further contended that ₹23,560/- of ITC was inadmissible, thereby restricting the eligible refund to ₹12,58,188/-, as against ₹18,28,146/- sanctioned.

The First Appellate Authority rejected the Department’s appeal, leading to the present appeal before the Tribunal.

Issue:

Whether the value of goods covered by export invoices issued during the relevant refund period can be included in the “turnover of zero-rated supply of goods” under Rule 89(4), even though the goods were physically exported after the relevant period? Whether inadmissible ITC of ₹23,560/- was required to be excluded from Net ITC for computing the refund?

Held That:

The Tribunal dismissed the Department’s appeal and upheld the refund sanctioned to the exporter.

On the first issue, the Tribunal noted that Rule 89(4) computes refund with reference to Net ITC, turnover of zero-rated supply and Adjusted Total Turnover, all pertaining to the “relevant period”. However, the expression “turnover of zero-rated supply of goods” under Rule 89(4)(C) refers to zero-rated supplies made during the relevant period, and this has to be understood in conjunction with the provisions governing time of supply and issuance of invoices.

Under Sections 12 and 31 of the CGST Act, in the case of movement of goods, the supply and corresponding invoice arise at the time of removal of goods. Thus, where goods are cleared for export under LUT/bond and the invoices are issued during the relevant period, the corresponding zero-rated supply forms part of the turnover of that period. The fact that the goods physically cross India’s customs frontier, and the export is subsequently evidenced by the shipping bill/EGM, does not by itself shift the supply to the subsequent period.

The Tribunal therefore held that where export invoices were issued during the relevant period and the goods were subsequently actually exported, the value of such supplies cannot be excluded from the zero-rated turnover merely because the physical export occurred after the relevant period. Refund, however, would become admissible only upon establishment that the goods were in fact exported.

In the present case, the four invoices were admittedly issued during 01.10.2021 to 31.12.2021, and there was no dispute that the goods covered by those invoices were ultimately exported. Consequently, their value was rightly included in the turnover of zero-rated supplies for the refund calculation.

On the second issue, although the Department pointed out inadmissible ITC of ₹23,560/-, the Tribunal observed that even after excluding such ITC, the maximum refund available under the Rule 89(4) formula remained substantially higher than the refund actually claimed and sanctioned. Therefore, the alleged ineligible ITC did not result in any excess refund.

Accordingly, the Tribunal found no infirmity in the impugned order and dismissed the Department’s appeal.

Key Takeaways

For refund under Rule 89(4), the relevant consideration for determining the turnover of zero-rated supply is when the supply/invoice falls in the relevant period, rather than merely the date on which the goods physically cross the Indian border. Thus, goods invoiced and removed for export during the refund period may form part of zero-rated turnover even if their actual export takes place in a subsequent period, provided the exporter ultimately establishes actual export.

Case Name: Shruti Bansal v. Solitaire Pharmacia (P.) Ltd. dated 24.09.2026

Citation No. 2026 Taxo.online 3053