Higher Duty Drawback Not A Reason To Deny Refund: Bombay HC Directs Commissioner Of Customs To Refund IGST

The Bombay High Court while hearing a petition under Article 226, directed the Respondents to refund the IGST along with interest to the Petitioner under the rules provided in Integrated Goods and Services Tax Act, 2017 (“IGST Act”) and the Central Goods and Services Tax Rules, 2017 (“CGST Rules”).

The Division Bench of Justice G.S Kulkarni and Justice Jitender Jain held that “Section 54 of the CGST Act provides for refund of tax, which would entitle the Assessee to claim any refund of tax and interest or any other amount paid by him. In case of zero-rated supply under Section 16(3) of the IGST Act, Rule 96 of the CGST Rules will apply, which provides for refund of integrated tax paid on goods or services exported out of India”.

Advocate Prathamesh Gargate appeared for the Petitioner while Advocate Jitendra B. Mishra appeared for the Respondents.

In the present case, the petitioner was involved in the business of exports. The Petitioner has contended that on December 19, 2017, the Petitioner had filed a GST Return inadvertently mentioning an incorrect Invoice No. and Port Code. On realizing such a mistake, the Petitioner filed an amended Return for the month of January 2018.

The Petitioner being a zero-rated supply in terms of Section 16(3) of the IGST Act, was eligible to claim refunds according to the provisions of Section 54 of the CGST Act. Accordingly,on Marxh 15, 2019 the Petitioner made an application to Respondent No.2 requesting to release the refund of IGST amount totaling Rs. 21,41,451.

Despite due compliance, the Petitioner claimed to have received no refund. Hence, the Petitioner lodged a grievance with the Central Public Grievance Redress and Monitoring System (“CPGRAMS”).The Petitioner’s grievance was disposed on the ground that the Petitioner had availed a higher duty drawback on its exports. The Petitioner filed the petition directing the Respondents to release the refund amount.

The Counsel for Petitioner placed reliance on notification dated 31.10.2016 which indicates that 2% was the common rate of duty and the duty drawback. Further, the Petitioner was a zero-rated supply in terms of the Section 16 of the IGST. Hence as seen from the provisions of Section 54 of CGST Act and Rule 96 of the CGST Rules, such refund could not be denied to the Petitioner.

The question for consideration before the Bench was whether the Respondents are correct in their assertion that in making the refund, the Petitioner had claimed duty drawback at the higher rate of the IGST refund.

The Court placed reliance on Amit Cotton Industries vs. Principal Commissioner of Customs” (2019 (29) G.S.T.L. 200 (Guj.).), wherein it was observed that “The rationale for not allowing the refund of IGST for those exporters, who claim higher duty drawback is that the higher duty drawback reflects the elements of Customs, Central Excise and Service Tax taken together and since higher duty drawback is already being availed than granting the IGST refund would amount to double benefit. In the case of the drawback rates being the same, it represents only the Customs elements, which did not get subsumed in the GST and thus, the writ-applicant cannot be said to have availed double benefit i.e., of the IGST refund and higher duty drawback.”

Based on the precedents and the notification of duty drawback rate, the Bench held that Petitioner is entitled to a refund of the IGST, as there is no case of double benefit. Accordingly, the Court directed the Respondents to pay Rs. 21,41,451/- with simple interest at 7% per annum.

Cause Title: Sunlight Cable Industries v. The Commissioner of Customs and Ors. [Neutral Citation No.: 2023:BHC-OS:5815-DB]

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