Delhi High Court orders IGST refund to exporters who claimed duty drawback
New Delhi, Apr 9 (KNN) In a major relief to exporters across the country, the Delhi High Court has directed the Central Board of Indirect Taxes and Customs (CBIC) to grant the refund of the Integrated Goods and Services Tax (IGST) paid on export of goods by exporters.
The said refund was denied to the exporters on the ground that Duty Drawback was claimed by the exporters under columns A of the Drawback Schedule. However, it was contested by the exporters before the High Court that the said denial is ultra vires the provisions of the CGST Act, IGST Act and the Constitution, and thus the said IGST should be refunded to the exporters at the earliest.
A detailed order was passed by the Court wherein the Court agreed with the submission of the petitioners (Exporters), subject to respondent authority verifying as to whether duty drawback had been availed of by the petitioners, with regard to Central Excise and Service Tax component.
''After hearing our submissions in detail and verifying the export data of each petitioner, the Court directed the CBIC to refund the said IGST paid on exports, with interest,'' said Advocate Sakshi Singhal to KNN India on Friday.
While explaining the entire matter, Singhal said that the petitioners had exported goods on various dates spanning between the transitional period i.e. from July 1st, 2017 to September 30th, 2017, falling under various tariff items mentioned in the Drawback Schedule, in respect of which the Drawback Rates prescribed in Column A and B were identical.
The said goods were exported on due payment of IGST, the refund of which is the legitimate right of the exporters, accruing to them by virtue of Section 16(3) of the IGST Act, 2017. However, the said refund was denied vide Circular No. 37/2018-Customs dated September 9th, 2018 on the ground that Duty Drawback was claimed by the exporters under column A of the Drawback Schedule instead of Column B, even though the Duty Drawback Rates in Column A and B were identical in respect of the said goods, she added.
In this regard, the petitioner contended that inter alia, that Rule 96(4) prescribed the only situations where IGST refund could be withheld, neither of which remotely contemplate claiming of drawback as a ground for denial of refund and therefore such a restriction is ex facie ultra vires Section 16 of the IGST Act, 2017 read with Section 54 of CGST Act, 2017 and Rule 96 of CGST Rules, 2017.
''We further contended that since in the present case, Duty Drawback rates in Column A and B were identical, the Petitioners had claimed and received only the custom component, and element of Central Excise and Service Tax was not included in the Drawback Rate, thus granting of IGST refund would in no case result in double neutralization of input taxes,'' she said.
Furthermore, the petitioner also argued that since the Drawback Rates were identical in Columns A & B for the goods exported by the petitioners, the mentioning of Column A rather than B was at best a technical glitch or typographical error that led to no benefit to them and petitioners should not be made to suffer because of the same.
While responding to these arguments, the CBIC contended that duty drawback scheme and zero rating of export under GST are mutually exclusive schemes for neutralization of separate input taxes on exported goods. It was further submitted that a clear option was provided to the exporters to either claim duty drawback under Column A or claim tax neutralization under GST legislation and the petitioners went with the former option and they cannot now turn around and claim benefit of the provision that was not availed in the first instance.
Eventually, after hearing the submissions in great detail, the Court held that the petitioners have claimed and received only the customs duty portion of the drawback and element of Central Excise Duty and Service Tax was not included in the Drawback Rate, therefore, granting of IGST refund would not result in double neutralisation of input taxes.
The Court further observed that exporters would not voluntarily opt for the claim of drawback under Column A at the cost of foregoing IGST paid on exports, where the duty drawback rates under Column A and B were same, as the exporters would have received the same amount of drawback even if they would have mentioned “B” in their shipping bills instead of “A” for claiming drawback; and since the condition for not claiming IGST refund is not applicable to cases where duty drawback has been claimed under Column B, exporters would have received IGST refund also on mentioning “B”.
Accordingly, the division bench of Justices Rajiv Shakdher and Talwant Singh held that the respondents (CBIC) are directed to immediately sanction the refund of the IGST paid in regard to the goods exported from the date of shipping bills till the date of actual refund.
''Just because some wrote A instead of B in drawback which can be considered as technical glitch or typographical error it doesn't mean that IGST refund should be stopped. It was the exporter's money and they should get it as they have paid tax on purchase,'' said Pankaj Bansal, CEO of TMA International Pvt Ltd.