Minescape Minerals PVT. LTD., Rep. By Its Aut. Sign., Ashok Antonio Cotta vs. Union Of INDIA, Thr. Ministry Of Finance, New Delhi And 3 Ors

Held

The Court held that the first proviso to Section 54(3) of the CGST/SGST Act, which restricts the refund of unutilized Input Tax Credit (ITC) for exports, is applicable only to goods that are actually subjected to export duty. The Court relied on a clarification dated 20.09.2021, which explained that the term 'subjected to export duty' means goods that are actually leviable to and suffering export duty at the time of export. Goods with a NIL rate of export duty, or those fully exempted from export duty by virtue of customs notifications, or not covered under the Second Schedule to the Customs Tariff Act, 1975, are not considered 'subjected to export duty' for the purpose of this restriction. Consequently, the restriction under Section 54(3) does not apply to such goods. The Court quashed and set aside the order-in-original dated 16.03.2020 and the order in appeal dated 27.11.2020, directing the respondents to process the petitioner's case in light of the clarification. The ratio decidendi is that the restriction on refund of unutilized ITC under Section 54(3) is contingent upon the actual imposition and payment of export duty, not merely the potential for it.

Facts

The petitioner, Minescape Minerals Pvt. Ltd., filed a writ petition before the Bombay High Court at Goa challenging orders related to GST. The respondents, Union of India and others, initially sought adjournments. However, during the proceedings, the respondents' counsel informed the court of a subsequent development, a clarification dated 20.09.2021, which led them to consent to the petition being allowed. The respondents' counsel placed on record communications dated 30.09.2021 and 24.09.2021, along with the aforementioned clarification, which addressed the issues in favour of the petitioner. The court was informed that the clarification settled the issues raised in the petition.

Key Issues

1. Whether the first proviso to Section 54(3) of the CGST/SGST Act, prohibiting refund of unutilized Input Tax Credit (ITC) in certain cases, is applicable to exports of goods that attract a NIL rate of export duty. Petitioner's Contention: The petitioner likely argued that the prohibition under Section 54(3) should not apply to their exports as the goods were not subjected to actual export duty. They would have relied on the interpretation of 'subjected to export duty' to mean goods that actually incur export duty. Revenue's Contention: The respondents, by consenting to the petition based on the clarification, implicitly accepted the petitioner's interpretation. Their argument, as reflected in the clarification, would have been that the proviso applies only when goods are actually leviable to and suffering export duty at the time of export. Goods with a NIL rate or fully exempted from export duty are not 'subjected to export duty' in the intended sense of the proviso.