Awadkrupa Plastomech PVT. LTD. vs. Union Of INDIA

Held

The Court held that the petitioner is entitled to the refund of IGST paid on zero-rated supplies. The Court found that the controversy was squarely covered by its earlier decision in Amit Cotton Industries Vs. Principal Commissioner of Customs. The Court reasoned that Circular No. 37/2018-Customs, relied upon by the respondents, could not be sustained in law as it could not run contrary to statutory rules, specifically Rule 96 of the CGST Rules. The Court noted that the circular was issued after the export date and dealt with drawback provisions, not IGST refund. Furthermore, the Court found that the petitioner had not availed the higher duty drawback in place of IGST refund out of their own volition. As the rates for higher and lower duty drawback were the same (2%), it represented only the customs component, which was not subsumed in GST. Therefore, allowing IGST refund would not amount to a double benefit. Rule 96 of the CGST Rules was deemed clear, stating that refund can only be withheld under specific contingencies not met in this case. The Court directed the respondents to immediately sanction the IGST refund. If the refund was not paid within six weeks, interest at 9% would accrue.

Facts

The petitioner, Awadkrupa Plastomech Pvt. Ltd., filed a writ application seeking sanction of refund of IGST paid on goods exported ('Zero Rated Supplies') vide shipping bill no. 7452830 dated 19/07/2017. The petitioner contended that the respondent authorities illegally withheld the refund, which was rejected under Section 54 of the CGST Act read with Section 16 of the IGST Act. The rejection was based on the ground that the petitioner had claimed a higher duty drawback. The petitioner argued that there was no legal embargo against availing both higher duty drawback and IGST refund for zero-rated supplies. The total invoice value of the export was Rs. 29,73,166/-, with a taxable value of Rs. 25,19,632/-. The IGST paid was Rs. 4,53,534/-. The petitioner's Custom House Agent inadvertently failed to disclose the IGST details in the shipping bill, but this was rectified in subsequent GST returns.

Key Issues

1. Whether the petitioner is entitled to a refund of IGST paid on zero-rated supplies when they have claimed a higher duty drawback, considering Section 16 of the IGST Act and Section 54 of the CGST Act. 2. Whether Circular No. 37/2018-Customs dated 09/10/2018, which denies IGST refund if higher duty drawback is claimed, is legally sustainable and applicable to the facts of the case, particularly when the export occurred prior to the circular's issuance. Petitioner's arguments: The petitioner contended that there is no statutory prohibition against claiming both IGST refund and duty drawback. They argued that the higher duty drawback claimed was only for the customs component as the rates for higher and lower duty drawback were the same (2%), and thus, it did not include the subsumed Central Excise and Service Tax components, preventing a double benefit. They also argued that Circular No. 37/2018-Customs cannot override statutory rules like Rule 96 of the CGST Rules and is not applicable as it was issued after the export date. Revenue's arguments: The revenue relied on Circular No. 37/2018-Customs and Notification 131/2016-Cus.(N.T.) dated 31.10.2016, as amended, to argue that claiming higher duty drawback precludes the claim for IGST refund, as higher drawback includes Customs, Central Excise, and Service Tax components. They contended that the petitioner had availed the option to take drawback at a higher rate in place of IGST refund.