The Writ Petition has been filed seeking for refund Rs. 4,80,355/- of IGST paid by the petitioner for the goods exported from India, i.e. ?Zero-Rated Supplies? which was withhold by department since petitioner has availed duty drawback on higher rate.

PJ/Case Law/2020-2021/3622

PRECOT MERIDIAN LTD. Versus COMMISSIONER OF CUSTOMS, TUTICORIN 2020 (34) G.S.T.L. 27 (Mad.) W.P. (MD) No. 20504 of 2019, decided on 19-11-2019

Issue - The Writ Petition has been filed seeking for refund Rs. 4,80,355/- of IGST paid by the petitioner for the goods exported from India, i.e. ‘Zero-Rated Supplies’ which was withhold by department since petitioner has availed duty drawback on higher rate.

Brief Facts- The petitioner is an exporter of cotton. During September, 2017, he exported cotton by way of seven shipping bills and paid Rs. 4,80,355/- towards IGST. He exported after paying the tax and as such, he is entitled to refund of tax paid as per Section 16(3) of the CGST Act, 2017.

Section 54 of the CGST Tax Act, 2017, specifies that subject to the provisions of sub-section (10), a registered person may claim refund at the end of any tax period.

In the instant case, the petitioner has wrongly availed the higher duty drawback to the tune of Rs. 75,454/- on 2-3-2018. Thereafter, he rectified the mistake by repaying it along with interest to the tune of Rs. 81,891/- and sought for refund of IGST paid by him. The respondents, relying on the circular issued by the Government vide Circular No. 37/2018-Customs, dated 9-10-2018, would contend that a person, who has made request consciously for refund of duty drawback, is not entitled to IGST/ITC claims and treated that exporter has consciously relinquished the same. Further, the respondents vehemently contend that the petitioner has wrongly claimed higher duty drawback and thereafter, on his own volition, but, without any sanction from the department, has paid it back. Having relinquished his right to get refund of IGST, he is not entitled to refund. Further, the entire refund is system-managed and it cannot be manually operated. Once the exporter draws higher duty drawback, the system automatically scrolls out IGST refund. Therefore, the petitioner is not entitled to refund.

Reasoning of the Judgment- The court said that the petitioner is entitled for refund and it cannot be ignored by citing the circular.

The Hon’ble Supreme Court, in a similar circumstance, in the case of Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries [2008 (12) S.T.R. 416 (S.C.)], has held that circulars cannot prevail over the statute. Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision. In that circumstance, it is clear that the explanation of provisions of drawback has nothing to do with the IGST refund. In view of that matter, Circular No. 37/2018-Customs, dated 9-10-2018 cannot have an application in the present case. Paragraph 2.5 reads as under:

“By declaring drawback serial number suffixed with A or C and by making above stated declarations, the exporters consciously relinquished their IGST/ITC claims.”

When the above circular was dealt with by the Hon’ble Division Bench of Gujarat High Court at Ahmedabad in M/s. Amit Cotton Industries Through Partner, Veljibhai Virjibhai Ranipa v. Principal Commissioner of Customs, in R/Special Civil Application No. 20126 of 2018, dated 27-6-2019 [2019 (29) G.S.T.L. 200 (Guj.)], the Division Bench has held that it has nothing to do with the IGST refund and it is incumbent on the respondents to refund the IGST as claimed by the petitioner therein. The respondents have already passed a circular when they were facing lot of problems because of the fact that the refunds are completely system-managed and they have taken a conscious decision to refund the amount vide Circular No. 40/2018-Customs, dated 24-10-2018.

Decision- The Writ Petition is allowed accordingly.

The respondents were directed to refund the amount of Rs. 4,80,355/- of IGST paid by the petitioner for the goods exported from India which are zero-rated supplies, within a period of six weeks from the date of receipt of a copy of this order.

Comment- The contentions by the department that that a person, who has made request consciously for refund of duty drawback, is not entitled to IGST/ITC claims and treated that exporter has consciously relinquished the same is not tenable. The petitioner has voluntarily deposited duty drawback along with the interest and hence, it makes him eligible for refund of IGST paid. The department pleading that refund can’t be granted because the system is manually operated is totally an excuse. In case of M/S DEENDAYAL PORT TRUST VERSUS UNION OF INDIA, the Gujarat High Court granted benefit to the petitioner on account of technical glitch on the erstwhile aces portal not allowing the assessee to revise ST-3 return second time while there was no such restriction in Rule 7B of the Service Tax Rules, 1994. Therefore, one can perceive that the above decisions will be a useful precedent for availing various benefits which are being denied to the assessee due to technical glitches on the portal in GST regime too. Another important analogy of this decision is substantive right cannot be lapsed due to technical breaches. This is very important that procedural requirements cannot take away the substantive right.
Prepared by - CA Preksha Jain

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PJ/Case Law/2020-2021/3622

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