Whether the appellant can take refund of unutilised credit when he has already claimed benefit of higher rate of Drawback?

PJ/Case Study/2020-21/152

25 April 2020

Case Study

M/s Durga Enterprises (Order in Appeal No. 02(DSD)CGST/JDR/2020)

Introduction: M/s Durga Enterprises is engaged in supply of goods for export under letter of undertaking having GSTIN No. 08AACFD1486D1ZP. Refund application of total unutilised credit of Rs.3,74,087/- for the month of August 2017 in RFD-01 has been applied through GST Portal.

Issue involved: Whether the appellant can take refund of unutilised credit when he has already claimed benefit of higher rate of Drawback?

Brief Facts: M/s Durga Enterprises is engaged in supply of goods for export under letter of undertaking having GSTIN No. 08AACFD1486D1ZP. Refund application of total unutilised credit of Rs.3,74,087/- for the month of August 2017 in RFD-01 has been applied through GST Portal.

A Show cause Notice No. (RFD)18/JDR-A/GST/LUT-EXP/164/2018/6753 Dated 24.04.2018 was issued to the appellant wherein it was alleged that the appellant has already claimed higher rate of DBK and as per provision of Section 54(3)- no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of Central Tax or Claims refund of the integrated tax paid. The Adjudicating Officer has allowed refund amount of Rs.25430/- relate to SGST and remaining amount was rejected amounting to Rs.348657/- vide order No. 178/2018-GST dated 31.05.2018. Aggrieved by such order, the appellant has applied before the commissioner appeals.

Assessee’s Contention: The assessee has contended in the following manner

The appellant submit that the impugned Order-in-original passed by the learned adjudicating officer is wholly and totally wrong and rejecting the refund amount and the same is liable to be quashed.

The appellant submit that the adjudicating authority has allowed the refund of SGST portion on the ground produced by the appellant.

The department is contending that the appellant have taken double benefit by taking CGST and IGST as well as claiming drawback at higher rate of duty. The appellant have accepted the contention of the department and surrendered the benefit of higher rate of drawback. The appellant have deposited the amount of higher rate of drawback along with interest. A copies of the letter forwarded to Assistant Commissioner of Customs, Mundra and Vishakhapatnam port by us along with challans showing deposit of excess duty drawback along with interest calculations have been submitted to department.

The appellant have filed the refund claim for the month of August 2017 on the basis of six shipping bills. Out of above, we have deposited the excess drawback for four shipping bills as enumerated in letter to custom department. These shipping bills are 7892508 dated 04.08.2017, 8314699 dated 30.08.2017 and 8383822 dated 01.09.2017 of Mundra port and shipping bill number 8073910 dated 18.08.2017 is of Visakhapatnam port. On the rest of two shipping bill number 8271434 dated 28.08.2017 and 7972403 dated 11.08.2017, we have claimed lower rate of drawback. For this purpose, we have given to EGM report from icegate website which clearly reflects that we have claimed lower rate of drawback on these shipping bills. The copy of bank statement has given to adjudicating authority. It is showing that the appellant has claimed lower rate of drawback.

The appellant have availed two benefit and surrender the one benefit of higher rate of drawback then the fund of the other benefit of refund claim should be allowed to us. But the adjudicating authority has not considered to above submission and reject to our refund amount.

The appellant submit that the apex court has affirmed in case of COLLECTOR OF CENTRAL EXCISE, BARODA Versus INDIAN PETRO CHEMICALS 1997 (92) E.L.T. 13 (S.C.) held that :

“Exemption - Assessee eligible to the benefit of two exemption notifications - Benefit of the notification which was more beneficial to the assessee given by the Tribunal - Appeal against the Tribunal order dismissed - Section 5A of the Central Excise Act, 1944.”
The assessee eligible to avail benefit of two exemption notification, the option is available with assessee to choice between one exemption notifications. In our case, the appellant have surrendered benefit of higher rate of duty drawback before submission of refund application but refund has disallowed by department. The order of adjudicating authority should be set aside.

The appellant submit that principal bench, New Delhi in case of KULTAR EXPORTS
Versus COMMISSIONER OF CUSTOMS, NEW DELHI 2013 (298) E.L.T. 461 (Tri. - Del.) has held that the department has sanctioned the drawback including excise portion. An amount is yet to be paid to the appellant. The revenue made case was not eligible for the excise portion of the drawback. We are reproducing the relevant para as under:
“Drawback- Exporter purchased ready-made garments and textiles from traders and claimed drawback of Customs duty and Excise duty - Revenue contends that the exporter not eligible for Excise portion of drawback and drawback claimed on false declarations - C.B.E. & C.’s Circular No. 54/2001-Cus., dated 19-10-2001 and certificate mentioned in it are not applicable for merchant-exporters who buy goods from open market - Also as per C.B.E. & C.Circular Nos. 17/97-Cus., dated 4-6-1997 and 64/98-Cus., dated 1-9-1998 there was no question of taking any declaration from merchant-exporters who buy goods from open market but drawback was supposed to be restricted to Customs portion only - HELD : Revenue chose to grant drawback for Excise portion - There was bona fide belief that exporter was eligible for impugned drawback - Huge liability for past period based on Circulars which were in knowledge of Department and which were not implemented, could not be confirmed - C.B.E. & C. Circular No. 16/2009-Cus., dated 25-5-2009 in interpreting Rule 3 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 also clarifies that merchant-exporters who purchase goods from local market shall be entitled for full rate of duty drawback including Excise portion - Rule 3 ibid. [paras 1, 6.1, 6.4, 9.1, 9.2, 9.3, 10, 13, 14]”
The analogy of above case is applicable on our case. In our case, the appellant have claimed higher rate of duty drawback from custom and same was deposited before issuance of show cause notice. But the adjudicating authority has ignored to our submission and disallowed our input tax credit refund claim. The order of adjudicating is not tenable and should be set aside.

Decision: The commissioner Appeals has set aside the impugned order and allowed the appeal of the appellant. This order was passed as the appellant had produced the necessary documents proving that he had surrendered the drawback claimed at higher rate along with interest.

Conclusion: The proviso to Section 54(3) of CGST Act 2017, reads as follows
“Provided also that no refund of Input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of Central Tax or claims refund of the integrated tax paid on such supplies.”
The proviso clearly states that refund of integrated tax, central tax shall not be eligible if the assessee has claimed drawback at a higher rate. Understanding this, the appellant has surrendered the benefit that he had claimed on duty drawback along with interest.

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PJ/Case Study/2020-21/152
25 April 2020

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