Authorities cannot withhold refund of IGST paid on exported goods for purpose of availing higher duty drawback where differential amount has been already remitted back.

Case Title: AIM Worldwide (P.) Ltd. v. Union of India

Court: High Court of Gujarat

Petition No.: R/Special Civil Application No. 15648 of 2020

Date of Judgement: 22nd December 2021

Relevant Sections: Section 16 of IGST Act, Section 54 and 56 of CGST Act, Rule 96 of CGST Rules

Category of Dispute: Refund of IGST on export (Zero Rated Supply)

Facts of the Case

[Para 2–3] AIM Worldwide (P.) Ltd., an exporter of cotton goods, paid IGST on exports and later claimed refund under Section 16 of the IGST Act. However, the company had mistakenly claimed higher duty drawback by selecting option “A” in shipping bills instead of the lower drawback option “B.”

[Para 3] Realizing the error, the petitioner voluntarily refunded the differential drawback amount of ₹3,39,245 through demand drafts in 2017 and sought amendment of shipping bills under Section 149 of the Customs Act, which the Customs Department approved on 30.10.2017.

[Para 4–6] Despite repeated representations (dated 30-10-2017, 23-7-2018, 27-9-2018, and 15-11-2019), the refund of IGST amounting to ₹14,94,739 was not sanctioned. The petitioner argued that the supplies were zero-rated and eligible for refund under Section 16(3)(b) of the IGST Act.

Questions in Consideration

[Para 12–14]

1. Whether refund of IGST can be denied solely on the ground that the petitioner initially claimed higher drawback (even though it was repaid)?
2. Can a Board Circular override statutory provisions under the GST and Customs laws regarding IGST refund eligibility?
3. Is the petitioner entitled to interest for delay in refund under Section 56 of CGST Act?

Observations of the Court

[Para 11–14]

• Section 16(3)(b) of IGST Act and Rule 96 of CGST Rules clearly allow refund for IGST on zero-rated supplies. The refund can only be withheld under two specific conditions under Rule 96(4)—neither of which applied here.
• The court noted that the refund was withheld on the basis of CBIC Circular No. 37/2018, which lacks statutory backing to override Rule 96 or deny refund post correction of drawback.

[Para 13–15]

• Reaffirmed the ratio in Amit Cotton Industries v. Principal Commissioner of Customs, which held that once higher drawback is repaid, refund of IGST cannot be denied.
• Circulars, per CCE v. Ratan Melting & Wire Industries and J.K. Lakshmi Cement Ltd., cannot override law or operate to the detriment of the assessee.

[Para 16]

• Cited Section 56 of the CGST Act, which mandates interest on delayed refunds beyond 60 days at notified rates. The petitioner was found eligible for 9% interest due to undue delay.

Judgement of the Court

[Para 17]

• Petition allowed.
• Directed immediate sanction of IGST refund of ₹14,94,739.
• Directed payment of interest @ 9% from the date refund was claimed till the date of actual payment.
• Ordered refund with interest to be paid within eight weeks, failing which further interest @ 9% would accrue.

Between Fine Lines (Simple Summary in 5 Lines)

The High Court held that refund of IGST cannot be denied merely because a higher duty drawback was initially claimed in error but later refunded. It ruled that CBIC circulars cannot override GST laws. The Court granted refund and interest at 9% due to prolonged inaction. The law is clear that zero-rated export supplies are eligible for refund. This ruling reinforces that procedural errors, if corrected, should not hinder substantive claims.

Summary of Referred Cases

Takeaway

“Refunds Cannot Be Denied for Corrected Errors—Law Overrides Circulars.”

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