Merely Assessee has availed higher drawback rates under Column A of the of Customs Notification No. 131/2016, dated 31-10-2016 does not keep away Assessee not to seek refund of IGST.

TMA International Pvt. Ltd. v. Union of India

High Court of Delhi

WP (C) No. 2694 of 2019

Category: Refund of IGST

Date of Judgement: 26 November 2019

Relevant Sections: Section 16 of the IGST Act, 2017; Section 54 of the CGST Act, 2017; Rule 96 of the CGST Rules, 2017

Facts of the Case

1. The petitioners, a mix of private limited companies, partnership firms, and proprietorships, exported goods during the transitional period post-GST implementation (01.07.2017 to 30.09.2017) and paid IGST on such exports. They sought refund under section 16(3) of the IGST Act, 2017.
2. Due to confusion during the transition, the petitioners claimed higher drawback rates under Column A of Notification No. 131/2016-Cus., where Column A typically precluded refund of IGST if CENVAT credit was availed
3. Circular No. 37/2018-Cus., dated 09.10.2018, denied IGST refunds to exporters who had availed higher drawback rates, stating that such exporters had consciously chosen one benefit over the other
4. Petitioners contended that the drawback rates under Column A and B were the same for their goods, implying that their claim did not include any excise or service tax components. Thus, they argued, they did not receive dual benefits

Questions in Consideration

1. Whether Circular No. 37/2018-Cus. and relevant portions of Notification No. 131/2016-Cus. (NT) as amended are ultra vires to Section 16 of the IGST Act and Rule 96 of the CGST Rules?
2. Whether denial of IGST refund based on availing higher drawback under Column A is legally tenable when the rates under Columns A and B were identical and pertained only to customs duty?

Observations of the Court

1. The Court emphasized that taxpayers faced procedural confusion during GST transition, and errors arising from such confusion should not result in denial of substantive rights like IGST refunds
2. The claim that drawback was availed under Column A by mistake and that no excise or service tax benefit was included in the drawback was considered plausible, especially since the rates under Column A and B were the same
3. The Court acknowledged that if only the customs component was claimed as drawback, refund of IGST would not lead to double benefit
4. Petitioners’ cost analysis showed serious financial impact due to denial of refund; the Court took note of this while considering the inadvertence argument and government’s prior practice of forming IT Grievance Committees for such issues

Judgement of the Court

1. The Court directed the respondents to verify whether the petitioners had claimed CENVAT credit or drawback of Central Excise and Service Tax components. If not, IGST refund should not be denied
2. Respondents were given 12 weeks to complete verification and file a report for each petitioner based on the annexures submitted with the petition
3. The matter was posted for further hearing on 27 April 2020

Between Fine Lines

• Exporters inadvertently claimed higher drawback during GST transition.
• Government circular denied IGST refund based on such claims.
• Court held that if only customs duty was neutralized, refund of IGST must be allowed.
• Confusion during transition cannot lead to denial of substantive rights.
• Refunds to be allowed post verification of actual benefits availed.

Summary of Referred Cases