Gujarat High Court Directs Authorities To Follow Court Orders In IGST Refund Case

The Gujarat High Court, in its decision on a special civil application, while emphasising the binding nature of its directions on respondent-authorities, stated that once the Court issues directions, they hold authority over the respondent-authorities, and consequently, the respondent-authorities are obligated to adhere to the directions issued by the Court when exercising their powers under Article 226 of the Constitution of India.

The division bench of Justices Bhargav D. Karia And Niral R. Mehta held, “Once this Court has issued the directions, the same are binding upon the respondent-authorities and the respondent-authorities had no reason to take a different view than the directions issued by this Court while exercising the powers under Article 226 of the Constitution of India. The respondent-authorities are bound by the directions issued by this Court and therefore, the impugned order is hereby, quashed and set aside.”

Real Prince Spintex (P.), engaged in the trade of cotton yarn and cotton waste, operates under the GST law, where exports of goods are classified as "zero-rated supplies." Section 16 of the Integrated Goods and Service Tax Act, 2017 ("the IGST Act") offers two options: either pay the IGST and seek a refund, or claim the refund of unutilized Input Tax Credit ("ITC") against a bond or letter of undertaking ("LUT"). Real Prince Spintex chose the latter option and conducted exports from July 2017 onwards under LUT, paying IGST on these exports.

However, upon the expiry of the LUT, an error occurred. Real Prince Spintex mistakenly selected the option of exporting without paying tax by submitting shipping bills for exports despite lacking the LUT. Additionally, a Clearing and Forwarding Agent ("CHA") incorrectly chose the tax-free export option when filing the shipping bill, resulting in IGST being shown as Nil, leading to Customs Authorities denying the refund of IGST paid despite attempts to rectify the error.

Subsequently, Real Prince Spintex filed a refund claim for exports from July to September 2017, but it was rejected because the Petitioner had not claimed a higher rate of duty drawback. Despite efforts to rectify this by explaining the CHA's mistake to the Revenue Department ("the Respondent"), no response was received.

Real Prince Spintex pursued the matter legally, resulting in a court order directing the Respondent to sanction the IGST refund with 7% simple interest from the shipping bill date until the actual refund date, deducting the differential duty drawback amount.

However, the Respondent's implementation of the court order ("the Impugned Order") granted the refund by adjusting the duty drawback and interest at a rate of 15%, deviating from the court's directive. Although the Respondent filed a Special Leave Petition against the Impugned Order, it was dismissed by the Hon'ble Supreme Court.

Discontented with the Impugned Order, Real Prince Spintex appealed to the Appellate Authority, which, on March 11, 2022, rejected the appeal. Hence, the present writ petition was filed, challenging the Impugned Order.

The petitioner company prayed for a direction quashing and setting aside impugned order in appeal dated 11.3.2022 passed by the Commissioner of Appeals, Customs under Section 128A of the Customs Act, 1961

The petitioner company further prayed for an order directing the Respondents to forthwith release amount of refund of IGST which is reduced as a result of imposition of interest of Rs. 11,59,606;

The petitioner company also prayed for an order directing the Respondents to forthwith grant interest on refund at the rate of 7% p.a. in accordance with the direction of this Hon. Court;

The petitioner company lastly prayed for an amount of refund of A IGST which was reduced as a result of imposition of interest of Rs. 11,59,606 and also grant interest on refund at the rate of 7% p.a. in accordance with the direction of the High Court

Having heard the advocates for the respective parties and considering the facts of the case, the Court observed that the impugned order was passed contrary to the directions issued by the High Court.

The Court directed the respondent-authorities to comply with the directions issued by the High Court while sanctioning the refund of IGST after deducting the differential duty drawback with 7% simple interest as ordered by this Court in the Special Civil Application No.14974 of 2019.

“Such exercise shall be completed within a period of four weeks from the date of receipt of the copy of this Order,” the concluded while allowing the petition.

Appearance:

Uchit N Sheth(7336) For The Petitioner(S) No. 1

Mr Utkarsh R Sharma(6157) For The Respondent(S) No. 1,2,3

Case No.: R/Special Civil Application No. 12978 Of 2022

Case Title: Real Prince Spintex Pvt. Ltd. Versus Union Of India

LL Citation: 2024 LiveLaw (Guj) 17

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