GST ITC Refund Can't Be Denied Even If Taxpayer Has Claimed Duty Drawback: Madras High Court

The petitioner/assessee had exported consignments of goods classifiable under Customs Heading No.8483-40-00 of the Customs Tariff Act 1975 and claimed duty drawback under Section 75 of the Customs Act, 1962. Additionally, the petitioner claimed a refund of the input tax credit availed on the input and input services used in the export goods.

The petitioner contended that the exports qualified as "zero rated supply" under Section 16 of the Integrated Goods and Services Tax Act, 2017, and thus entitled to a refund of the unutilized input tax credit under Section 16(3)(a) of the Integrated Goods and Services Tax Act, 2017.

The department has denied the refund of unutilized ITC under Section 16(3)(a) of the Integrated Goods and Services Tax Act of 2017, citing the petitioner's claim for duty drawback on the same export.

The issue raised was whether exports made without payment of IGST under a bond on which duty drawback was claimed under the provisions of the Customs and Central Excise Duties and Service Tax Drawback Rules, 2017, would entitle an exporter to the benefit of a refund of ITC.

The court observed that the refund of the input tax credit cannot be denied, merely because the petitioner has claimed duty drawback under the provisions of the Customs and Central Excise Duties and Service Tax Drawback Rules, 2017. It does not mean that the petitioner is not entitled to a refund under Section 16(3) of the Integrated Goods and Services Tax Act, 2017 read with Section 54 of the Central Goods and Services Tax Act, 2017 and Rules 89 and 96 of the Central Goods and Services Tax Rules, 2017.

The court noted that there are two rates of duty drawback under Notification No.131/2016- Cus (N.T) dated 31.10.2016. Column No.4 in the Schedule to the Notification deals with the situation where the CENVAT facility has not been available. Column No.5 deals with the situation where the CENVAT facility has been made available.

"As far as the goods falling under Customs Heading No. 8483-40-00 of the Customs Tariff Act 1975 are concerned, the rate of duty for goods both covered under these two columns is only at 2%. Thus, there is no variation as far as the rate of duty is concerned. In this case, admittedly, the petitioner is entitled to duty drawback at 2% irrespective of the fact that whether the petitioner has availed input tax credit under the provisions of the Central Goods and Services Tax Act, 2017 or under the provisions of the State Goods and Services Tax Act, 2017," the court said.

The court, while allowing the petition, directed the department to scrutinise the refund ITC claims filed by the petitioner under Section 16(3) of the Integrated Goods and Services Tax Act, 2017 read with Section 54 of the Central Goods and Services Tax Act, 2017 and Rule 89 of the Central Goods and Services Tax Rules, 2017 and other applicable rules and refund the ITC together with applicable interest under the provisions of the respective enactments, within a period of three months from the date of receipt of a copy of this order.

Case Title: Numinous Impex (I) Pvt. Ltd. Versus The Commissioner of Customs

Case Number:  W.P.(MD) No.20468 of 2021

Dated: 08.04.2022

Counsel For Petitioner: Advocate Henri Tiphagne

Counsel For Respondent: B.Vijaya Karthikeyan Senior Standing Counsel

Citation: 2022 Livelaw (Mad) 168

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