VSG Exports (P.) Ltd. VS Commissioner of Customs, Tuticorin

In this case, the petitioner argues that under Rule 96A of the Central Goods and Services Tax (CGST) Rules, 2017, any Shipping Bills filed by an exporter of goods are automatically treated as applications for a refund of the integrated tax (IGST) paid on those exported goods. Despite this provision, the petitioner contends that the second respondent has not refunded the IGST paid on the goods in question.

The petitioner claims that upon investigating the matter, it was discovered that the refund of IGST was pending because the petitioner had availed of a higher rate of drawback, specifically the Composite Rate. This higher drawback rate, according to the authorities, disqualified the petitioner from receiving the IGST refund. The petitioner’s position is that they are entitled to the refund as per the automatic application process stipulated in Rule 96A, irrespective of the higher drawback rate claimed.

The core issue revolves around the interpretation and application of Rule 96A in conjunction with the conditions related to drawback rates, and whether the petitioner’s entitlement to the IGST refund should be affected by the drawback rate availed. The petitioner seeks the court’s intervention to ensure the refund of the IGST amount paid, arguing that the current withholding of the refund is unjustified under the existing rules and regulations.

The petitioner contends that, under Rule 96A of the Central Goods and Services Tax (CGST) Rules, 2017, Shipping Bills submitted by an exporter are considered as applications for a refund of integrated tax (IGST) paid on goods exported from India. However, the petitioner claims that the second respondent has not refunded the IGST amount for the goods mentioned. Upon inquiry, it was revealed that the IGST refund was pending because the petitioner had availed of a higher drawback rate, known as the Composite Rate.

The petitioner asserts their eligibility for the IGST refund on the exported goods. They argue that with the implementation of GST from July 1, 2017, the Customs Central Excise Duties and Service Tax Drawback Rules, 1995, were extended for a transition period of three months (July 2017 to September 2017) via Notification No. 22/2017-Customs, dated June 30, 2017. The petitioner’s counsel submits that the Drawback rates were outlined in the Drawback Schedule annexed to the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995, as amended by Notification No. 131/2016-CUSTOMS (N.T.), dated October 31, 2016. According to this schedule, the exported goods, specifically Polished Granite Slabs, are classified under Tariff Item No. 680203.

Furthermore, the petitioner refers to Notification No. 131/2016-CUSTOMS (N.T.), dated October 31, 2016, which states that if the rates in columns (4) and (6) are the same, it implies that the rate pertains solely to the Customs component and is available regardless of whether the exporter has availed of the CENVAT Facility. The petitioner’s counsel emphasizes this point in their argument.

According to the petitioner, under Rule 96A of the Central Goods and Services Tax (CGST) Rules, 2017, Shipping Bills filed by an exporter of goods are considered as applications for the refund of integrated tax (IGST) paid on exported goods. However, the petitioner contends that the second respondent has not refunded the IGST amount paid on their exported goods. Upon inquiry, it was discovered that the IGST refund was withheld because the petitioner had availed a higher rate of drawback, known as the Composite Rate.

The petitioner asserts that they are eligible for a refund of the IGST paid on the export of goods. They explain that following the implementation of the Goods and Services Tax (GST) from July 1, 2017, the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995 were continued for a transitional period of three months (from July 2017 to September 2017) as per Notification No.22/2017-Customs dated June 30, 2017. The petitioner’s counsel points out that the drawback rates are specified in the Drawback Schedule annexed to these rules, which were amended via Notification No.131/2016-CUSTOMS (N.T.) dated October 31, 2016. In this schedule, the petitioner’s exported goods, specifically Polished Granite Slabs, are classified under Tariff Item No.680203.

The petitioner argues that Notification No.131/2016-CUSTOMS (N.T.) dated October 31, 2016, specifies that if the rate in columns (4) and (6) is the same, it indicates that the rate pertains solely to the customs component and is available regardless of whether the exporter has used the CENVAT facility. Since the rate for Polished Granite Slabs is the same in both columns, the petitioner claims they have only drawn back the customs component for their exports.

The petitioner also refers to Circular No.22/2017-Customs dated June 30, 2017, which addresses drawback claims during the transition period. This circular states that exporters have the option to claim only the customs portion of the All Industry Rates (AIRs) of duty drawback and can avail input tax credit, CGST, IGST, or refund of IGST paid on exports. Additionally, the petitioner cites CBEC Circular No.37/11/2018 GST dated March 15, 2018, which clarifies that suppliers who claim drawback only for the basic customs duty are eligible for a refund of GST.

Based on these regulations and circulars, the petitioner maintains that they are entitled to claim a refund of the IGST paid on exports. Furthermore, they mention that Circular No.05/2018-Customs dated February 23, 2018, provides an alternative procedure for claiming such refunds.

In this case, the petitioner has encountered an issue regarding the refund of Integrated Goods and Services Tax (IGST) despite having paid it. An exception has been made to allow the refund of IGST through an officer interface, where the officer can verify the payment based on GST return information forwarded by the GST Network (GSTIN). This is in line with the decision mentioned in a Central Board of Excise and Customs (CBEC) Circular No. 8/2018-Cus dated 23.03.2018.

The petitioner claims that their mistake is similar to the one referred to in the aforementioned CBEC Circular. They argue that the department can check the lower drawback availed from the shipping bill filed by the petitioner and that a similar facility should be extended to them as was done in the case referenced in the Circular.

Due to this inadvertent error, the petitioner states that they have been deprived of a significant refund amount of IGST. Despite sending repeated reminders to the respondents, the petitioner has not received the refund. The last reminder sent by the petitioner was on 06.09.2018, urging the respondents to refund the IGST amount for the export of Polished Granite Slabs under the specified Shipping Bills.

The petitioner has filed a writ petition seeking a refund of Integrated Goods and Services Tax (IGST) paid on exported goods, despite having made an inadvertent error in declaring the Drawback Code on the shipping bills. The petitioner asserts that this error, which involved declaring the Drawback Code as 680203A instead of 680203B, should not deprive them of the IGST refund. The petitioner references CBEC Circular No. 8/2018-Cus dated 23.03.2018, which allows for IGST refunds through an officer interface in cases of similar errors. This circular permits officers to verify the actual payment of IGST based on GST return information, thus facilitating refunds even when mistakes are made in shipping bill declarations.

The petitioner argues that the department can easily verify the correct Drawback Code from the shipping bills and extend the same facility as provided in the aforementioned circular. Due to this inadvertent error, the petitioner claims they have been unjustly deprived of a significant IGST refund. They have repeatedly requested the respondents to process the refund, with the latest reminder sent on 06.09.2018. However, the respondents have not refunded the IGST amount, prompting the petitioner to file this writ petition.

In their counter affidavit, the respondents admit that the petitioner made an error in declaring the Drawback Code and acknowledge that the petitioner is entitled to the IGST refund. However, they state that the refund could not be processed because the IGST refund system is automated, and the Export General Manifest (EGM) for the shipping bills in question has already been closed by the computer system. This closure prevents any amendments to the shipping bill, thus blocking the refund process.

The respondents do not dispute the circulars cited by the petitioner, which support the petitioner’s claim for an IGST refund despite the error in the Drawback Code. However, they maintain that the current system limitations and the closure of the EGM have prevented them from processing the refund.

In a writ petition filed by the petitioner regarding the refund of Integrated Goods and Services Tax (IGST) on exported Polished Granite Slabs, the petitioner argues that due to an inadvertent error in the shipping bill, the refund has been wrongly withheld. The error involved the incorrect declaration of the Drawback Code as 680203A instead of 680203B. The petitioner contends that this mistake is similar to the one addressed in the CBEC Circular No.8/2018-Cus dated 23.03.2018, which allowed for refunds despite such errors through an officer interface that verifies actual IGST payments based on GST return information.

The petitioner asserts that the department can verify the lower drawback from the shipping bill and should extend the same corrective facility as mentioned in the CBEC Circular. Due to this error, a significant refund amount has been deprived, and despite multiple reminders to the respondents, the IGST refund has not been processed, leading to the filing of the writ petition.

In their counter affidavit, the respondents admit the petitioner’s error in declaring the wrong Drawback Code and acknowledge the petitioner’s entitlement to the IGST refund. However, they explain that the refund could not be processed because the system-generated refund process is tied to the Export General Manifest (EGM), which has already been closed for the shipping bills in question, making amendments to the shipping bill impossible once it has moved to history status.

The respondents do not dispute the circulars cited by the petitioner, including Circular No.05/2018 and Circular No.08/2018, which suggest alternative mechanisms for correcting such errors and processing refunds. The court heard arguments from both the petitioner’s and respondents’ counsel, with the petitioner’s counsel emphasizing that the IGST refund is undisputedly payable but has been hindered solely due to the coding error.

The case revolves around a dispute concerning the refund of Integrated Goods and Services Tax (IGST) for exported Polished Granite Slabs. The petitioner contends that due to an inadvertent error in declaring the drawback code on their shipping bills, specifically stating code 680203A instead of 680203B, they were denied the IGST refund. Despite repeated reminders to the respondents (presumably customs authorities), the refund was not processed because the system automatically processes IGST refunds and cannot be overridden once the Export General Manifest (EGM) is closed.

The petitioner cites CBEC Circular No. 8/2018, dated 23.03.2018, which allows for exceptions to process IGST refunds through an officer interface in cases where errors such as incorrect declaration of IGST payment status (‘NA’ instead of ‘P’) or invoice mismatches (error codes SB005 and SB006) occur. The circular provides a mechanism for such refunds, even in cases where the system limitations prevent automatic processing.

In response, the respondents admitted in their counter affidavit that the petitioner’s error was inadvertent and that they are entitled to the IGST refund, but due to system constraints, it could not be processed automatically. They acknowledge the applicability of Circular No. 5/2018 and Circular No. 8/2018, which provide alternative mechanisms for correcting errors in export declarations and processing IGST refunds.

During the hearing, counsel for the petitioner emphasized the similarity of their case to those covered under Circular No. 8/2018, noting that the circular extends relief for errors similar to the petitioner’s, albeit primarily applicable to shipping bills filed up to 23.03.2018. Since the petitioner’s bills were filed on 07.09.2017, they argue that the circular should apply to their case, allowing for the refund through the officer interface as a one-time exception.

In summary, the petitioner seeks relief under Circular No. 8/2018 to rectify the inadvertent error in their export documentation, thereby enabling the refund of IGST that has been withheld due to procedural limitations of the automated system. The case hinges on whether the court will allow the refund under the terms of the circular, notwithstanding the system’s automated closure of the EGM for the shipping bills in question.

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