Abi Egg Traders VS Assistant Commissioner, Salem

The petitioner, a sole proprietary involved in exporting eggs, found themselves entangled in a tax dispute. They argued that since eggs were classified as ‘nil’ rated commodities, there should be no tax liability on their export. Consequently, they believed they were entitled to claim Input Tax Credit (ITC). The crux of their argument lay in the interpretation of tax laws, particularly regarding the treatment of exported goods under the GST regime. They contended that denial of ITC amounted to double taxation, which was not intended by the legislature. The case delved into the nuances of tax legislation, exploring the legislative intent and the practical implications for businesses engaged in export activities. It highlighted the complexities surrounding tax compliance in a globalized economy, where businesses often operate across borders. Ultimately, the resolution of the dispute carried significant implications not only for the petitioner but also for the broader regulatory framework governing international trade and taxation.

The petitioner, a sole proprietorship involved in exporting eggs, contends that since eggs are ‘nil’ rated, there’s no tax liability on exports, and therefore, they are entitled to Input Tax Credit (ITC) accumulated on exports. They filed a return for the period from August 1, 2017, to March 31, 2018, using Form GSTR-3B in May 2018.

However, the petitioner claims to have mistakenly opted for “with payment of tax” instead of “without payment of tax” for exports. As of March 31, 2018, the ITC in the Electronic Credit Ledger (ECL) amounted to Rs. 7,04,851/-. But according to the petitioner, upon filing the return, the ITC had increased to Rs. 11,63,200/-.

The petitioner did not provide documentary evidence to support the increased ITC figure at the time of filing the return in May 2018. They subsequently claimed a refund of Rs. 11,63,200/- on August 12, 2019, under Section 54(3) of the Central Goods and Service Tax Act, 2017 (CGST), along with Section 16(3) of the Integrated Goods and Service Tax Act, 2017 (IGST).

A notice of deficiency was issued on September 5, 2019, highlighting an error in the refund application. It’s important to note that a refund application requires the assessee to specify the grounds for claiming the refund, and the grounds provided in column 7 are crucial for this purpose.

The petitioner, a sole proprietorship engaged in exporting eggs, filed a return for the period of August 1, 2017, to March 31, 2018, under Form GSTR-3B in May 2018. As eggs are ‘nil’ rated, there is no tax liability on their export, entitling the petitioner to Input Tax Credit (ITC) accumulated on exports. However, an error occurred as the petitioner mistakenly opted for “with payment of tax” instead of “without payment of tax” for exports. Despite claiming an enhanced ITC of Rs. 11,63,200/- upon filing the return, no documentary evidence was provided to substantiate this increase from the initial Rs. 7,04,851/- available in the Electronic Credit Ledger (ECL) as of March 31, 2018.

On August 12, 2019, the petitioner applied for a refund of the ITC amounting to Rs. 11,63,200/- under Section 54(3) of the Central Goods and Service Tax Act, 2017 (CGST) read with Section 16(3) of the Integrated Goods and Service Tax Act, 2017 (IGST). However, a notice of deficiency was issued on September 5, 2019, highlighting the error in the refund application. The refund application should have cited grounds for the claim, where ground 7(b) regarding “export of services – without payment of tax” was deemed applicable by the petitioner. Yet, this ground was unavailable in the application, creating a discrepancy.

The petitioner, a sole proprietorship engaged in egg export, seeks Input Tax Credit (ITC) for exports, which are tax-exempt. They claim an ITC discrepancy between the filed return (GSTR-3B) and the actual amount. Initially, they erroneously selected “with payment of tax” instead of “without payment of tax” for export options. They filed a refund claim under Section 54(3) of CGST and Section 16(3) of IGST for Rs. 11,63,200/-, citing Section 7(b) (export of services without tax). However, they were forced to select the residuary ground (k) due to discrepancies between the refund application and GSTR-3B. The officer noted the claimed refund exceeds the available credit balance as of March 31, 2018. The petitioner clarified their stance, arguing for the credit on May 19, 2019, not March 31, 2018, as the refund application date. They highlighted the ECL balance enhancement only after filing GSTR-3B in May 2018. After subsequent communications and notices, the officer rejected the refund, tacitly accepting the petitioner’s ITC quantum explanation.

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