Vedanta Limited VS Commissioner of Customs (Drawback)

The petitioner, a company engaged in exporting goods, paid Integrated Goods and Service Tax (IGST) on its exports and subsequently sought a refund of these taxes. They exported goods using 512 invoices across 71 shipping bills, amounting to IGST payments totaling Rs.94,42,39,026, as required under Section 16(3) of the IGST Act.

During the export process, the petitioner encountered a situation where prices fluctuated on the London Metal Exchange, necessitating revisions to the prices listed on 442 invoices covered by 61 shipping bills. As a result of these price adjustments, the petitioner paid additional IGST amounting to Rs.2,02,94,956 on the differential export value.

Following these transactions, the petitioner filed a refund claim totaling Rs.94,42,39,026, which represented the original IGST paid, along with the additional IGST paid due to the fluctuation in London Metal Exchange rates.

In summary, the petitioner exported goods, paid IGST in accordance with the IGST Act, made adjustments for price variations, paid additional IGST accordingly, and subsequently sought a refund encompassing both the initial IGST payments and the additional IGST paid due to market fluctuations.

The petitioner, a company engaged in exporting goods, has filed for a refund of Integrated Goods and Service Tax (IGST) paid on its exports. They exported goods via 512 invoices covered by 71 shipping bills and paid IGST amounting to Rs. 94,42,39,026 under Section 16(3) of the IGST Act. Subsequently, due to fluctuations in London Metal Exchange rates, prices were revised for 442 invoices across 61 shipping bills, resulting in an additional IGST payment of Rs. 2,02,94,956.

Upon claiming a refund totaling Rs. 94,42,39,026 for the initial IGST amount and Rs. 2,02,94,956 for the additional tax paid due to price variations, the petitioner received the first amount but encountered difficulty with the refund of the balance Rs. 2,02,94,956. The respondents attributed this issue to limitations in their automated refund processing system, which does not account for manual intervention. Despite deliberations, the authorities acknowledged the need to address such discrepancies and referred to Circular No. 40 of 2018 issued by the fourth respondent (likely the Central Board of Indirect Taxes and Customs), which highlights instances where errors in declaration or system processing have led to discrepancies in refund amounts.

The circular aims to rectify such issues, providing relief to exporters affected by incorrect IGST refund amounts due to errors in declaration, omission of Compensation Cess details, or typographical errors in customs processing. It underscores efforts by the authorities to resolve disputes and improve the refund process for exporters, albeit within the confines of their current system capabilities.

In essence, the petitioner’s case underscores systemic challenges in refunding IGST amounts accurately, despite compliance with tax obligations, and highlights ongoing efforts by authorities to streamline processes and address grievances through regulatory measures like circulars and procedural adjustments.

The petitioner, a company exporting goods, paid Integrated Goods and Service Tax (IGST) amounting to Rs. 94,42,39,026 under Section 16(3) of the IGST Act. They exported goods via 512 invoices covered by 71 shipping bills. Due to fluctuating rates on the London Metal Exchange, prices changed for 442 invoices covered by 61 shipping bills, resulting in an additional tax payment of Rs. 2,02,94,956. The petitioner subsequently claimed a refund of both the initial IGST amount and the additional tax paid due to price revisions, totaling Rs. 96,45,33,982.

While the authorities refunded Rs. 94,42,39,026, they did not refund the balance of Rs. 2,02,94,956, citing system limitations that prevented manual processing. In response to such issues, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 40 of 2018, acknowledging discrepancies where the refund amount was lower than what exporters had actually paid. This was attributed to errors in declaration, omission of Compensation Cess details, or typographical mistakes during refund processing.

To address these challenges, CBIC introduced an officer interface-based facility in the Indian Customs EDI System (ICES) for processing eligible differential IGST refunds. This facility resembled procedures outlined in Circular No. 05/2018-customs, ensuring relief for exporters affected by such discrepancies. Exporters were instructed to submit a Revised Refund Request (RRR) to designated authorities, who would verify and approve the revised refund amount through ICES. Once approved, a new refund scroll would be generated specifically for the differential amount.

The circular emphasized the importance of accurate documentation and customs officers’ diligence in preventing similar issues in the future. It highlighted the temporary availability of this facility for shipping bills filed up to November 15, 2018, cautioning exporters to avoid recurring mistakes as future provisions might differ. Detailed guidance from the Directorate of Systems ensured proper implementation and communication across all system managers involved in the refund process.

In essence, the petitioner’s case reflects broader challenges in automated refund systems for IGST, prompting regulatory responses aimed at improving accuracy and efficiency in handling such claims through the customs framework.

Download PDF:

For Reference Visit:

Read Another Case Law:

GST Case Law: