Customs cannot Deny IGST Refund to Exporter even if Higher Rate of Duty Drawback was Availed: Madras HC [Read Order]

In a significant ruling, the Madras High Court, Madurai Bench, has held that the Customs Department cannot deny refund of Integrated Goods and Services Tax (IGST) to exporters merely on the grounds that they had availed a higher rate of duty drawback.

The decision was rendered by a Division Bench of the Madras High Court while entertaining a Writ Appeal and Civil Miscellaneous Petition as an intra-court appeal against a decision rendered by a Single-Judge Bench on a prior Writ Petition filed by the Respondent herein.

Read More: Interest for Delayed IGST Refunds start after 60 Days of Filing Shipping Bill: Bombay HC

The Respondent herein M/s.Modern India Products (Modern India), is an exporter of goods known as “absorbent gauze roll”. Modern India exported goods on September 26, 2017, valued at ₹12,72,827 and paid an IGST of ₹2,54,449. The respondent further applied for a refund of this IGST amount under Sections 16 and 54 of the IGST Act, 2017, read with Rule 96 of the CGST Rules, which permitted refund claims on zero-rated supply exports.

TDS Mistakes Cost You More Than You Think – Stay Compliant with This Handbook, Click Here

However, the Customs Department failed to act on the refund application, leading the petitioner to file W.P. (MD) No. 9796 of 2020 before the Madras High Court. A single bench ruled in favor of the petitioner on April 17, 2021, thus prompting the Customs Department to file the present appeal.

Read More: Case Digest on Refund under GST

Standing Counsel Mr. R. Nandakumar appearing for the Customs Department, argued that Circular No. 37/2018-Customs, dated October 9, 2018, explicitly prohibited IGST refunds when exporters have already availed a higher rate of duty drawback.

The Customs contended that the provisions of the Circular were squarely applicable to Modern India, contending that exporters choosing higher duty drawback rates do so voluntarily, relinquishing their right to IGST refunds as per the declarations made in their shipping bills.

Meanwhile, N. Sudalai Muthu represented the Respondent Modern India.

TDS Mistakes Cost You More Than You Think – Stay Compliant with This Handbook, Click Here

The division bench of Justice G.R. Swaminathan and Justice M. Jothiraman referenced the decision of the Gujarat High Court in M/s. Amit Cotton Industries v. Principal Commissioner of Customs (2019), where it was held that such circulars cannot supersede statutory provisions. He further relied on a previous ruling of the Madras High Court in M/s. Precot Meridian Limited v. Commissioner of Customs (2019), which reaffirmed this principle.

Read More: Registered Person making Zero Rated Supply eligible to Claim IGST Refunds: Madras HC

The Madras High Court further held that the statutory provisions under the CGST and IGST Acts take precedence over administrative circulars, and Rule 96 explicitly allows IGST refunds for zero-rated supplies, regardless of duty drawback claims.

Read More: Understanding Notice on Applicability of ITC in Export of Items Exempted from GST [Find Draft Format Here]

Dismissing the appeal by the Customs, the Madras High Court upheld the ruling of the preceding single-bench in favour of M/s.Modern India Products.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates