In a major relief to Phoenix Contact India Private Ltd, a two-judge bench of the Delhi High Court comprising Justice Rajiv Shakdher and Justice Poonam A. Bamba has held that IGST refund is allowable on zero-rated supplies. Earlier, the department has denied the claim pointing out the correction in two shipping bills and higher duty draw back claim.
The petitioner is a manufacturer and exporter of electrical connectors falling under Chapter 85 of the Central Excise Tariff, claimed refund of Integrated Goods and Service Tax (IGST) against two shipping bills bearing nos. 7837037, dated 05.08.2017 and 8697421, dated 16.09.2017.
It was claimed that the petitioner by oversight had claimed duty drawback by referring to the code no. 853699“A” instead of 853699“B”. Resultantly, the respondent/revenue granted duty drawback @ 2% of the FOB (free on board) value of exports amounting to Rs. 1,17,162/-, and not the IGST paid on the goods exported.
Before the High Court, the department contended that because the petitioner claimed duty drawback at higher rate, and, therefore, it cannot be permitted now to seek refund of IGST.
Rejecting the above argument of the department terming the same as “factually incorrect”, the High Court observed that “there is no dispute that the petitioner has paid the IGST. The petitioner in terms of Section 16 of the IGST Act1 read with Section 54 of the CGST Act, 2017 is clearly entitled to refund of IGST. Rule 96 of the CGST Rules 3 also clearly provides for refund of IGST in respect of zero rated supplies.”
“The Schedule, appended to the notification dated 31.10.2016 [which came into force on 15.11.2016] and is marked as Annexure P-4,[ appended on page 37 of the case file] shows that the duty drawback against tariff entry no. 853699 with respect to Column A [drawback rate when CENVAT facility has not been availed] and Column B [drawback rate when CENVAT facility has been availed] is identical i.e., 2%. Therefore, paragraph 3 of the circular dated 09.10.2018 will have no application in the instant case,” the Court said.
The Court further noted that the petitioner had sought amendment of the duty drawback code, which was permitted upon payment of Rs. 4,000/- as fee and penalty in respect of each of the subject shipping bills. This amendment was permitted in October, 2018.
“Despite this correction having been permitted, the refund of IGST was not ordered,” the Court said.
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