Win for TATA Steel: Jharkhand HC Directs ₹1.23 Cr GST Refund for Wrongful Rejection of ITC on Compensation Cess [Read Order]

In a recent judgment, the Jharkhand High Court directed the State GST department to refund Rs. 1.23 crore to Tata Steel Ltd., ruling that the rejection of its Input Tax Credit (ITC) claim on Compensation Cess was based on invalid and extraneous grounds not supported by law.

Tata Steel (the petitioner) had filed a writ petition challenging the refund rejection order dated 16.05.2023, as well as the appellate order dated 25.10.2023, contending that it was entitled to a refund of the accumulated ITC of Compensation Cess on coal used in the manufacture of exported goods.

The company had exported goods under a Letter of Undertaking (LUT) without payment of IGST, leading to the accumulation of unutilized ITC. It applied for a refund for the financial year 2021–22 but the claim was denied on five grounds, including non-furnishing of payment receipts within 180 days of export, proof of export within 90 days, non-prosecution declaration, undertaking under Section 11(2) of the Cess Act, and a statement under Para 43(C) of the 2019 CBIC circular.

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The State GST department argued that the petitioner failed to provide necessary documents and declarations. The department insisted on compliance with procedural requirements such as timelines for export and payments, and argued that the rejection was consistent with statutory and circular guidelines.

The company countered these arguments by pointing out that most of the grounds cited for rejection had no legal basis. The court was informed that under Rule 89(2) of the CGST Rules and paragraph 48 of the 2019 CBIC circular, proof of receipt of payment is not required for export of goods, only for services.

The company further submitted that shipping bill reconciliations and export invoices had already been provided, and all payments were received within nine months as per RBI norms. The petitioner also submitted a CA certificate and relevant undertakings as part of its refund application.

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The bench comprising Chief Justice M. S. Ramachandra Rao and Justice Deepak Roshan observed that the CBIC’s own circulars made it clear that proof of payment and declarations sought by the department were not applicable in cases of export of goods under LUT without tax payment.

The court also observed that the appellate authority had failed to apply the correct legal principles, resulting in a miscarriage of justice. The court quashed the refund rejection order and the appellate order and directed the State GST authorities to process and refund Rs. 1,23,22,617 along with interest under Section 56 of the CGST Act, 2017, within twelve weeks from the date of receipt of the court’s order. The writ petition was allowed.

To Read the full text of the Order CLICK HERE

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