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2021 (11) TMI 152 - HC - GSTRefund of IGST - goods exported out of India - zero rated supplies - misdeclaration of description/value before allowing export - period February, 2021 to May, 2021 - HELD THAT - The provisions of the CGST Act and the IGST Act do not mandate the petitioner to verify the genuineness of the suppliers of its supplier, inasmuch as enough safeguards/mechanism are provided under the Act to recover the taxes, if not paid or wrong credit is availed by the petitioner s supplier or supplier s supplier - Inasmuch as no discrepancy has been found with regard to the suppliers of the petitioner, the refund claim by the petitioner cannot be denied to be processed on the ground that verification of the suppliers of the petitioner s supplier is pending. The reluctance on the part of the respondents in granting of refund to exporters upon completion of exports would result in taking away the incentive to export and would make the exports from the country unviable due to non-flow of funds in the form of refund assured under the Act. Further, the non-committal stand of the respondents in the counter indicating a time frame for completion of the verification in respect of L2 supplier also cannot be countenanced, since it is not the duty of the exporter, like the petitioner, to get such verification done, more so, when there is no such prescription to cause verification by the exporter, like the petitioner, before purchasing any goods from its supplier. The stand of the respondents in not completing the exercise, even if it is required to be undertaken at their end, is contrary to the instructions contained in internal circular No.20/16/07/2020-GST, dt.20.05.2020, issued by the Board wherein the Board had made changes to the SOP dt.23.01.2020 for verification of IGST refunds and specified that in future, all verifications are to be completed and report sent to the 5th respondent within a maximum period of three weeks of receipt of request for verification. The action of the respondents, and in particular the 2nd respondent, in not granting refund of IGST paid by the petitioner on exports made during the period - 15.02.2021 to 21.05.2021, in a sum of ₹ 14,78,99,959/-, cannot be held to be valid and also the non-grant of All Industry Drawback claimed by the 4th respondent, cannot be sustained. Petition allowed.
Issues Involved:
1. Refund of Integrated Goods and Services Tax (IGST). 2. All Industry Drawback and Brand Rate Drawback. 3. System alert and No Objection Certificate (NOC) for exports. Issue-wise Detailed Analysis: 1. Refund of Integrated Goods and Services Tax (IGST): The petitioner, an MSME unit engaged in manufacturing and exporting various copper products, sought a refund of ?14,78,99,959/- in IGST paid on exports made between February and May 2021. Under Section 54 of the CGST Act and Rule 96 of the CGST Rules, the petitioner argued that they were entitled to this refund. The petitioner filed the necessary shipping bills and returns, which should have triggered the refund process. However, the refund was withheld due to a system alert issued by the Deputy Commissioner of Customs, requiring 100% examination of the export consignment. Despite the petitioner providing all required details and undergoing verification, the refund was not processed. The court noted that the respondents justified the non-refund based on the system alert and the need to verify the suppliers up to two levels. However, the court found that the verification was completed, and the suppliers were found to be genuine. The court concluded that the respondents' failure to grant at least a provisional refund of 90% was unjustified and directed the 2nd respondent to process the IGST refund within three weeks. 2. All Industry Drawback and Brand Rate Drawback: The petitioner also sought the grant of All Industry Drawback of ?1,10,10,580/- and brand rate drawback of ?2,15,28,420/-. The respondents contended that the petitioner was identified as a risky exporter, which warranted further verification. The court observed that the verification of the petitioner and its suppliers was completed, and no significant discrepancies were found. The court directed the 4th respondent to grant the All Industry Drawback to the petitioner if the claim was in accordance with the Customs Act, 1962, and the Customs and Central Excise Duties Drawback Rules, 2017. 3. System Alert and No Objection Certificate (NOC) for Exports: The petitioner faced a system alert issued by the Risk Management Centre for Customs, which led to the suspension of the refund scroll and required 100% examination of export consignments. The respondents argued that the alert was based on data analytics identifying the petitioner as a risky exporter. The court noted that the verification reports from the jurisdictional authorities indicated that the export consignment and the suppliers were in order. The court criticized the respondents for not completing the verification within the stipulated three-week period as per the internal circular and for not providing a clear timeframe for the completion of the verification of L2 suppliers. The court held that the respondents' inaction was contrary to the instructions and directed the removal of the system alert and the issuance of the NOC. Conclusion: The court allowed the writ petition, directing the 2nd respondent to grant the IGST refund and the 4th respondent to grant the All Industry Drawback if the claims were in accordance with the law. The court emphasized that the respondents' reluctance to process refunds and drawbacks was unjustified and detrimental to the petitioner, especially given the completed verifications and the lack of significant discrepancies. The court also highlighted the importance of timely verification and processing of refunds to ensure the viability of exports and compliance with the statutory provisions.
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