Directions issued by the Court are binding on the Authorities

[CA Bimal Jain]

The Hon’ble Gujarat High Court in the case of REAL PRINCE SPINTEX PVT. LTD. VERSUS UNION OF INDIA [2024 (1) TMI 32 - GUJARAT HIGH COURT] held that once a court has issued directions, same were binding upon authorities and they cannot take any reason to take a different view than directions issued by Court while exercising powers under Article 226 of Constitution of India. The Authorities have to comply with directions issued by the Court while sanctioning the refund of Integrated Goods and Service Tax (“IGST”) after deducting differential duty drawback with 7 percent simple interest as ordered.

Facts:

Real Prince Spintex (P.) (“the Petitioner”) engaged in the business of trading cotton yarn and cotton waste. Under the GST law, the said export of goods is declared as “zero rated supplies”. As per Section 16 of the Integrated Goods and Service Tax Act, 2017 (“the IGST Act”) provides two options to the Petitioner that is either to pay the IGST and get the refund of payment of IGST or not to pay the IGST and claim the refund of unutilised Input Tax Credit (“ITC”) against bond or letter of undertaking (“LUT”). Thus, under LUT, the Petitioner made exports from July 2017 till the LUT was obtained on payment of the IGST on such exports. 

Later, on expiry of LUT, the Petitioner erroneously selected the option of export without payment of tax by filing shipping bills for exports even though the Petitioner did not have the LUT and also claimed higher rate of duty drawback under the Customs Act, 1962 (“the Customs Act”). Additionally, the Clearing and Forwarding Agent (“CHA”) had erroneously selected the option of export without payment of tax while filing the shipping bill, the amount of the IGST paid was shown as Nil in the shipping bills and as a result thereof, the Customs Authorities did not grant the refund of the IGST paid on exports by the Petitioner though various correspondence was made with the Customs Authorities explaining the error committed by the CHA.

Thereafter, the Petitioner filed the refund for export on payment of the IGST for the period July to September, 2017. However, the refund was not granted on the grounds that the Petitioner had not claimed a higher rate of duty drawback. The Petitioner thereafter persuaded the matter with the Revenue Department (“the Respondent”) requesting to grant the refund after adjusting the differential duty drawback amount which was claimed erroneously because of the mistake committed by CHA. However, no response was received from the Respondent.

Consequently, the Petitioner filed Special Civil Application before this Court which was disposed of by the Court by passing an Order directing the Respondent to sanction the refund of IGST paid with regard to the exported goods with 7% simple interest from the date of shipping bill till the date of actual refund after deducting the differential amount of the duty drawback for the period between July, 2017 and September, 2017. On the direction of the court, the Petitioner made and application before the Respondent to implement the Order passed by this Court.

However, the Order (“the Impugned Order”) was passed pursuant to the directions of this Court and granted the refund by adjusting the differential duty drawback along with interest at the rate of 15% from the refund entitlement and further granted interest at the rate of 6% instead of 7% as directed by this Court. The Respondent also filed the Special Leave Petition against the Impugned Order passed by this Court which was dismissed by the Hon'ble Supreme Court.

Being aggrieved by the Impugned Order passed, the Petitioner filed an Appeal before the Appellate Authority which by order dated March 11, 2022, rejected the Appeal. Hence, aggrieved by the Impugned Order the present writ petition was filed.

Issue:

Whether the order passed by the court is binding on Authorities?

Held:

The Gujarat High Court in REAL PRINCE SPINTEX PVT. LTD. VERSUS UNION OF INDIA [2024 (1) TMI 32 - GUJARAT HIGH COURT] held as under:

• Held that, the Impugned Order is passed contrary to the directions issued by this Court. Once this Court has issued the directions, the same are binding upon the Respondent and they had no reason to take a different view than the directions issued by the Court while exercising the powers under Article 226 of the Constitution of India. The Respondent is bound by the directions issued by this Court and therefore, the Impugned Order was hereby quashed and set aside.
• Directed that, the Respondents to comply with the directions issued by this Court while sanctioning the refund of the IGST after deducting the differential duty drawback with 7% simple interest as ordered by this Court in the Special Civil Application. Such exercise shall be completed within a period of four weeks from the date of receipt of the copy of this Order.

(Author can be reached at info@a2ztaxcorp.com)