TMI Blog2023 (3) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the IGST Act, such supplier is exempted from IGST. The notification No.15 of 2017 integrated tax dated 30th June, 2017 provides that the suppliers supplying the goods at SEZ can supply under the bond or electronic undertaking without payment of IGST and claim credit of ITC or can supply on payment of IGST or claim refund of taxes paid - It is an additional burden on the administration, the respondents authorities to verify whether the supplier has claimed the refund or not and whether the SEZ unit has actually paid the taxes to the supplier. A system since is not geared up for the same, the concern has multiplied. Any inadvertent payment of the amount of taxes to the supplier in wake of thousands of such transactions happening everyday in the SEZ, it is urged that no exceptions be made. An attempt is made to distinguish the matter on the facts and particularly, since the petitioner is non- SEZ by pointing out that the one which is decided in M/s. Britannia Industries [ 2020 (9) TMI 294 - GUJARAT HIGH COURT ] is in relation to the credit of IGST distributed by ISD for the services pertaining to the SEZ unit, as it was not possible for a supplier to file refund application to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to such unutilized Input Tax Credit (`ITC for short). It was done under the category of `Export of Goods/Services without payment of tax . The application had been moved under Section 54(3) of the Central Goods and Services Tax Act, 2017 (`CGST Act for short) and Rule 89(4) of the Central Goods and Services Tax Rules, 2017 (`CGST Rules for short). 3. The show cause notice was issued on 28.10.2020, reply to which had been given by the petitioner. The Assistant Commissioner, on 23.11.2020, rejected the refund claim of the petitioner vide Order in Original No.GSTD-VII/Vad-I/AC/Ref/04/SE Forge/2020-21 dated 23.11.2020. 4. Aggrieved, the petitioner preferred appeal before the Commissioner, CGST and Central Excise (Appeals), Vadodara, which rejected the appeal on 3.2.2021 vide OIA No.VAD-CGST-001-APP-ADC-107-2020- 21. 5. Another refund application dated 12.3.2022 in Form GST RFD-01 vide ARN AA2403220420117 for the period of January-2020 to November-2021 amounting to Rs.22,64,582/- has been made. Provisional Refund Order was issued in FORM GST RFD-04 on 27.3.2022 for refund of Rs.18,11,665/-. 6. The show cause notice was in issued FORM GST RFD-08 dated 28.4.2022 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law including the benefit of tax free supply from suppliers located in Domestic Tariff Area (`DTA for short) under the CGST and IGST and Rules made thereunder. 9. According to the respondent, the petitioner has received the supplies from DTA unit on which DTA unit charges GST. The petitioner filed refund claim dated 28.9.2020 under the category of `Export of goods/service without payment of tax of unutilized Input Tax Credit for the period from September, 2018 to December, 2019 amounting to Rs.8,88,079/- before the respondent no.3. The rejection of the refund claim on 23.11.2020 is after following principle of natural justice. The appeal has been filed against the order dated 23.11.2020 before the respondent, which after following due process, is rejected. The appellate authority upheld the order issued by respondent no.1. 10. It is further contended that the petitioner filed refund claim amounting to Rs.22,64,582/- for same purpose for the period from January, 2020 to November, 2021, which is rejected vide order dated 11.5.2022. 11. It is the case of the respondent that Section 2(19) of the IGST Act provides that SEZ shall have the same meaning as assigned to it in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributed by the ISD. As per Section 2(61) of CGST Act, 2017, Input Service Distributor means : (a) It is the office of supplier of goods and/or services (b) The said office receives tax invoices towards receipt of input services (c) The said office distributes credit of CGST/SGST/IGST/UTGST to a supplier of goods/services having same PAN (d) The said office issues tax invoice or other prescribed documents for distribution of credit. A supplier of goods/services may have various offices such as head office, registered office, regional office, marketing office, branch, godown, sales depot etc., which avail various input services such as security services, communication charges, courier expenses, housekeeping expenses to name a few, and pay service tax. Such units and premises may obtain registration as an Input Service Distributor for availment of credit on such input services and distribution of credit to other units to resolve the challenge of efficient utilization of accumulated credit. A sole SEZ unit cannot sit at par with credit distributed by Input Service Distributor. 13. The essential anxiety on the part of the respondent is that if the payment of amount of tax is already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersus Union of India (Coram : J.B. Pardiwala,J (as His Lordship then was) and Bhargav Karia,J), where the petitioner unlimited company had filed that petition through their Director and it was situated in SEZ. It filed an application for refund in Form GSTRF3018 with regard to the credit of integrated goods and service tax distributed by the Input Service Distributor (`ISD for short) for the services pertaining to the SEZ unit. It was also the case of the petitioner that since it was a SEZ unit making zero rated supplies under the GST, was not in a position to utilize the credit of ITC of IGST from its IST, which remained unutilized in electronic credit ledger and hence, the application to claim such refund was made. The same has been dealt with by the Court extensively. The Court has not upheld the stance of the department that the petitioner would not be entitled to seek the refund of the ITC paid in connection with the goods or services supplied to the SEZ unit. So, the relevant findings and the observations would require reproduction. 16. Paragraph 19 onwards are as under : 19. Having heard the learned advocates for the respective parties and having gone through the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment: Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies. Xxx Integrated Goods Service Tax Act,2017 16. (1) zero rated supply means any of the following supplies of goods or services or both, namely: (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zerorated supplies, notwithstanding that such supply may be an exempt supply. (3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely: (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n invoice means invoice conforming to the provisions contained in section 31; (ii) where the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer. (3) Where the application relates to refund of input tax credit, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed. (4) In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero rated supply of services) x Net ITC Adjusted Total Turnover (A) Refund amount means the maximum refund that is admissible; (B) Net ITC means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; (C) Tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Finance, notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321(E), dated the 23rd October, 2017; or (b) availed the benefit of notification No. 78/2017- Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299(E), dated the 13th October, 2017, the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted. (5) In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 96(4) makes it abundantly clear that the claim for refund can be withheld only in two circumstances as provided in subclauses (a) and (b) respectively of clause (4) of Rule 96 of the Rules, 2017. 27. In the aforesaid context, the respondents have fairly conceded that the case of the writ-applicant is not falling within sub-clauses (a) and (b) respectively of clause (4) of Rule 96 of the Rules, 2017. The stance of the department is that, as the writ-applicant had availed higher duty drawback and as there is no provision for accepting the refund of such higher duty drawback, the writ-applicant is not entitled to seek the refund of the IGST paid in connection with the goods exported, i.e. 'zero rated supplies'. 28. If the claim of the writ-applicant is to be rejected only on the basis of the circular issued by the Government of India dated 9th October 2018 referred to above, then we are afraid the submission canvassed on behalf of the respondents should fail as the same is not sustainable in law. 29. We are not impressed by the stance of the respondents that although the writ-applicant might have returned the differential drawback amount, yet as there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot lodge an appeal taking the ground which is contrary to the circular. 6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. 7. As noted in the order of reference the correct position vis-a-vis the observations in para 11 of Dhiren Chemical s case (supra) has been stated in Kalyani s case (supra). If the submissions of learned counsel for the assessee are accepted, it would mean tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise, Bolpur v. Ratan Melting and Wire Industries (2008)13 SCC 1, it has been held that circulars and instructions issued by the Board are binding on the authorities under respective statute, but when this Court or High Court lays down a principle, it would be appropriate for the Court to direct that the circular should not be given effect to, for the circulars are not binding on the Court. In the case at hand, once circular dated 15.04.1994 stands withdrawn vide circular dated 16.04.2001, the appellant-assessee cannot claim the benefit of the withdrawn circular. 27. The controversy herein centres round the period from 1st April, 2001 to 31st March, 2002. The period in question is mostly post the circular dated 16.04.2001. As we find, the appellant-assessee has pleaded to take benefit of the circular dated 15.04.1994, which stands withdrawn and was only applicable to the notification dated 07.03.1994. It was not specifically applicable to the notification dated 21.01.2000. The fact that the third paragraph of the notification dated 21.01.2000 is identically worded to the third paragraph of the notification dated 07.03.1994 but that would not by itself justify the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the IGST refund. Thus, the circular will not save the situation for the respondents. We are of the view that Rule 96 of the Rules, 2017, is very clear. 35. In view of the same, the writ-applicant is entitled to claim the refund of the IGST. 36. In the result, this writ-application succeeds and is hereby allowed. The respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund. 21. In facts of the present case, instead of Rule 96 as was applicable in case of M/s. Amit Cotton Industries(supra), Rule 89 would be applicable which is pertaining to refund of the input tax credit. Rule 89 of the CGST Rules provides for procedure for application for refund of tax, interest, penalty, fees and prescribes that in respect of supplies to a SEZ unit, the application for refund has to be filed by the supplier of goods or services. The contention of the respondents that as the petitioner is not the supplier of the goods and services, the petitioner would not be entitled to file application for refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST distributed by ISD for the services pertaining to the SEZ unit, as it was not possible for a supplier to file refund application to claim the refund of ITC distributed by the ISD. It is also the stand of the department that the matter is pending in the form of SLP No.13431 of 2021 before the Apex Court. It is fairly admitted that no stay has been granted. We noticed that not only this decision but also M/s.IPCA Laboratories versus Commissioner in Special Civil Application No.638 of 2021 covers this issue squarely with a specific undertaking having been tendered along with the application for the refund that the supplier has not claimed any refund and any eventuality of the supplier having been given the refund, the petitioner is taking the responsibility to make good the amount which may have been given will need to be borne in mind and accordingly, this petition is allowed, quashing the order passed by the Commissioner (Appeals) for the period of September, 2018 to December, 2019 and Assistant Commissioner for the period of 2020 to November, 2021 that the respondent grant the refund of ITC to the petitioner after proper verification and by obtaining a specific undertaking / bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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