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June 23, 2022

IGST refund is permitted for zero-rated supplies despite duty drawback claim at higher rate

by CA Shivam Jaiswal in Income Tax

IGST refund is permitted for zero-rated supplies despite duty drawback claim at higher rate

Facts and Issue of the case

The fact of the case are the petitioner is a manufacturer and exporter of electrical connectors falling under Chapter 85 of the Central Excise Tariff.The petitioner avers that its factory is located at Dudhola, Palwal, Haryana.Insofar as the instant writ petition is concerned, the petitioner claims 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 is not disputed that the petitioner had paid IGST i.e., local tax @ 28% of the export value. The refund amount claimed against the two shipping bills i.e., bill no. 7837037 [dated 05.08.2017] is Rs. 8,00,621/-, while against shipping bill bearing no. 8697421 [dated 16.09.2017], the refund claimed is Rs. 8,25,349/-. These refunds are claimed under Section 16 of the IGST Act, 2017.

It appears 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.The petitioner having realised the mistake applied for correction. The respondent/revenue permitted the correction to be made upon payment of fee and penalty amounting to Rs.4,000/-, in respect of each of the aforementioned two shipping bills. This correction was made on 25.10.2018. In other words, the petitioner was allowed to correct the duty drawback code; the correct code being 853699“B”, as noted above.

Despite the correction having been permitted, the refund of IGST was not granted to the petitioner. The petitioner has remained engaged with the respondent/revenue in this regard since October, 2018. Because there was no movement in the matter, the petitioner was propelled to file the instant petition.

Observation by the court

The court had heard the learned counsel for the parties that the writ petition would have to be allowed.   The refund would have to be ordered and interest would also have to be granted at the rate indicated hereafter.There is no dispute that the petitioner has paid the IGST. Thepetitioner in terms of Section 16 of the IGST Act read with Section 54 of the CGST Act, 2017 is clearly entitled to refund of IGST. Rule 96 of the CGST Rules also clearly provides for refund of IGST in respect of zero rated supplies.

Insofar as the argument advanced on behalf of the respondent/revenue is concerned, which is, that because the petitioner claimed duty drawback at higher rate, and, therefore, it cannot be permitted now to seek refund of IGST, is factually incorrect.

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.

Thus, for the foregoing reasons, the respondent/revenue is directed to refund IGST against the aforementioned shipping bills.Furthermore, having regard to the fact that the necessary fee and penalty was paid as far back as on 24.10.2018, interest will be paid at the rate of 7% (simple) per annum, albeit from 25.10.2018, when correction was effected by the respondent.


The writ petition is disposed by the court.


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