Refund of IGST cannot be withheld due to risky exporter

- Sales Tax - Soham Mashruwala

There is a lot of controversy regarding refunds under the GST law. A very awkward situation arises as the exporter does not get the refund. Under the GST law, exports, supplies of cess units are known as zero rated supplies. No separate application for refund is required in case the export is made on payment of IGST and the refund is paid through the system based on the shipping bill. A DGARM account has been set up by the government to monitor the export of goods and in case of non-compliance, it is identified as 'risky export' and the officer is directed to collect (field) information. And then a No Objection (NOC) certificate is issued by DGARM if deemed fit. In such case refund of IGST is not paid by customs. In this regard recently by the Gujarat High Court. Choksi Exports (SCA No. 23798 of 2022, dated 3-2-2023) has given a very interesting judgment which is discussed in today's article.

The facts of the case

Applicant's refund of IGST amounting to Rs.14,80,27,927 is withheld which is recoverable under section 54 (6) and rule 91 (1). The business of the petitioner is manufacture and export of organic pigments. The applicant was registered as a 'risky export' in pursuance of which on 10th December 2021 the account officer went to the place of business of the applicant to verify the facts as per Government Circular No. 131/1/2020 GST dated 23-1-2020 the applicant submitted all information on 17th January 2022 Email Posted by Apart from this, all other information and other compliances which were to be done were not completed and the refund was not received by the petitioner on 15-6-2022. However, a petition has been filed before the High Court due to non-receipt of refund.

Petitioner's contention

It was contended by the petitioner that the refund amounting to Rs.14,80,27,927 is wrongly withheld which is against Section 54 (6) and Rule 91 (1) as per this provision 90% of the refund amount by the account within seven days of the shipping bill. From receiving comes giving.

Refund not to be paid only when tax evasion of more than two and a half lakh rupees has been committed or prosecution for any offense has been made in the next five years as per Government circular dated 23-1-20 and the refund has been paid by the account despite all actions taken by the applicant and the compliance thereof. not The account's contention that a refund is not available if purchased from a 'risky supply' is not correct.

Argument of account

It was contended by the account that the goods purchased by the petitioner from L2 risk suppliers were claimed in tax credit and hence refund is not payable.

Judgment of the High Court

The Gujarat High Court specifically noted that, as per the provisions of Section 54 (6) and Rule 91 (1), the account is supposed to be refunded 90%, but it has not been paid. In order to get a refund the petitioner paid the L2 Risk supplier's tax credit with interest which was not required even though the refund was wrongly withheld. Ordered to pay the refund within three weeks allowing the petitioner's plea.