Procedural irregularities should not obstruct legitimate claims for export incentives; the court directed reconsideration of the refund claim under appropriate rules.

ORDER

The petitioner has challenged the impugned Order-in-Original No. 01/2022 – GST, dated 23.03.2022 passed by the fifth respondent. By the impugned order, the fifth respondent has confirmed the demand proposed in the Show Cause Notice that preceded with the impugned order. Operative portion of the impugned order reads as under:-

“ORDER

i. I confirm the demand of an amount of Rs. 22,50,53,102/- (Rupees Twenty Two Crore Fifty Lakh Fifty Three Thousand One Hundred and Two only) (IGST: Rs.22,50,53,102/-) made on M/s. Shobikaa Impex Private Limited, Karur towards the ineligible refund of IGST paid on exports availed by them during the period from January, 2019 to September, 2020, made under Section 74(1) of Central Goods and Services Act, 2017 read with the Section 20 of the IGST Act, 2017 along with the corresponding provisions of the SGST Act and I determine the same under Section 74(9) of the CGST Act, 2017 read with read with the of the IGST Act, 2017 along with the corresponding provisions of the SGST Act;

ii. I order that M/s. Shobikaa Impex Private Limited, Karur shall pay interest at appropriate rates on the amount confirmed as in Sl.No.(i) above, under the provisions of Section 50 of the CGST Act, 2017 read with the Section 20 of the IGST Act, 2017, along with the corresponding provisions of the SGST Act; and

iii.I impose a penalty of Rs.22,50,53,102/- (Rupees Twenty Two Crore Fifty Lakh Fifty Three Thousand One Hundred and Two only) on M/s. Shobikaa Impex Private Limited, Karur under Section 122 (2)(b) of the CGST Act 2017 read with the Section 20 of the IGST Act, 2017, along with the corresponding provisions of the SGST Act.”

2. The reasons given in the impugned order for rejecting the refund claims filed by the petitioner under Rule 96 of the CGST Rules, 2017 read as under:-

“Section 54 of the CGST Act, 2017 provides for refund of tax paid and input tax credit which has been accumulated in certain conditions and this section also lays down conditions subject to which the refund can be claimed. Thus, in case if any exporter choses the option under Section 16(3)(b) as above, the conditions, safeguards and procedures prescribed thereon have to be adhered to, which, in this case, are provided for under Rule 96(10) of the CGST Rules, 2017 . From the provisions of Section 16 of IGST Act, 2017, it is clearly seen that the benefit of refund of IGST paid goods or services supplied is restricted to the case of making zero rated supplies. Rule 96(10) was inserted under the powers conferred under Section 164 of CGST Act, 2017 in order to prevent exporters from availing double benefits of duty free / concessional procurement of inputs by availing the benefit under the relevant notification and of refund of IGST paid on exports as it will tantamount to monetization of Input Tax Credit which is attributable towards the non-export supplies. Thus, Rule 96(10) of the CGST Rules, 2017 seeks to prevent an exporter who is receiving the goods (inputs) availing the benefit of certain notifications under which they supply goods without payment of tax or reduced rate of tax, from exporting their final products on payment of integrated tax by way of utilizing their ITC which may not be attributable to the export goods. In other words, the provisions of Rule 96(10) of CGST Rules, 2017 are intended to ensure that the exporter does not utilize the input tax credit availed on other domestic supplies received for making the payment of IGST on exports. Thus, Rule 96(10) of CGST Act, 2017 invariably bars an exporter to pay IGST on exports when they have procured inputs by way of availing benefits under Notification No. 48/2017- Central Tax dated the 18.10.2017, Notification No. 78/2017-Cus