Legal principle

On a conjoint reading of Sections 54 and 56 of the CGST Act, the Department must process export IGST refunds in a time-bound manner and delayed refunds attract interest under Section 56, even where the Department claims the delay was due to bona fide administrative processes, particularly once the order underlying the withholding has been set aside in appeal.

Court decision

The writ petition succeeded: Rule was made absolute in terms of prayer clause (b), obligating the Department to pay interest in terms of Section 54 CGST Act read with Section 16 IGST Act (through Section 56) on the delayed IGST refund, from the date of filing the shipping bills to the date of actual refund, with compliance directed within four weeks; the refund of Rs.76,11,150 had already been granted during the pendency of the petition.

Facts

The petitioner, proprietor of Guru Nanak Motor House (dealing in parts/accessories of motor vehicles and mobile accessories), exported 'SD Super-Fast Data Sync' cables and related items under 30 shipping bills between 21 December 2018 and 14 January 2019, having paid IGST at the time of procurement. On 22 January 2019 the SIIB seized the goods under Section 110 of the Customs Act alleging mis-declaration of value, and the Order-in-Original dated 03.03.2020 rejected the declared FOB value under Rule 8 of the Customs Valuation Rules 2007 (re-determining it under Rule 6), restricted drawback (s.75) and MEIS, confiscated the goods under s.113(i) with a redemption fine option under s.125, ordered recovery of excess drawback under Rule 17 of the Drawback Rules 2017, and imposed penalties of Rs.1,00,000 each under ss.114(iii) and 114AA. The Commissioner (Appeals) set aside this order on 25 June 2021 for breach of natural justice (no s.110(2) show-cause notice within six months of seizure, no personal hearing) and on merits, and the Tribunal dismissed the Department's appeal on 03 December 2021, which the Department accepted; the goods were released and no investigation remained pending. Despite this, the IGST refund was kept on hold under an alert; the refund of Rs.76,11,150 was released during the pendency of the petition, and the petition claimed interest on the delayed refund under s.54 CGST Act read with s.16 IGST Act.

Key provisions

• Rule 6, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Determination of value where value can not be determined under rules 3, 4 and 5
• Section 75, Customs Act, 1962 — Drawback on imported materials used in the manufacture of goods which are exported
• Section 113(i), Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 114(iii), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 50(2), Customs Act, 1962 — Entry of goods for exportation
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Rule 17, Customs and Central Excise Duties Drawback Rules, 2017 — Repayment of erroneous or excess payment of drawback and interest
• Section 110(1), Customs Act, 1962 — Seizure of goods, documents and things