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File NO.APPL-ADCOGST/7/2020-GST- APL-CHD

, .. ---- .

OFFICE OF THE JOINT COMMISSIONER (APPEALS).

CENTRAL GOODS & SERVICES TAX (APPEALS) COMMISSIONERA TE.

CHANDIGARH. C. R. BUILDING. PLOT NO. 19, SECTOR 17-C.

CHANDIGARH, PH. 0172-2720240.

Appeal No. 08-11/ADC/AIGST/CHD/2019-20 DIN No. ~~ ~llU 5 5 D A 1..00'00 I t-I 5Y 6,

~ ORDER-IN-APPEAL

Order-in-Appeal No. CHD CGST-001-APPL-JC- 05-08 -2020-21 Oated-29.0S.2020

Name of the Appellants MIs Cadila Healthcare Limited, Swaraj Majra, Juddi Kalan, Tehsil Nalagarh, Baddi, Solan. (H.P.)

Refund Sanction Order No. & 270-273/RFD-06/CGST IBAD D 1/20 19-20 dated date 27.11.2019. Sanctioning Authority The Deputy Commissioner, Central Goods & Service

Tax Division-Baddi (H.P.) Amount of Refund Rejected Rs. 15,26,894/- -

Period of Dispute July, 2017 and August, 2017

MIs Cadila Healthcare Limited, Swaraj Majra, .Juddi Kalan, Tehsil Nalagarh, Baddi, Solan, (H.P.) (for brevity 'the appellants') have filed the present appeal against the Refund Sanction Order (Form GST-RFD-06) No. 270-273/RFD-06/CGST/BADDI/2019-20 da (j 27.11.2019 (for brevity 'the impugned order') passed by the Deputy Commissioner, C tral Goods & Service Tax Division-Baddi, (H.P.) (for brevity 'the Sanctioning authority').

2. Briefly stated the facts of the case are that the appellants had filed four Refund applications in RFD-01A filed on GST Portal on 29.11.2018 & 26.06.2019 under Section 54 of the Goods and Services Tax Act, 2017 (here-in-after referred to as 'the Act') for total refund amounting to Rs. 15,26,894/-. In two of the said applications (for Rs. 47,621/- & Rs. 35,694/-) the reason of claiming refund was mentioned as 'Short receipt of IGST paid on export of goods' whereas in the other two claims (for Rs.7,52,925/- and Rs. 6,90,654/-) the reason of claiming refund was mentioned as 'Excess Payment of Tax'.

2.1 While filing the above said four applications with the CGST Division, Baddi, involving Amount of Rs. 15,26,894/-, the appellants submitted that they had exported goods on payment of IGST; that as per Rule 34 of Central Goods & Services Tax Rules, 2017 (here­ in-after referred to as 'the Rules'), the rate of exchange for determination of value of taxable goods shall be the applicable rate of exchange as notified by the CBIC under Section 14 of the Customs Act,1962. However, due to oversight, the company considered rate of exchange as declared by Reserve Bank of India for determining IGST liability instead of rate of exchange as declared by Customs for the referred tax period and that the exchange rate of RBI was higher than the rate as per Customs, which had resulted in payment of additional IGST liability, that however, the refund was granted to the company considermq the rate

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notified by CBIC by the Customs authorities, therefore, the refund received by the appellants on export of goods was less than the actual liability of IGST discharged on export of goods.

3. On examination of the refund applications, a show cause notice (Form GST-RFD-08) was issued to the appellants vide C. No. V(18)R/GST/Baddi/176/2019 dated 20.09.2019, proposing rejection of refund on the ground that the application for refund of Integrated tax paid on goods exported out of India was to be filed with the Customs authorities instead with the CGST Division.

4. The matter was decided by the sanctioning authority vide the impugned order by referring to Section 16(3)(b) of the Integrated Goods & Services Tax Act, 2017; Rule 96 of the CGST Rules, 2017 and Instructions governing Export procedure and sealing of containerized cargo vide Circular NO.26/2017-Customs Dated 01/07/2017 issued by the Central Board of Indirect Taxes & Customs (CBIC) whereunder it was held that the Refund of Integrated Tax paid on goods exported out of India was to be dealt with by the Customs authorities and that any differential claim arising in that connection should also have been filed with Customs authorities. Further, it was held that CGST Division, Baddi with which the refund claims have been filed is not the competent authority for deciding their claims and accordingly, rejected the refund claims for RS.15,26,894/-, detailed below:

Month ARN Date of ARN Amount August 2017 AA0208171 025030 29/11/2018 7,52,925 July 2017 AA02071719392N 29/11/2018 6,90,654 August 2017 AA020619005118J 26/06/2019 47,621 July 2017 AA020619005116N 26/06/2019 35,694

Total 15,26,894 -

5. Feeling aggrieved, the appellants preferred the subject appeal on the facts and grounds which interalia are summarized as under:

5.1 That the appellants were entitled to refund of entire IGST paid on export of goods under Section 16 of the IGST Act; that as per Section 16 of the IGST Act, export of goods is treated as 'zero rated' supply, which can be made either with payment of tax or without payment of tax and that Section 16(3) of the IGST Act, entitles the appellants to claim refund of tax when the zero-rated supply is made with payment of tax which clearly suggests that refund of entire tax paid on 'zero rated' supply of goods or services can be claimed.

5.2 That Section 54(8)(a) of the CGST Act also provides for refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports. That Rs.11 ,03,54,1901- is the tax amount reflected on tax invoices issued at the time of export, reported in GSTR -1 and paid through GSTR 3B to the Government treasury which should be refunded as provided under Section 16(3) of IGST Act.

5.3 That GST was introduced from 1 July 2017; that the Central Excise Act 1944, prevailing in the pre-GST regime, granted rebate of duty paid on account of exports of goods; that similar provisions have also been enacted in the GST legislation vide Section 16 of the IGST Act read with Rule 96 of the CGST Rules; that both of these provisions (Central Excise as well as GST) provide for refund 1 rebate of taxes paid on export of goods and that accordingly, considering the consistent legislative framework and intention of the Government, one can take recourse of the circulars issued by the Government in the pre­ GST regime as apposite and pari-materia to the present scenario.

5.4 That there were several doubts with respect to determination of rebate amount (refund) in cases where prices of export-goods were quoted in foreign currency and ad

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valorem Central Excise duty was paid after converting the value in equivalent Indian rupee and that para 3 of the clarificatory Circular 510/06/2000-CX dated 3 February 2000 issued by the Central Board of Excise and Customs clearly stated that rebate of entire tax paid should be granted even in case the rebate sanctioning authority has reasons to believe that duty has been paid in excess of what should have been paid. The Circular further stated that the rebate sanctioning authority should not re-quantify the amount of rebate by applying some other rate of exchange prevalent subsequent to the date on which the duty was paid. Further, that the Circular provided clarity on a peculiar aspect that if the assessees were not granted full refund of entire tax paid, whether the rejected amount was to be re-credited and that it was specifically stated that as the assessees were supposed to be refunded the entire tax paid on export of goods, question of re-credit does not arise.

5.5 Reliance has been placed on the judgement of Paper Products Limited vs. Commissioner of Central Excise [1999(112) E.L. T.765 (S.C.) wherein the Hon'ble Supreme Court held that the departmental circulars are binding on the departmental authorities and they cannot take a contrary stand.

5.6 That the provisions of Central Excise laws, though not in force, ~an be referred for drawing an analogy as the rationale and legal principle of the GST Legislation are more or less similar to Central Excise laws. They have relied upon the following judicial precedents through which common reference has been made to Rule 18 of the Central Excise Rules, 2002 which provided for refund of duty paid on export of goods and not amount of duty payable. That the language of Section 16(3)(b) of the IGST Act and Rule 18 of the Central Excise Rules are not exactly same but in pari-materia.

a) Bharat Chemicals vs. Commissioner [2004 (170) E.L.T.568 (Tri.-Mumbai)] - Affirmed by the Bombay High Court [2015 (320) E.L.T. 337 (Born.)]

b) Gayatri Laboratories Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai [2006 (194) E.L.T.73 (Tri. - Mumbai)]

c) Nahar Industrial Enterprises Limited vs. Union of India [2009 (235) E.L.T.22 (P & H)]

5.7 That Rule 96 of the Rules deals with refund of IGST paid on the goods exported out of India, subject to fulfillment of certain compliance requirements like filing of shipping bill, reporting of export transaction in GSTR 38 and GSTR - 1 and that all compliances required under the Rule 96 of the CGST Rules have been duly undertaken by the appellants.

5.8 Further, that as per Rule 96(3) of the Rules, if an applicant has furnished valid return in form GSTR - 38 for the period, the amount of IGST paid in respect of the export transactions should be credited to the bank account of the applicant.

5.9 That conjoint reading of the Section 16 of the IGST Act and Rule 96(3) of the Rules, suggest that if the goods are exported out of India on payment of IGST, an assessee is eligible for refund of entire amount, which is paid as IGST. That it is worth noticing that the GST legislation prescribes for refund of the amount, which is paid, however, the refund of only partial amount has been granted.

5.10 That the appellants have made payment of IGST liability, filed GSTR 38 returns, filed shipping bills, on timely basis and hence are rightfully eligible to claim the refund of excess IGST liability discharged.

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5.11 That brief procedure of automatic processing of refund on export of goods is that the details of export tax invoices reported in table 6A of GSTR - 1 is transmitted electronically by the GSTN portal to the Customs portal, once the amount of tax as per GSTR - 1, GSTR - 3B and shipping bill matches, the refund is automatically processed, however, if there is a difference between the tax amounts mentioned in GSTR - 1, GSTR - 3B and shipping bill, the lowest of all is automatically processed as a refund. That in the instant case, the tax amount mentioned in the shipping bill (derived from CBIC exchange rate) was lesser than the tax amount reported in GSiR - 1 / GSTR - 3B (derived from RBI exchange rate), the tax amount mentioned in shipping bill, being the lowest of all, was granted as refund and the balance amount is pending to be received.

5.12 That the modus operandi of automatic refund processing system is inconsistent with the intent of the Rule 96 of the Rules in the cases where the higher IGST amount has been paid in GST returns (basis RBI exchange rate) as compared to IGST amount reflected in shipping bill (basis CBIC exchange rate) and that the balance amount, not granted as refund due to defined modus operandi of automatic refund processing system, be granted to the appellants.

5.13 That even if for the sake of argument, one were to contend that the refund should not be allowed under Rule 96 of the Rules, the appellants has paid tax which ought not have been paid. That Rule 34(1) of the Rules prescribes the rate of exchange for determination of value of supply of goods, relevant extract of the said Rule effective till July 26, 2017 has been reproduced below:

"34. Rate of exchange of currency, other than Indian rupees, for determination ofvalue.- The rate of exchange for the determination of the value of taxable goods or services or both shall be the applicable reference rate for that currency as determined by the Reserve Bank of India on the date of time of supply in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act. rs

5.14 That the appellants had correctly considered the exchange rate determined by RBI for the tax invoices raised till July 26, 2017, however, the shipping bills were prepared on the basis of the exchange rate notified by CBIC under Section 14 of the Customs Act, 1962 and the refund was processed, on the basis of the amount mentioned in the shipping bill which was lesser than the tax liability already discharged based on exchange rate of RBI. That the appellants should not suffer merely because of contradiction in the provision of GST legislation and Customs legislation.

5.15 That subsequently, Rule 34 of the Rules were amended vide Notification No. 17/2017 - Central Tax dated 27 July 2017. The relevant extract of amended Rule 34 has been reproduced below:

"34. Rate of exchange of currency, other than Indian rupees, for determination ofvalue.-

(1) The rate of exchange for determination of value of taxable goods shall be the applicable rate of exchange as notified by the Board under section 14 of the Customs Act. 1962 for the date of time of supply of such goods in terms of section 12 of the Act. rt

5.16 That w.eJ. July 27, 2017, the appellants were required to consider the exchange rate notified by CBIC under Section 14 of the Customs Act, 1962 for determination of value of taxable goods under GST, however due to oversight, the appellants continued to issue tax

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invoice based on the exchange rate of RBI, which in fact was higher than the exchange rate of CBIC used for generating shipping bills. The following illustration has been given by the appellants to explain their point:

Taxable IGST@ As per tax invoice I As per shipping bill Refund value 18% Exchange IGST@ Exchange IGST@ granted (USD) (USD) rate 18% (INR) rate 18% (INR)

I I G (Lower A B C D = B * C E F=B*E of D & F) 100 18 20 360 19 342 342

Rs. 18 (360 - 342) [Amount paid while filing return, however not refunded by the authorities]

5.17 That it can be easily seen that the appellants discharged excess tax liability in respect of invoices raised on or before July 27, 2017, which should be refunded to the Appellant without an iota of doubt. Further, that CBIC also acknowledges 'excess payment of tax due to mistake' as a situation leading to refund claim in Rule 89(2)(k) of the CGST Rules which is also clarified in the e-version of GST Flyer on 'Refund in GST' issued by CBIC [Reference http://www. cbic. gov. in/resources//htdocscbec/gstlRefunds G S T. pdf: jsessionid=OF636A 514 7 31 C486E3E87 A50947CE870]

5.18 That without prejudice to the above the appellants have deposited the amount in excess of tax liability which ought to have been discharged while filing of GSTR - 3B.That the appellants had actually paid IGST by determining value according to RBI exchange rate as per Rule 34 of the CGST Rules and that subsequently, there was amendment in the Rule 34 from 27 July 2017 wherein the exchange rate as prescribed by CBIC was to be taken into consideration, however, the appellants continued paying the amount on the basis the RBI exchange rate, which was always higher than the CBIC exchange rate which resulted in payment of amount in excess of the IGST liability on the basis CBIC exchange rate and that the amount paid in excess of IGST liability, may be refunded without an iota of doubt.

5.19 Reliance has been made to the application made before the Government of India, Ministry of Finance by IPCA Laboratories Ltd. [2014 (314) E.L. T.929 (G.O.I)] wherein the applicant had paid Central Excise duty at 8% on export of goods, instead of 4% in terms of the applicable Central Excise notification issued by CBEC; the matter under consideration was whether the assessee should be granted refund of entire tax paid on export of goods and the Ministry of Finance while deciding the matter in favour of the assessee, held that any amount paid in excess of duty liability should be refunded. The relevant extracts of the judgement have been reproduced below:

"12 ... that any suchamount paid in excess of duty liability on one's own volition cannot be treated as duty and it has to be treated asvoluntary deposit with the Government which is required to be returned to the assessee in the manner in which it is paid . ... 14 ... Governmentfurther directs that such excess amount paid should be allowed as re-credit in CENVAT credit account from which the dutv was paid. "

[Emphasis supplied]

5.20 The appellants have also placed reliance on the following judgments:-

• Belapur Sugar & Allied Indus Ltd. vs. CCE, Aurangabad [1999(108) E.L.T. 9 (S.C.)],

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• Commissioner of Sales Tax, U.P. vs. Auriaya Chamber of Commerce, Allahabad [1986(25) E.L.T.867 (S.C)]

• Mafatlal Industries Ltd. vs. Union of India [1997(89) E.L.T.247 (S.C)]

5.21 Further, that considering ali the above submissions and judgements, the appellants are fairly entitled to the refund of such excess tax paid and that even if such excess tax paid is not refunded by way of cash, such excess tax paid by utilizing the input tax credit should at least be allowed to be re-credited to the electronic credit ledger of the appellants.

6. Personal Hearing in the case was held on 18-02-2020 and Sh. Manoj Bassi, Assistant Manager, appeared on behalf of the Appellants, before me for personal hearing. He reiterated to the submissions made on 07.01.2020. He had nothing to add.

7. I have gone through the impugned orders, the facts & grounds of appeal, documents placed on record and submissions made by the appellants at the time of personal hearing. I observe that issues to be decided before me are that:

(i) The appellants were eligible to the refund of entire duty paid by them in terms of prevalent pre-amended Rule 34 (i.e. upto 26.07.2017) which has been restricted by the Customs authorities in accordance with the amended Rule 34 vide Notification No.17/2017-Central Tax dated 27.07.2017 and who is the competent authority to deal with the same?

(ii) Whether the appellants were eligible to the refund of inadvertently excess paid amount of IGST on exports after 26.07.2017 due to change in the provisions of Rule 34 vide Notification No. 17/2017-Central Tax dated 27.07.2017 and who is the competent authority to deal with the same?

7.1 I take up the issues one by one:

7.2 Firstly, as regards the duty paid by the appellants in terms of pre-amended Rule 34 (i.e. upto 26.07.2017). The adjudicating authority has held that the office of the Deputy Commissioner, CGST Division, Baddi is not the competent authority for deciding the refund claim of the appellants in respect of differential claim arising in connection to the integrated tax (IGST) paid on goods exported out of India as the refund -of integrated tax on exported goods is dealt with by the Customs Authorities and that hence, any differential claim arising in this connection should also be filed with the Customs Authorities. The appellants have contended that they have not been refunded the whole of the IGST reflected on tax invoices issued at the time of export, reported in GSTR -1 & paid through GSTR 3B to the Government treasury having correctly conslderinq the exchange rate determined by RBl for the tax invoices raised till July 26, 2017 which should have been refunded as provided under Section 16(3) of IGST Act and that the appellants should not suffer merely because of contradiction in the provision of GST legislation and Customs legislation.

7.2.1 I have thoroughly gone through the relevant sections/provisions under the Law i.e. Section 16 of the IGST Act, 2017, Rule 96 of the CGST Rules, 2017, Rule 34 of the CGST Rules, 2017 as well as the Circular No. 26 /2017 -Customs dated 01.07.2017 issued by the CBIC. The Rule 96 of the CGST Rules, 2017 deals with refund of Integrated Tax paid on goods exported out of India; it provides that the shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India once export general manifest (EGM) and valid return in Form GSTR-3 or Form GSTR- 3B, as the case may be has been filed. Once these conditions are met, the Customs System shall process the claim for refund and an amount equal to the integrated tax paid in respect

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of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities. I observe that the amount of IGST paid on the exports of goods is to be refunded by the Customs authorities as per the prescribed procedure. I agree with the observation of the sanctioning authority that the competent authority to deal with the differential amount of refund claimed by the appellants under Rule 96 is the Customs authorities.

7.3 Similarly, the second issue relates to the refund of the excess amount paid by the' appellant, inadvertently, after issuance of the Notification No. 17/2017-Central Tax dated 27.07.2017 to amend Rule 34 of the CGST Rules, 2017. I observe that the amount again relates to the excess IGST paid on the goods exported out of India. Hence, as per the provisions of Rule 96 of the CGST Rules, 2017, the refund claim arises, ifany, the same is to be dealt with by the jurisdictional Customs authorities.

ORDER

8. In the above backdrop the impugned order is up-held and the appellant is advised to file the refund claims to the jurisdictional Customs authorities. The appeals stand disposed

of, accordingly. ~~o

(Dr. Ravindra Kumar) Joint Commissioner (Appeals)

Regd.A.D.

MIs Cadila Healthcare Ltd., Swaraj Majra, Juddi Kalan, Teh. Nalagarh, Baddi, Distt. Solan, Himachal Pradesh.

Copy to:

1. The Commissioner, Central Goods & Service Tax Commissionerate, Shimla. 2. The Dy.lAssistant Commissioner, Central Goods & Service Tax Division, Baddi .(HP). 3. Guard file.

~ c 0' "'YO '

Superintend nt Appeals)