These 3 appeals have been filed under Section 107 of the CGST Act, 2017 (hereinafter also referred to as “the Act”) by M/s. Dileep Potteries Private Limited, Village Chirota. Post – Ajayrajpura, Via. Bagru, Jaipur, Rajasthan-303007 against the below mentioned Refund Sanction/Rejection orders (hereinafter referred to as “the impugned orders”) filed under Section 54 of the CGST Act, 2017 read with Section 54 of the CGST Act, 2017 passed by the Deputy Commissioner. CGST Division-F, Jaipur (hereinafter referred to as “the adjudicating authority”) as per the below mentioned details. As the issue is same and of identical nature. I take up all the appeals simultaneously

2. Brief facts of the case are that the appellant is registered under GST having GSTIN : 08AAECD5106B1Z8 and engaged into the business of manufacturing and trading of ceramic handicraft items. That the appellant had applied for the refund under sub-section (3) of Section 54 of the CGST Act, 2017 of unutilized ITC for the period mentioned above in Para 1 of the above Table in column No. 5 on the zero-rated supplies made under Section 16 of the IGST Act, 2017 vide Form RFD-01A.

3. The above mentioned amounts of refunds mentioned above in Para 1 of the above Table in Column No. 6 were rejected on the ground that the appellant has claimed higher drawback under column A of drawback schedule and also refund of credit found inadmissible under Section 17(5) of CGST Act, 2017. Being aggrieved with the above impugned orders, the appellant have filed appeals mainly on the following grounds which are summarized as under :-

(i)      That sub-section (3) of Section 54 of the CGST Act, 2017 is being reproduced :

(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period :

Provided that no refund of unutilised input tax credit shall be allowed in cases other than –

(i)      zero rated supplies made without payment of tax;

(ii)    where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council :

Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty :

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

(ii)    That the second proviso to Section 54(3) provides that the refund of input tax credit shall not be allowed where the supplier avails the drawback in respect of central tax or claims refund on integrated tax on such supplies, It is therefore a clear position in the CGST Act and consequently in IGST Act that a supplier availing the drawback of central tax may not be eligible to claim refund of accumulated ITC under the CGST Act and there is no dispute in it.

(iii)   That on the contrary, the refund claim of the appellant has been rejected primarily on the ground of claiming the higher rate of drawback under Column A of the drawback schedule. The said contention is faulty.

(iv)   That Circular No. 22/2017-Cus., dated 30-6-2017 provides for the amendments effective from 1-7-2017 to All Industry Rates of Duty Drawback and other Drawback related changes provides that

Transition period :

In order to ensure smooth transition to the GST regime, Government has allowed the extant Duty Drawback scheme to continue for a period of three months i.e. from 1-7-2017 to 30-9-2017. The exporter may, for exports made during this period, continue to claim the composite rates i.e. rates and caps given under columns (4) and (5) respectively of the Schedule of AIRs of duty drawback, subject to certain additional conditions. During the transition period, exporters can also claim Brand rate of duty/tax incidence as they have been doing earlier. The conditions imposed for claiming these composite rates aim to ensure that the exporters do not claim composite AIRs of duty drawback and simultaneously avail input tax credit of Central Goods and Services Tax (CGST) or Integrated Goods and Services Tax (IGST) on the export goods or on inputs and input services used in manufacture of export goods or claim refund of IGST paid on export goods. Further, an exporter claiming composite rate shall also be barred to carry forward Cenvat credit on the export goods or on inputs or input services used in manufacture of export goods in terms of the CGST Act, 2017. The exporters have to give a declaration and certificates as prescribed in this Notification at the time of export. Similar checks shall apply while determining the Brand rate of drawback. While a transition period of three months has been allowed, the exporters shall have an option to claim only Customs portion of AIRs of duty drawback i.e. rates and caps given under column (6) and (7) respectively of the Schedule of AIRs of duty drawback and avail input tax credit of CGST or IGST or refund of IGST paid on exports.

(v)     That further the Notification No. 131/2016-Cus. (N.T.), dated 31-10-2016 which provides for the rates of drawback along with certain notes and conditions. One such condition states that if the rate of drawback in Column A & Column B is same, then the same pertains to only customs component and is available irrespective whether the exporter avails the cenvat credit or not. That a copy of the same is also produced below for your reference.

(vi)   That there is no dispute in the fact that the goods being exported by the appellant falls under Tariff Code 6914 under the schedule against which the rates of drawback under Columns A & B is 1.5%. From the perusal of the above, it is ample clear that when the rates of drawback are same i.e. in this case 1.5%, then the rate pertains to customs component only and not towards the central excise and service tax component. That a copy of the drawback rate prescribed in the aforesaid notification is reproduced below :

(vii)  That from the above, it is amply clear that the appellant has claimed drawback of custom component only and has rightly availed ITC in respect of the good exported and therefore the refund is admissible and cannot be rejected on account of incorrect allegation of claiming higher rate of drawback.

4. Personal hearing in the matter was held on 3-12-2018 Shri Mudit Jain, Chartered Accountant and Authorized Representative appeared for personal hearing. He explained the case in detail and reiterated the grounds of appeal and requested to decide the case accordingly on merits.

5. I have carefully gone through the case records, appeal memos and oral submissions of the appellant made during the course of personal hearing. I find that in all the three appeals filed by the appellant, the main issue involved is that the adjudicating authority has rejected the drawback claims for the transition period of three months i.e. from July, 2017 to September, 2017 on account of that the appellant has claimed higher rate of draw back under column A of drawbacks.

6. I further observe that consequent upon implementation of GST with effect from 1-7-2017, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 were continued for a transition period of three months i.e. from July, 2017 to September, 2017 vide [Circular] No. 22/2017-Cus., dated 30-6-2017.

According to notes & conditions No. 7 to Notification No. 131/2016-Cus., dated 31-10-2016. “if the rate indicated is the same in the columns (4) and (6), it shall mean that the same pertains to only Customs component and is available irrespective of whether the exporter has availed of Cenvat Facility or not”. I also find that the appellant’s commodity are classifiable under Tariff Item No. 6914 “Other Ceramic Articles”, which attracts the same rates of drawback i.e. 1.5% under both the columns (4) & (6). Hence, it is evident that the appellant has claimed drawback of Customs component only for their export.

Further, as per Circular No. 22/2017-Cus., dated 30-6-2017, which deals with drawback claims for the transition period, clearly provides that “While a transition period of three months has been allowed, the exports shall have an option to claim only Customs portion of AlRs of duty drawback i.e. rates and caps given under column (6) & (7) respectively of the Schedule of AIRs of duty drawback and avail input tax credit, CGST or IGST or refund of IGST paid on exports”. Furthermore, C.B.E. & C. vide Circular No. 37/11/2018-GST in F. No. 349/47/2017-GST, dated 15-3-2018 has also clarified that a supplier availing drawback only with respect to basic custom duty shall be eligible for refund of unutilized input tax credit of Central tax/State tax/Union territory tax/Integrated tax/Compensation Cess under the said provision.

7. Further, vide Para 40 of Circular No. 125/44/2019-GST issued under C. No. CBEC-20/16/04/18-GST, dated 18-11-2019 it is clarified that as per the third proviso to sub-section (3) of Section 54 of the CGST Act states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services or both avails of drawback in respect of Central tax. It is clarified that if a supplier avails of drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback Rules, 2017 he shall be eligible for refund of unutilized input tax credit of Central tax/State tax/Union Territory tax/Integrated tax/Compensation Cess. It is also clarified that refund of eligible credit on account of State tax shall be available if the supplier of goods or services or both has availed of drawback in respect of Central tax.

8. In view of above clarification and discussion & findings above. I allow the appeals filed by the appellant only to the extent of rejection of refund of IGST and CGST on account of higher drawback under column A of drawback schedule.

9. Further, no plausible ground has been given by the appellant against the rejection of refund for inadmissible credit under Section 17(5) of CGST Act, 2017, therefore, the appeals to that extent is rejected.

10. Accordingly, the appeals are disposed off in above manner.