This appeal has been filed under Section 107 of the CGST Act, 2017 (hereinafter also referred to as “the Act”) by M/s. Dileep Trading Corporation, 618, Mahaveer Nagar, Tonk Road, Jaipur-302018 (Raj.) against the Refund Sanction/Rejection Order No. CGST DIV-F/69/2018/4664, dated 1-6-2018 (hereinafter referred to as “the impugned order”) 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”).

The adjudicating authority vide above impugned order has rejected the refund claim of CGST ₹ 6,36,878/-, SGST ₹ 398/- and IGST ₹ 11,219/- total amounting to ₹ 6,48,495/- . Out of above, the appellant has admitted the rejection of refund of CGST ₹ 5,26,123/-, SGST ₹ 398/- and IGST ₹ 8974/- total amounting to ₹ 5,35,495/-. Now the appellant has contested and filed the appeal in the instant case for CGST ₹ 1,10,755/- and IGST ₹ 2,245/- total amounting to ₹ 1,13,000/-.

Brief facts of the case :-

2. That the appellant is registered under GST having GSTIN : 08AAWPB2062M1ZD and engaged into the business of manufacturing and trading of handicraft items. The appellant had applied for the refund vide Form RFD-01A under sub-section (3) of Section 54 of the CGST Act, 2017 of unutilized ITC for the period July, 2017 and exported the goods on the zero rated supplies made under Section 16 of the IGST Act, 2017.

3. The refund of CGST ₹ 6,36,878/-, IGST ₹ 11,219/- was rejected on the ground that the appellant has claimed DBK in Group A and also not submitted invoices relating to ITC of IGST ₹ 11,680/- and of SGST ₹ 398/-.

4. Being aggrieved with the above impugned order, the appellant has filed appeal on the following grounds which are summarized as under :-

4.1 That the adjudicating authority in its order raised an entirely different ground from the ground raised in the Show Cause Notice and rejected refund of IGST ₹ 11,219/-, CGST ₹ 6,36,878/- on the ground that the appellant has claimed DBK in group A and also rejected refund of IGST of ₹ 11,680/- and SGST ₹ 398/- due to non-submission of invoices.

(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 hilly 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.

4.2 Thai 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.

4.3 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.

4.4 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.

4.5 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.

Notification No. 131/2016-Cus. (N.T.), dated 31-10-2016.

Drawback-All Industry Rates of Drawback 2016-17 notified – Notification No. 110/2015-Cus. (N.T.) superseded

In exercise of the powers conferred by sub-section (2) of Section 75 of the Customs Act, 1962 (52 of 1962), sub-section (2) of Section 37 of the Central Excise Act, 1944 (1 of 1944) and Section 93A and sub-section (2) of Section 94 of the Finance Act, 1994 (32 of 1994), read with rules 3 and 4 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (hereinafter referred to as the said rules) and in supersession of the notification of’ the Government of India in the Ministry of Finance (Department of Revenue) No. 110/2015-CUSTOMS (N.T.), dated 16th November, 2015, except as respects things done or omitted to be done before such supersession, the Central Government hereby determines the rates of drawback as specified in the schedule annexed hereto (hereinafter referred’ to as the said Schedule) subject to the following notes and conditions, namely :-

(7) The figures shown in the DBK said Schedule in columns (4) and (5) refer to the total drawback (Customs, Central Excise and Service Tax component put together) allowable and those appearing in columns (6) and (7) refer to the drawback allowable under the Customs component. The difference in rates between the columns (4) and (6) refers to the Central Excise and Service Tax component of drawback. 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.

4.6 Although the appellant during the disputed period has exported goods worth ₹ 36,57,829/- under the higher rate of drawback, but has also exported the goods worth ₹ 9,15,077/- under the lower rate of drawback. Copy of invoices and S/Bs of the exports made during the disputed period for which refund is claimed is also enclosed.

4.7 From the above, it is amply clear that the drawback, claimed in invoice No. 17/21 is under column B i.e. at lower rate and therefore the refund cannot be questioned. That in relation to the invoice No. 17/25, although it appeared in S/B that the appellant had claimed drawback under Column A. but in reality the rate of drawback under the drawback schedule for goods falling under Chapter 6914 is same under both the column A & B i.e. 1.5%.

4.4 From the combined reading of the above paras, 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 :

4.5 That from the above, it is amply clear that the appellant has claimed drawback of custom component only in relation to Invoice No. 17/021 and 17/025 and has rightly availed ITC in respect of the good exported under the above invoices and therefore the refund is admissible and cannot be rejected on account of incorrect allegation of claiming higher rate of drawback.

4.6 That in relation to Invoice No. 17/024, the appellant admits to have claimed the drawback at the higher rate and therefore the refund on the same appeared to be inadmissible.

4.7 However, the refund of CGST ₹ 20,865/- allowed by the adjudicating authority is erroneous and based on incorrect interpretation and incomplete application of mind. That taking into consideration the goods exported under lower rate of drawback, the appellant was admissible for refund of ₹ 1,31.620/-. Calculation sheet is also enclosed. Therefore, the adjudicating authority seems to have fallaciously rejected refund of CGST to the tune of ₹ 1,10,755/-.

4.8 That in relation to the allegation regarding non-submission of the invoices pertaining to the ITC of IGST amounting to ₹ 11,680/- the same had already been submitted to the adjudicating authority but the same have not been considered. The copy of the invoices again submitted.

5. Personal hearing in the matter was held on 11-12-2018 Shri Chirag Jain, Chartered Accountant and Authorized Representative on behalf of the appellant appeared for personal hearing. He explained the case in detail and reiterated the submission made in the grounds of appeal and requested to decide the case on merits as per facts available on records.

6. 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 the appeal filed by the appellant on the ground that the adjudicating authority has rejected the drawback claims for the transition period of one month i.e. July, 2017 on account of that the appellant has claimed DBK in Group ‘A’ and not submitted the invoices relating to ITC of IGST and SGST.

7. 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 also 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”, (Invoice No. 17/25, dated 29-7-2017) under Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 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 exporters shall have an option to claim only Customs portion of AIRs 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 of 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 customs 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.

8. The appellant has also submitted the copies of invoices of ITC of IGST which were not submitted at the time of personal hearing held before the adjudicating authority resulting to rejection of refund claim. The appellant is directed to submit all such invoices before the adjudicating authority for verification.

9. In view of above clarification and discussion & findings, I allow the appeal filed by the appellant only to the extent of rejection of refund of IGST amounting to ₹ 2245/- and CGST amounting to ₹ 1,10,755/- subject to verification by the adjudicating authority.

10. Accordingly, the appeal is disposed off in above manner