ORDER

This appeal has been filed under Section 107 of the Central Goods and Services Tax Act, 2017, by M/s. Mega Jewels Pvt. Ltd. (EOU), F-57, EPIP, Sitapura Industrial Area, Jaipur (hereinafter also referred to as “the appellant”) against the Order-in-Original No. CGST DIV-F/30/2019/1036, dated 2-5-2019 (hereinafter called as the “impugned order”) passed by the Joint Commissioner, Central Goods & Services Tax Division-F, Jaipur (hereinafter called as the “adjudicating authority”).

2. Brief facts of the case :

2.1 The appellant having GSTIN No. 08AADCM6287B1ZG is a 100% Export Oriented Unit (hereinafter referred to as “the appellant) are engaged in business of manufacturing and exporting of Jewellery from its registered office situated at Sitapura Industrial Area, Jaipur has filed application for refund claim under Section 54 of the CGST Act, 2017 of ₹ 5,79,552/- for the period November, 2017 in respect of ITC accumulated on account of export of goods & services without payment of Integrated Tax against filing the Letter of Undertaking (hereinafter referred to as LUT). The refund claim was rejected by the adjudicating authority on the grounds that the appellant has not followed the procedure for procurement of goods from DTA units.

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

that the order dated 2-5-2019 passed by the Learned Asstt. Commissioner, CGST Division-F, Jaipur (for short “AC”) being arbitrary, capricious and against factual matrixes of the case, hence deserves to be quashed and against the law and to be set aside.

that the department had rejected the refund claim on the ground that the appellant has not followed the procedure for procurement of goods from DTA Unit as prescribed under Circular No. 14/14/2017-GST, dated 6-11-2017 according to which the appellant as required to give prior intimation in Form A to be pre-approved by the Development Commissioner to the Registered Supplier as well as his jurisdictional officer and also to the jurisdictional officer of the appellant and failed to furnish undertaking as described in Para 4 of Circular No. 24/24/2017-GST, dated 21-12-2017. The appellant submits that it had filed refund claim for the month of Nov., 2017 and both these circulars were issued on 6-11-2017 and 21-12-2017 respectively. Since, the GST Rollout the assessees have faced lot of problems in getting the refund on account uncertainty in the procedures, lack of clarity on part of the assessee and department and ambiguity in law. With passage of times department has issued numerous notifications and circulars/clarifications to make suitable changes in the Rules and procedures prescribed under the said Rules. Before moving forward following statutory provisions needs to be perused which are as under :-

SECTION 54. Refund of tax. – (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed :

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.

(2) ……..

(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.

RULE 89. Application for refund of tax, interest, penalty, fees or any other amount. – (1) Any person, except the persons covered under notification issued under Section 55, claiming refund of any tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner :

Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub- section (6) of Section 49 may be made through the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7 as the case may be :

Provided further that in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the –

(a)     supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone;

(b)     supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone :

Provided also that in respect of supplies regarded as deemed exports the application may be filed by, –

(a)     the recipient of deemed export supplies; or

(b)     the supplier of deemed export supplies in case where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund

From the perusal of the aforesaid provisions it is clearly evident that Section 54 permits refund of accumulated ITC only in two situations (a) when such ITC has accumulated on account of zero-rated supply without payment of tax (b) when Input Tax Rate is higher than the Output Tax Rate. Further, such application of refund needs to be filed as per Rule 89 of the CGST Rules, 2017. Third proviso to Rule 89 permits filing of refund application in case of deemed export either by the recipient of deemed export supplies or by the supplier of the deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund. In the case of the appellant, it is recipient of deemed export supplies and therefore, is entitled to file refund application under Rule 89 read with Section 54 aforesaid. The appellant has procured inputs on payment of full tax to the supplier and has availed input tax credit of the same. Hence, the appellant has rightly filed claim of refund of such accumulated ITC. It is important to mention here that the condition of furnishing an undertaking has been specified only in case when the supplier of the deemed export intends to file refund claim. The third proviso was substituted w.e.f. 18-10-2017. Prior to its substitution only the recipient of deemed export could file the refund claim. The supplier was not permitted to file refund claim of such supplies. Subsequent, to the amendment even the supplier was permitted to file the refund claim subject to furnishing of undertaking. Hence, the appellant being recipient of deemed exports has rightly filed the refund claim as there is no requirement for furnishing any undertaking for the recipient of deemed supplies as the Rule does not prescribe so. The contention of the department that the appellant has not furnished the undertaking as specified in para 4 of the Circular No. 24/24/2017-GST, dated 21-12-2017 is not tenable as condition which has not been prescribed under the Rules cannot be imposed upon on the basis of Circular. Further, without causing prejudice to this contention of the appellant it is further submitted that such requirement of furnishing the undertaking from the supplier that he shall not claim the refund in respect of such supplies was specified vide Circular dated 21-12-2017 whereas the appellant is filing refund claim for the month of Nov., 2017 when such requirement was not in place. However, the appellant on insistence of department has obtained such undertaking-cum-declaration from most of the suppliers in order to prove its bona fides and ensure compliance; though unwarranted. Copy of such declaration-cum-undertaking is enclosed and marked as Annexure-A. But the adjudicating authority has failed to consider such documents and did not cite any reason for not considering the same thereby making the impugned order perverse and non-speaking and thus deserves to be set aside on this ground alone.

–        that so far as non-compliance of giving prior intimation in Form-A pre-approved by Development Commissioner to the supplier and its jurisdictional officer is concerned the appellant submits that such procedure was prescribed in the month of Nov., 2017 only and that too for the suppliers of goods to 100% EOU claiming deemed export benefits. The procedure prescribed by the said Circular is not applicable to the appellant who is recipient of such supplies and intends to claim refund of accumulate input tax credit. Further, the appellant has been told in the discussion with the Development Commissioner, Noida SEZ that there is no such system of issuing any pre-approved Form-A from their office. The appellant has also written letter in this regard to the then Joint Commissioner, Central GST, CGST Division-F with copy marked to Office of the Assistant Development Commissioner, Government of India, Ministry of Commerce and Industry, Department of Commerce, Noida Special Economic Zone, Noida. However, till date the appellant has not received any response from either of the departments. Copy of which letter is enclosed and marked as Annexure-B. Hence, the appellant cannot be blamed for non-compliance of such procedure when department itself has failed to respond to the appellant’s letter. Further for non-compliance of such procedure; compliance of which is beyond the control of the appellant it cannot be denied substantial benefit of refund for which it is otherwise legally entitled to. There is no dispute with regard to the fact that the appellant had procured the goods from suppliers on payment of full GST and have also obtained undertaking-cum-declaration from the suppliers that they shall not claim any refund of the GST in respect of goods supplied by them. It is settled legal position that non-observance of procedural condition of technical nature is condonable. Even if it is presumed for the sake of argument that the appellant has not given prior intimation in Form A then also it cannot be denied refund of inputs tax credit as such compliance is procedural in nature and deserves to be condoned. The appellant place reliance on the following decisions in support of its contention :-

Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner [1991 (55) E.L.T. 437 (S.C.)]

Lupin Laboratories Ltd. v. CCE [1994 (71) E.L.T. 914 (Tri.) – Held : Modvat Credit Scheme – Substantial compliance enough – Benefit not deniable for non-observance of technical requirement.

Similar views were expressed in 2017 (52) S.T.R. 340 (Tri. – Mumbai).

–        that without causing prejudice to the aforesaid submissions it is submitted that the suppliers of the goods to the appellant have not claimed any benefit as may be available on deemed exports. The procedure prescribed by Circular dated 6-11-2017 is only applicable when the appellant intends to procure the goods from the suppliers of DTA unit supplying goods under deemed exports benefit under Section 147 of the Act. In the case of the appellant the suppliers are not claiming the refund; the refund is being claimed by the appellant. Hence, there is no requirement to follow such procedure. Further when a normal unit making zero-rated supplies is entitled to refund of accumulated ITC without any procedure then denial of refund to 100% EOU on the ground of non-compliance of such procedure is all the more illogical as EOU is in better position to claim such refund than a unit in DTA as it is duty bound to export all its goods and the intention of Legislature has always been to provide tax exemption and benefits to EOU’s.

4. Personal hearing in the case was held on 13-3-2020 wherein Shri  Ankit Totuka, Advocate on behalf of the appellant appeared. He explained the case in details and reiterated the submissions made in their grounds of appeal he has also submitted the additional written submission dated 13-3-2020 and requested to decide the case accordingly.

5. I have carefully gone through the case records and submissions made in the appeal memorandum as well as written submission submitted by the appellant at the time of personal hearing on 13-3-2020. I find that the adjudicating authority has rejected the refund claim filed on the ground that the claimant has not followed the procedure for procurement of goods from DTA Unit and the appellant was required to give prior intimation in a prescribed proforma in Form A bearing running number containing the goods to be procured, as pre-approved by the Development Commissioner and the details of the supplier before such deemed export/supplies. The question of deemed export arises as the appellant is 100% EOU and supply received by them is deemed export, therefore, the appellant had to comply with provisions of Circular No. 14/14/2017-GST, dated 6-11-2017 and other provisions for the time being in force. The deemed export refer to supplies of goods manufactured in India (and not Services) which are notified as deemed export under Section 147 of the CGST Act, 2017 and recipient EOU shall have to follow the procedure as per Circular No. 14/14/2017-GST.

6. Rule 89 of the CGST Rules, 2017 (hereinafter referred to as ‘the Rules’) as amended vide Notification No. 47/2017-Central Tax, dated 18-10-2017 allow either the recipient or supplier of deemed export supplies to claim refund of tax paid thereon.

Certain supplies of goods have been notified as deemed export supplies vide  Notification No. 48/2017-Central Tax, dated 18-10-2017. Circular No. 14/14/2017-GST, dated 6-11-2017, provides for the following procedure and safeguards in respect of supplies to EOU/EHTP/STP/BTP units :-

As per Para 2 of C.B.E. & C. Circular No. 14/14/2017-GST, dated 6-11-2017 – For supplies to EOU/EHTP/STP/BTP units in terms of Notification No. 48/2017-Central Tax, dated 18-10-2017, the following procedure and safeguards are prescribed –

(i)      The recipient EOU/EHTP/STP/BTP unit shall give prior intimation in a prescribed proforma in “Form-A” (appended herewith) bearing a running serial number containing the goods to be procured, as pre-approved by the Development Commissioner and the details of the supplier before such deemed export supplies are made. The said intimation shall be given to –

(a)        the registered supplier;

(b)        the jurisdictional GST officer in charge of such registered supplier; and

(c)        its jurisdictional GST officer.

(ii)    The registered supplier thereafter will supply goods under tax invoice to the recipient EOU/EHTP/STP/BTP unit.

(iii)   On receipt of such supplies, the EOU/EHTP/STP/BTP unit shall endorse the tax invoice and send a copy of the endorsed tax invoice to –

(a)        the registered supplier;

(b)        the jurisdictional GST officer in charge of such registered supplier; and

(c)        its jurisdictional GST officer.

(iv)   The endorsed tax invoice will be considered as proof of deemed export supplies by the registered person to EOU/EHTP/STP/BTP unit.

(v)     The recipient EOU/EHTP/STP/BTP unit shall maintain records of such deemed export supplies in digital form, based upon data elements contained in “Form-B” (appended herewith). The software for maintenance of digital records shall incorporate the feature of audit trail. While the data elements contained in the Form-B are mandatory, the recipient units will be free to add or continue with any additional data fields, as per their commercial requirements. All recipient units are required to enter data accurately and immediately upon the goods being received in, utilized by or removed from the said unit. The digital records should be kept updated, accurate, complete and available at the said unit at all times for verification by the proper officer, whenever required. A digital copy of Form-B containing transactions for the month, shall be provided to the jurisdictional GST officer, each month (by the 10th of month) in a CD or Pen drive, as convenient to the said unit.

7. The above procedure and safeguards are in addition to the terms and condition to be adhered to by a EOU/EHTP/STP/BTP unit in terms of the FTP 2015-20 and the duty exemption notification being availed by such unit.

8. The appellant has also contested that the condition of furnishing undertaking has been specified only in case when the supplier of the deemed export intends to file refund claim. As per Para 4 of C.B.E. & C. Circular No. 24/24/2017-GST, dated 21-12-2017 – Whereas, the Government has issued notification No. 48/2017-Central Tax, dated 18-10-2017 under Section 147 of the CGST Act wherein certain supplies of goods have been notified as deemed export. Further, the third proviso to Rule 89(1) of the CGST Rules allows the recipient or the supplier to apply for refund of tax paid on such deemed export supplies. In case such refund is sought by the supplier of deemed export supplies, the documentary evidences as specified in Notification No. 49/2017-Central Tax, dated 18-10-2017 are also required to be furnished which includes an undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and that no input tax credit on such supplies has been availed of by him. The undertaking should be submitted manually along with the refund claim. Similarly, in case the refund is filed by the recipient of deemed export supplies, an undertaking by the supplier of deemed export supplies that he shall not claim the refund in respect of such supplies is also required to be furnished manually. Thus, the undertaking in both the case is to be furnished mandatorily, therefore the contention of the appellant is not acceptable.

9. Further, vide Para 41 of Circular No. 125/44/2019-GST, dated 18-11-2019 it is also clarified that the procedure regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU)/Electronic Hardware Technology Park (EHTP) Unit/Software Technology Park (STP) Unit/Bio-Technology Parks (BTP) Unit under deemed export as laid down in Circular No. 14/14/2017-GST, dated 6-11-2017 needs to be complied with. Thus, the appellant was required to follow the procedure as prescribed but they failed to do so. The case laws cited by the appellant in their defence is squarely not applicable in the instant case.

10. In view of the above legal provision, discussion and findings, I hereby reject the appeal filed by the appellant.