ORDER

This is an appeal filed by M/s. Vaachi International Pvt. Ltd., Trading Unit No. 3/8, VSEZ, Duvvada, Visakhapatnam (hereinafter referred to as ‘Appellant’) against the tax orders passed by the Assistant Commissioner (ST), Gajuwaka Circle, Visakhapatnam Division (hereinafter referred to as ‘Assessing Authority’/for short ‘A.A.’) for the tax periods from July, 2017 to March, 2018 under CGST/APGST Act, 2017 in GSTIN : 37AABCV5897L1ZH vide his orders dated 2-5-2019, disputing the rejection of refund of ₹ 20,97,104/-.

2. The case is posted for hearing details are as under :

Sl. No.	Date of notice issued	Posted for hearing date	Status of hearing
1.	4-10-2019	28-10-2019	Not Attended
2.	6-11-2019	16-11-2019	Not Attended
3.	26-11-2019 (final)	19-12-2019	Attended

3. Sri Manish Goel, Chartered Accountant and Authorized Representative of the firm (hereinafter referred to as ‘A.R.’) has appeared on earlier occasion and finally on 19-12-2019 for arguing the case. Finally, the appeal was heard by the Appellate Authority.

Statement of facts :

4. The appellant is an assessee on the rolls of the AA and doing the business export of Dried Ornamental Plant materials.

5. The AA recorded in his refund rejection order that on examination of appellant’s refund claim under Section 54 read with Rule 89 of (CGST/SGST) GST Act, 2017, it was identified by him that the appellant is not eligible for refund of ITC, because such eligibility is available to the taxpayers who made zero rated supplies to SEZ units/Developers with payment of tax.

6. The AA further stated that the facility of getting refund of tax paid is statutorily made available to those taxpayers who made supplies to SEZ only, with payment of tax. This is to ensure that the refund of tax paid is claimed only by the suppliers to SEZ on filing of declarations from their SEZ purchasers, to avoid duplicity of the claims, as there may be a situation where the SEZ Unit gets supplies of goods/services from multiple number of Vendor taxpayers, spread over different places, and it is not possible for the department to track their refund claims, against the [supplies] made to such SEZ unit, with payment of tax. Therefore, the contention of the taxpayer that the SEZ unit can also make refund claim against the zero rated supplies made without payment of tax, is not tenable.

7. Citing the above reasons and circumstances, the AA has rejected total refund claim of ₹ 20,97,104/-.

8. Thus, the assessing authority has passed refund rejection orders under CGST & APGST Acts, dated 2-5-2019, by rejecting total refund amount of ₹ 20,97,104/-.

9. Aggrieved by the above refund rejection orders passed by the assessing authority, the appellant has preferred the present appeal and disputed the rejection of refund of ₹ 20,97,104/-.

Grounds of Appeal :

10. The grounds of appeal filed by appellant in the appeal are extracted hereunder;

1. For the impugned order suffers from mis-appropriation and/or incorrect appreciation of facts, and is violative of the natural justice, wrongful, biased, erroneous and bad in law.

1.1 All the grounds for appeal is prayed herein are independent of each other and is read without prejudice to each other and conjoined reading of more than one ground for appeal may be done as requested and prayed.

The rejection confirmed by the adjudicating authority is against the established principles of law.

1.1 Refund claimed filed by the appellant has been rejected solely on the ground that as per Section 54(3)(i) read with Rule 89(2)(f) of the GST Law (APGST Act, CGST Act), the provisions for refund of unutilized input tax is available to only those taxpayer who made supplies to SEZ Unit or the Developer not vice versa.

The relevant provisions of law are as under :

1.2 As per Section 54(3) of Central Goods and Services Tax Act, 2017,

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

Provided that no refund of unutilized 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.

1.3 Further as per Section 16 of Integrated Goods and Services Tax Act, 2017,

(1)     “zero rated supply” means any of the following supplies of goods or services or both, namely :-

(a)     Export of goods or services or both; or

(b)     Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

(2)     Subject to the provisions of sub-section (5) of Section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero rated supplies; notwithstanding that such supply may be an exempt supply.

(3)     A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely :-

(a)     He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit; or

(b)     He may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

1.4 Further Section 2(5) of the Integrated Goods and Services Tax Act, 2017 defines “export of goods” as “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to place outside India.

As per Section 2(56) of the Central Goods and Services Tax Act, 2017, “India” means the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters.

1.5 In perusal of the above Sections the appellant is primarily involved in exporting dried ornamental plant, materials and candles and as per the definition of Zero-rated supply cited above the appellant falls under the definition of Zero-rated supply under category (a) of sub-section (1) of Section 16 of IGST Act. The appellant is a SEZ Unit and the supplies made to the SEZ unit are used for exporting goods. The suppliers of SEZ unit also falls under the definition of Zero-rated supply under category (b) of sub-section (1) of Section 16 of IGST Act.

The appellant is claiming refund under “Refund of ITC on Export of Goods and Services without payment of Integrated Tax”. Since the appellant is involved in zero-rated supplies made without payment of tax they are eligible for refund as per Section 54(3) of Central Goods and Services Tax Act, 2017 cited above.

1.6 Also as per Rule 89(2)(f) of Andhra Pradesh Goods and Services Tax Rules, 2017.

“The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely –

A declaration to the effect that the Special Economic Zone unit or the Special Economic developer has not availed the input tax credit of the tax paid by the supplier of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

This rule was amended by Notification G.O.M.S. No. 179 (Andhra Pradesh), dated 19-2-2019 and the clause was substituted as “a declaration to the effect that the tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or Special Economic Zone developer.

We would like to bring to your kind attention to the rules prior to amendment wherein it was mentioned that suppliers to SEZ need to give declaration from the SEZ unit that the SEZ unit has not claimed input tax credit and this sub-rule makes it clear that the SEZ unit can claim input tax credit and the option to claim refund of tax is open to both the SEZ unit and the supplier to the SEZ unit haven’t claimed any Input Tax Credit.

1.7 Also we would like to bring your kind attention towards the direction of Adjudicating Authority to furnish declaration from all the vendors who made supplies to us, against which the present claim is preferred for refund of unutilized ITC to the effect that the vendors have not availed the refund of amounts paid on supplies made to the taxpayers SEZ unit. We are in process of getting those declarations from all the vendors.

1.8 The appellant is eligible for the refund claimed, since they exported the goods, outside the country and there is no bar to claim refund by the SEZ unit. Further as per the GST Rules, it is obligatory for the suppliers of SEZ unit to obtain declaration from the SEZ unit to the effect that the SEZ unit has not claimed any ITC i.e., tax paid by them on supplies made to SEZ unit. Thus, the department is well-positioned to check the duplicity of refund claim.

2. As per the provisions cited above, we conclude that we are eligible for the refund claimed.

Additional grounds of appeal :

11. At the time of hearing on 19-12-2019, the A.R. has submitted the additional grounds in support of his contentions, which are extracted hereunder;

1. For the impugned order suffers from misappropriation and/or incorrect appreciation of facts, and is violative of the natural justice, wrongful, biased, erroneous and bad in law.

All the grounds for appeal as prayed herein are independent of each other and is read without prejudice to each other and conjoined reading of more than one ground for appeal may be done as requested and prayed.

2. The refund rejected by the adjudicating authority is against the established principles of law.

2.1 As per conjoined reading of Section 54(3) Central Goods and Services Tax Act, 2017 and Section 16 and Section 2(5) of Integrated Goods and Services Tax Act, 2017, any person doing export is eligible to claim refund of Input Tax Credit.

The appellant place before the Ld. Appellate Joint Commissioner that the appellant is doing exports of goods from the SEZ unit to United States and as per the foregoing provisions, the SEZ unit is very well placed to claim the refund of unutilized Input Tax Credit (“ITC”). Further, the IT Infrastructure maintained by the Goods & Services Tax Infrastructure Network allows the SEZ unit to seamlessly file the refund application for refund of unutilized Input Tax Credit (“ITC’).

2.2 As per Rule 89(2) of Andhra Pradesh Goods and Services Tax Rules, 2017

“a declaration to the effect that the Special Economic Zone unit or the Special Economic developer has not availed the input tax credit of the tax paid by the supplier of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

The Ld. Adjudicating Officer had interpreted the above provisions as that the SEZ unit is not eligible to take input tax credit and on such erroneous interpretation he has rejected refund claim and such rejection is unconstitutional and bad in law and not maintainable in the eyes of law.

The above interpretation of Ld. Adjudicating Officer raises the below questions :-

(a)     Is the SEZ unit eligible to take claim of input tax credit under the Integrated Goods and Services Tax Act, 2017?

(b)     Is the declaration mentioned in Rule 89(2)(f) of Andhra Pradesh Goods and Services Tax Rules, 2017 restricts the ab initio eligibility of SEZ unit to claim input tax credit?

The appellant do hereby humbly submit as follows :-

(a)     The first aspect – “Is the SEZ unit eligible to take claim of input tax credit under the Integrated Goods and Services Tax Act, 2017” – has been dealt as follows :-

          Section 16 of Andhra Pradesh Goods and Services Tax Act, 2017 deals with the “Eligibility and conditions for taking input tax credit”. As per the sub-section (1) of said Section 16 :-

          “Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”

          Further sub-section (2) of said Section 16 read as :-

          “Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless :-

(a)     He is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as may be prescribed;

(b)     He has received the goods or services or both.

          [Explanation: – For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services –

(i) Where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise.

(ii)  Where the services are provided by the supplier to any person on the direction of and on account of such registered person]

(c)     Subject to the provisions of [Section 41 or Section 43A]. the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

(d)     He has furnished the return under Section 39;

          Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment :

          Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed;

          Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.”

          Section 49 of the said Act, which deals with payment of tax, also speaks about the manner in which ITC shall be credited. Sub-section (2) of Section 49 stipulates that the input tax credit as self-assessed in the return of a registered person should be credited to his electronic credit ledger in accordance with section 41. The amount available in the electronic credit ledger may be used by virtue of sub-section (4) of Section 49 for making any payment towards output tax under the Act.

          The Ld. Adjudicating Officer hasn’t specified any reason under the foregoing provisions why the SEZ unit is not eligible to take claim of refund of unutilized input tax credit.

          The appellant submit before the Learned Appellate Joint Commissioner that, the appellant is eligible to take claim of input tax credit as per the relevant provisions of Andhra Pradesh Goods and Services Tax Act, 2017. Further, the IT Infrastructure maintained by the Goods & Service Tax Infrastructure Network allows the SEZ unit to seamlessly claim the input of tax paid on procurement or availment of supplies from the Domestic Tariff Area.

(b)     The Second aspect – “Is the declaration mentioned in Rule 89(2)(f) of Andhra Pradesh Goods and Services Tax Rules, 2017 restricts the ab initio eligibility of SEZ unit to claim input tax credit?” – has been dealt as follows :-

          The appellant retreat before the Learned Appellate Joint Commissioner that the Rule 89(2)(f) specifically says that declaration will be required from SEZ unit that no input tax credit (“ITC”) has been claimed by the SEZ unit, We would like to place a common question that why a declaration is required? In the common parlance of law, a declaration is given by the declaring party to confirm and declare to best of his/her knowledge that the declaring party has refrained from doing the matters as declared in the said declaration. Only when the declaration is given, the declaring party limits its action and eligibility itself to do or enjoy the matters in the said declaration. In case, the declaring party was not eligible to claim ITC, then why the declaration is sought after all?

          In the instant case, the supplier to the SEZ unit applying the refund of tax paid on supplies to SEZ unit need to obtain declaration from the SEZ unit that the SEZ unit has not claimed any ITC in their return. Such declaration is required as to check that there is no duplicity of refund claim – viz., (a) the refund application filed by the supplier of the SEZ unit of tax paid on supplies to SEZ; and (b) the refund application filed by the SEZ unit to claim refund of unutilized ITC.

          There are two ways of making supplies by the person located in Domestic Tariff Area (“DTA”) to SEZ unit. Firstly, the DTA unit can make supply to SEZ unit on payment of tax. Secondly, the DTA unit can make supply to SEZ without paying tax under Letter of

Sl. No.	Party Name	GST No.	Total Taxes Paid
1	Sai Ganapathi Traders	37BQMPK5783R1ZN	4,02,081.20
2	Apl (India) Pvt. Ltd.	37AAECA1501B1ZJ	3,60,040.40
3	Agarwai Sales Corporation	19ACXPA1113H1ZR	2,92,505.40
4	Sri Nivasa Paints & Hardware	37AXOPS5652F1ZX	2,83,570.43
5	Intelligent Materials Pvt. Ltd.,	03AABCI9814Q1Z6	1,59,298.57
6	Vaachi International Pvt. Ltd.,	19AABCV5897LIZF	1,36,872.00
7	V.K. Chhajer & Co.	19AAJFV7945G1ZJ	1,27,121.02
8	Sri Vijayadurga Packages	37ACRFS5824M1Z9	87,099.80
9	Goodluck Packaging Pvt. Ltd.	19AADCG6008L1ZF	71,822.93
10	Mitsui Osk Lines Ltd.	37AADCM1073B1ZX	53,376.92
11	Srivalli Shipping & Transport Pvt. Ltd.	37AAPCS7844G1ZQ	52,389.00
12	Sri Sai Maruti Trading Corporation	37AXUPS0433N1ZP	36,765.12
13	C.H. Robinson Worldwide Freight India Pvt. Ltd.	36AACCC9617L1ZB	23,039.77
14	Lurthmatha Handicrafts (Sea Shell’s)	37AFMPL2491P1ZN	19,591.00
15	Omega Shipping Agencies Pvt. Ltd.	37AAACO3745R3ZS	12,276.94
16	Sai Bhaskara Packaging	37AAHPE1615L1ZT	12,096.00
17	CMA CGM Agencies India Pvt. Ltd.	37AABCC9048G1ZK	11,838.52
18	Sri Vinayaka Paper Packaging	37AIXPS007C3ZZ	10,980.24
19	Allwin Shipping Services	33AAGFA6004N1ZM	10,444.98
20	Sai Chemicals	37ACMPD5473C1Z0	8,550.00
		Total	2,171,760.24

Undertaking. In the first case, since tax amount is mentioned in the invoice, the SEZ unit can claim input tax credit as per Section 16 of Andhra Pradesh Goods and Services Tax Act if the SEZ unit pays taxes to the DTA unit. In the first case itself, if the SEZ unit doesn’t pay any taxes to the DTA unit then as a principle of natural justice he can’t claim any credit of input tax and thus, the SEZ unit needs to provide declaration to the DTA unit that the SEZ unit hasn’t claimed any credit of input tax. In the second case, since no tax has been charged on the supplies by the DTA unit to SEZ unit, there is no question of declaration of non-availment of ITC. Thus, on the basis of such declaration the department is well-positioned to check the duplicity of refund claim.

We would like to further throw light on third provision to Rule 89(1) of Andhra Pradesh Goods and Services Tax Rules, 2017, which read as follows :-

“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 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.”

As per the above provision, the facility to claim refund has been given both to the recipient and the supplier of deemed export supplies. In case the supplier of deemed export supplies, exercises his option to claim refund of taxes paid on its outward supplies [then] it has to take declarations from the recipient that no input tax credit has been availed by the recipient of supplies. Further, there are provisions in law against any person committing offence of wrongful declaration and thus, the Revenue Department has appropriate safeguard regarding any wrongful declaration.

On the basis of the provisions of law stated in foregoing paragraphs, the appellant humbly submit before the Ld. Appellate Joint Commissioner that the SEZ unit can claim the refund of unutilized Input Tax Credit.

2.3 The details of parties to whom taxes has been paid during the period for which this appeal has been filed and the appellant has claimed the input of taxes paid on the procurement of supplies from DTA units are :-

Table 2.3.1 : Details of Suppliers of the Appellant

The appellant declare before the Ld. Appellate Joint Commissioner that because of the financial crunch and liquidity crisis, triggered by the challenging global macro-economic environment, being currently faced by the appellant and the rejection of our refund application by the Ld. Adjudicating Officer leading to blockage of our substantial working capital in taxes, for which refund has been filed, the appellant forego the following refund claims of ₹ 6,10,776/- (Rupees Six Lakhs Ten Thousand Seven Hundred and Seventy Six only) (as the following parties have filed the refund application with or claimed the GST Refund from their jurisdiction officer based on the declaration and endorsement of specified officer provided to such suppliers by the appellant after the refund was rejected by the Ld. Adjudicating Officer) :-

Table 2.3.2 : Details of Suppliers claiming the refund

Sl. No. of Table 2.3.1	Party Name	GST No.	Total Taxes Paid
1	Sai Ganapathi Traders	37BQMPK5783R1ZN	4,02,081.20
6	Vaachi International Pvt. Ltd.,	19AABCV5897L1ZF	1,36,872.00
9	Goodluck Packaging Pvt. Ltd.	19AADCG6008L1ZF	71,822.93
		Total	6,10,776.13

The appellant further declare that it has neither given nor intended to give in future any declaration and Certificate of Endorsement of supplies from the Specified Officer, which is compulsorily for the supplier to obtain from SEZ unit to apply for refund, to its suppliers (other than mentioned in Table 2.3.2) so as to enable the suppliers to claim the refund of taxes paid on supplies made to the appellant. Accordingly, the total amount sought as refund in this appeal stand reduced by ₹ 6,10,776/- (Rupees Six Lakhs Ten Thousand Seven Hundred and Seventy Six only).

2.4 As per the grounds cited above, we conclude that we are eligible for the refund claimed of ₹ 20,97,104/- (Rupees Twenty Lakhs Ninety Seven Thousand One Hundred and Four only) in this appeal as reduced by ₹ 6,10,776/- (Rupees Six Lakhs Ten Thousand Seven Hundred and Seventy Six only) which comes to ₹ 14,86,328/- (Rupees Fourteen Lakhs Eighty Six Thousand Three Hundred and Twenty Eight only) which is bona fide for the ends of justice and that the balance of convenience weighs very much in favour of the appellant.

Para-wise remarks :

12. The Assistant Commissioner (ST), Gajuwaka Circle, Visakhapatnam Division has submitted Para-wise remarks on 3-12-2019 against the grounds of appeal of the appellant, and the same is extracted hereunder :

I invite kind attention to the reference cited and submit the para-wise remarks for the appeal filed by the dealer, M/s. Vaachi International Pvt. Ltd., against the Tax orders of the CTO, Gajuwaka Circle, for the tax period 2017-18 under GST Act.

For the impugned order suffers from misappropriation and/or incorrect appreciation of facts, and is violative of the natural justice, wrongful, biased, erroneous and bad in law.

1.1 All the grounds for appeal as prayed herein are independent of each other and is read without prejudice to each other and conjoined reading of more than one ground for appeal may be done as requested and prayed.

The rejection confirmed by the adjudicating authority is against the established principles of law.

In reply to objection 1 it is submitted that the application, along with the documents, filed has been primarily examined with reference to Section 54(3), Rule 89 of the APGST Act, 2017 and issued RFD-02, dated 19-3-2019 (acknowledgment). The refund claim has been further examined, and it was observed that the taxpayer was not eligible to claim refund of ITC on Export of Goods and Services without payment of IGST, since such provision is available to the taxpayers who made zero-rated supplies to SEZ unit/developer with payment of tax under Section 54 read with Rule 89(2) only. Accordingly, it was sought to issue Show-cause Notice (RFD-08) from RFD-02 stage (acknowledgment), on the proposed rejection of the refund claim. However, issued RFD-04, dated 30-3-2019 wherein provisional refund to the extent of 20%, amounting to ₹ 46,205/- (CGST); 46,205/- (SGST); 3,27,010/- (IGST); has been granted to the taxpayer on the APTIS Module, since there was no provision to issue RFD-08 (show cause notice) from RFD-02 on APTIS.

Subsequently, Show Cause Notice (SCN) in RFD-08, dated 3-4-2019 was issued to the taxpayer, proposing rejection of the entire refund claim, including the 20% provisional refund granted vide Form RFD-04, dated 30-3-2019, amounting to ₹ 4,19,420/- and called for their objections, if any, against such proposition. In this notice personal hearing was granted to the taxpayer on 9-4-2019, to represent their case in person.

In response to the SCN in RFD-08, dated 3-4-2019, the taxpayer filed reply in RFD-09, dated 19-4-2019, and requested for another personal hearing, as they did not avail, personal hearing granted on 9-4-2019 the request of the taxpayers was considered, keeping in view the principles of natural justice, and another opportunity of personal hearing was granted on 27-4-2019.

Accordingly, on 27-4-2019, Shri Manish Goel, C.A, Authorized Representative (A.R) appeared before the Refund sanctioning authority and represented the case.

The written contentions raised, and the arguments put forth, are verified thoroughly and found are of no avail and accordingly they are rejected as not tenable. Therefore, the refund claimed by the taxpayer i.e. ₹ 20,97,104/- (including the amount of ₹ 4,19,420/- provisionally sanctioned was rejected.

2.1 Refund claimed filed by the appellant has been rejected solely on the ground that as per Section 54(3)(i) read with Rule 89(2)(f) of the GST Law (APGST Act, CGST Act), the provisions for refund of unutilized input tax is available to only those taxpayer who made supplies to SEZ Unit or the Developer not vice versa.

The relevant provisions of law are as under :

In reply to objection 2.1, it is submitted that there no remarks to offer.

2.2 As per Section 54(3) of Central Goods and Services Tax Act, 2017,

Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized Input Tax Credit at the end of any tax period :

Provided that no refund of unutilized 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.

In reply to objection 2.2, it is submitted that there no remarks to offer.

2.3 Further as per Section 16 of Integrated Goods and Services Tax Act, 2017,

(1)     “zero-rated supply” means any of the following supplies of goods or services or both, namely :-

(c)     Export of goods or services or both; or

(d)     Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

(2)     Subject to the provisions of sub-section (5) of Section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies; notwithstanding that such supply may be an exempt supply.

(3)     A registered person making zero-rated supply shall be eligible to claim refund under either of the following options, namely :-

(a)     He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit; or

(bb)  He may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of Section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

In reply to objection 2.3, it is submitted that there no remarks to offer.

2.4 Further Section 2(5) of the Integrated Goods and Services Tax Act, 2017 defines “export of goods” as “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to place outside India.

As per Section 2(56) of the Central Goods and Services Tax Act, 2017, “India” means the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed and sub soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters. In reply to objection 2.4, it is submitted that there no remarks to offer.

2.5 In perusal of the above Sections the appellant is primarily involved in exporting dried ornamental plant, materials and candles and as per the definition of Zero-rated supply cited above the appellant falls under the definition of Zero-rated supply under category (a) of sub-section (1) of Section 16 of IGST Act. The appellant is a SEZ Unit and the supplies made to the SEZ unit are used for exporting goods. The suppliers of SEZ unit also falls under the definition of Zero-rated supply under category (b) of sub-section (1) of Section 16 of IGST Act.

The appellant is claiming refund under “Refund of ITC on Export of Goods and Services without payment of Integrated Tax”. Since the appellant is involved in zero-rated supplies made without payment of tax they are eligible for refund as per Section 54(3) of Central Goods and Services Tax Act, 2017 cited above.

In reply to objection 2.5, it is submitted that Section 54(3) and Rule 89(2)(f) of the GST Law (APGST Act., CGST Act) read as below :

“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.”

Rule 89(2)(f)

The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure-1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely :-

a declaration to the effect that tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or a Special Economic Zone developer.”

As per provisions described above, the provision for refund of utilized input tax credit is made available only to those taxpayers who made supplies to SEZ unit or the developer, against LUT.

Further in Rule 89(2)(f) it has been clearly prescribed that the refund application shall accompany a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

Thus, the facility of getting refund of tax paid is statutorily made available to those taxpayers who made supplies to SEZ only, with payment of tax. This is to ensure that the refund of tax paid is claimed only by the suppliers to SEZ, on filing of declarations from their SEZ purchasers, to avoid duplicity of the claims, as there may be a situation where the SEZ Unit gets supplies of goods/services from multiple number of Vendor taxpayers, spread over different places, and it is not possible for the department to track their refund claims, against the supplies made to such SEZ Unit, with payment of tax. Therefore, the contention of the taxpayer that the SEZ Unit can also make refund claim against the zero rated supplies made without payment of tax, is not tenable.

Further, the taxpayer stated that part of export turnover related to the nil rated goods. Since the taxpayer is not basically eligible for claiming the refund of unutilized tax credit against zero supply this aspect is not addressed.

2.6 Also as per Rule 89(2)(f) of Andhra Pradesh Goods and Services Tax Rules, 2017.

“The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely –

A declaration to the effect that the Special Economic Zone unit or the Special Economic developer has not availed the input tax credit of the tax paid by the supplier of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

This rule was amended by Notification G.O.M.S. No. 179 (Andhra Pradesh), dated 19-2-2019 and the clause was substituted as “a declaration to the effect that the tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or Special Economic Zone developer.

We would like to bring to your kind attention to the rules prior to amendment wherein it was mentioned that suppliers to SEZ need to give declaration from the SEZ unit that the SEZ unit has not claimed input tax credit and this sub rule makes it clear that the SEZ unit can claim input tax credit and the option to claim refund of tax is open to both the SEZ unit and the supplier to the SEZ unit haven’t claimed any input tax credit.

In reply to objection 2.6 it is submitted that the provision for refund of utilized input tax credit is made available only to those taxpayers who made supplies to SEZ unit or the developer, against LUT.

Further in Rule 89(2)(f) it has been clearly prescribed that the refund application shall accompany a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

Thus the facility of getting refund of tax paid is statutorily made available to those taxpayers who made supplies to SEZ only, with payment of tax. This is to ensure that the refund of tax paid is claimed only by the suppliers to SEZ, on filing of declarations from their [SEZ] purchasers, to avoid duplicity of the claims, as there may be a situation where the SEZ unit gets supplies of goods/services from multiple number of Vendor taxpayers, spread over different places, and it is not possible for the department to track their refund claims, against the supplies made to such SEZ unit, with payment of tax. Therefore, the contention of the taxpayer that the SEZ unit can also make refund claim against the zero-rated supplies made without payment of tax, is not tenable.

2.7 Also we would like to bring your kind attention towards the direction of Adjudicating Authority to furnish declaration from all the vendors who made supplies to us, against which the present claim is preferred for refund of unutilized ITC to the effect that the vendors have not availed the refund of amounts paid on supplies made to the taxpayers SEZ unit. We are in process of getting those declarations from all the vendors.

In reply to objection 2.7, it is submitted that Rule 89(2)(f) :

“The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely-

A declaration to the effect that the Special Economic Zone unit or the Special Economic developer has not availed the input tax credit of the tax paid by the supplier of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

As per provisions described above, the provision for refund of utilized input tax credit is made available only to those taxpayers who made supplies to SEZ unit or the developer, against LUT. Further in Rule 89(2)(f) it has been clearly prescribed that the refund application shall accompany a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

Thus the facility of getting refund of tax paid is statutorily made available to those tax payers who made supplies to SEZ only, with payment of tax. This is to ensure that the refund of tax paid is claimed only by the suppliers to SEZ, on filing of declarations from their [SEZ] purchasers, to avoid duplicity of the claims, as there may be a situation where the SEZ unit gets supplies of goods/services from multiple number of Vendor taxpayers, spread over different places, and it is not possible for the department to track their refund claims, against the supplies made to such SEZ unit, with payment of tax.

2.8 The appellant is eligible for the refund claimed, since they exported the goods, outside the country and there is no bar to claim refund by the SEZ unit. Further as per the GST Rules, it is obligatory for the suppliers of SEZ unit to obtain declaration from the SEZ unit to the effect that the SEZ unit has not claimed any ITC i.e., tax paid by them on supplies made to SEZ unit. Thus, the department is well-positioned to check the duplicity of refund claim.

In reply to objection 2.8, it is submitted that further in Rule 89(2)(f) it has been clearly prescribed that the refund application shall accompany a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer.”

Thus the facility of getting refund of tax paid is statutorily made available to those taxpayers who made supplies to SEZ only, with payment of tax. This is to ensure that the refund of tax paid is claimed only by the suppliers to SEZ, on filing of declarations from their [SEZ] purchasers, to avoid duplicity of the claims, as there may be a situation where the SEZ unit gets supplies of goods/services from multiple number of Vendor taxpayers, spread over different places, and it is not possible for the department to track their refund claims, against the supplies made to such SEZ unit, with payment of tax. Therefore, the contention of the taxpayer that the SEZ unit can also make refund claim against the zero-rated supplies made without payment of tax, is not tenable.

3. As per the provisions cited above, we conclude that we are eligible for the refund claimed.

In reply to the objection 3, it is submitted that for the aforesaid reasons, it is respectfully submitted that the appeal is devoid of any merits and accordingly it is prayed that the Hon’ble Appellate Deputy Commissioner may be pleased to dismiss the appeal or to pass such further or other orders fit and proper in the circumstances of the case.

Discussion :

13. Perused the grounds of appeal vis-a-vis the impugned orders passed by the assessing authority i.e. A.A.

14. The appellant primarily put forth that the rejection of refund claim is in violation of natural justice and against the facts of the case. The appellant also contended that, it is not correct that Refund claim filed by the appellant has been rejected solely on the ground that as per Section 54(3)(i) read with Rule 89(2)(f) of the GST Law (APGST Act, CGST Act), the provisions for refund of unutilized input tax is available to only those taxpayer who made supplies to SEZ Unit or the Developer.

15. The appellant also put forth Section 16, professing that their supplies are definitely falls under zero-rated supply under Section 16(1)(b). The appellant also advanced that they have claimed refund under “Refund of TTC on Export of Goods and Services without payment of Integrated Tax”. Since the appellant is involved in zero-rated supplies made without payment of tax, they are eligible for refund as per Section 54(3) of Central goods and Services Tax Act, 2017 cited above.

16. The appellant also pointed out that prior to amendment wherein it was mentioned that suppliers to SEZ need to give declaration from the SEZ unit that the SEZ unit has not claimed input tax credit and this sub-rule makes it clear that the SEZ unit can claim input tax credit and the option to claim refund of tax is open to both the SEZ unit and the supplier to the SEZ unit.

Issues for adjudication :

17. Whether the rejection of refund claim by the AA, is in tune with the provisions of (CGST/SGST) APGST Act, 2017 or not?

Analysis :

18. Perused the grounds of appeal along with the assessment orders passed by the A.A., and after thorough verification of records, the following findings are recorded;

19. Before embarking on adjudication of this dispute, it is essential here to understand Section 54(3) read with Rule 89(1), (2)(f) of (CGST/SGST) APGST Act & Rules, 2017. Therefore, these are abstracted hereunder for better clarity.

Section 54(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.”

Rule 89(1) :

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 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] :

Provided also that refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him under section 27 at the time of registration, shall be claimed in the last return required to be furnished by him.

Rule 89(2)(f) :

The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure-1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely :-

a declaration to the effect that tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or a Special Economic Zone developer.”

20. On comprehending the Rule 89(1), the second proviso unambiguously stipulates that in respect of supplies to SEZ units/developers, the refund “SHALL” be claimed by suppliers of goods to the SEZ unit or developer only. Further, Rule 89(2)(f) prescribes that SEZ unit/developers shall not avail input tax credit on the supplies received by them from non SEZ suppliers and refund would be claimed by supplier to SEZ unit/developer only.

21. Thus, a conjoint reading of all the above provisions undoubtedly point towards a conclusion that SEZ unit/developers shall not claim any refund against the ITC involved in supplies received by them from non SEZ suppliers. The Act facilitates eligibility for refund claim to the suppliers who made supplies to SEZ unit/developers with payment of tax. The AA has rightly adhered to these provisions and rejected the refund claim in legitimate manner. In addition to this, it is to be observed that the appellant contentions of their eligibility regarding refund against the zero-rated supplies received by them, is found to be not tenable.

Conclusion :

22. In view of the above emerged findings and discussed circumstances, it is to be held that the refund eligibility claim by the appellant is not in tune with the provisions of Act and the AA has precisely rejected such refund claim duly observing the provisions of the Act. So the rejection of refund by AA need not be interfered with and to be upheld as legitimate, and the appeal is dismissed by confirming the tax so levied by the assessing authority.

Result of the Appeal :

23. In the result, the levy of refund reject by the assessing authority, are confirmed, and the appeal stands dismissed.