Case Note & Summary
The petitioner, BA Continuum India Pvt. Ltd., is a company incorporated under the Companies Act, 1956, engaged in providing information technology and information technology enabled services to customers located outside India. It had entered into a master agreement with Bank of America National Association (BANA), a US-based bank, to provide such services. Under the GST regime, the petitioner migrated from service tax registration to GST registration. The services provided to BANA qualified as 'export of services' and 'zero-rated supply' under sections 2(6) and 16 of the Integrated Goods and Services Tax Act, 2017 (IGST Act). The petitioner exported the services without payment of tax and filed five refund applications for the period from April 2018 to June 2019, claiming refund of unutilized input tax credit under section 16(3) of the IGST Act read with section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Rule 89 of the Central Goods and Services Tax Rules, 2017 (CGST Rules). The total refund claimed was Rs. 9,58,13,338. The respondent No. 4 rejected all five refund claims by identical orders dated 26.06.2020, solely on the ground that the petitioner had not opted for the pre-audit procedure under rule 96(10) of the CGST Rules. The petitioner challenged these orders by way of a writ petition under Articles 226/227 of the Constitution of India. The court examined the provisions and held that rule 96(10) applies only to refund of integrated tax paid on export of goods or services, and not to refund of unutilized input tax credit under section 54. The rejection was therefore unsustainable. The court quashed the impugned orders and remanded the matter to the respondent No. 4 for fresh consideration on merits, in accordance with law, after giving the petitioner an opportunity of hearing. The court also directed that the refund claims be decided within eight weeks from the date of receipt of the order.
Headnote
A) Goods and Services Tax - Refund of Unutilized Input Tax Credit - Zero-Rated Supply - Export of Services - Sections 16(3) IGST Act, 54 CGST Act, Rule 89 CGST Rules - Petitioner, an IT/ITeS exporter, claimed refund of unutilized ITC for five quarters from April 2018 to June 2019. The refund was rejected solely on the ground that the petitioner had not opted for the pre-audit procedure under rule 96(10) of the CGST Rules. The court held that rule 96(10) applies only to supplies made without payment of tax under bond or LUT, and not to refund claims under section 54. The rejection was quashed and the matter remanded for fresh consideration on merits. (Paras 2-18) B) Goods and Services Tax - Interpretation of Rule 96(10) - Pre-Audit Requirement - Rule 96(10) CGST Rules - The court interpreted rule 96(10) and held that it applies only to refund of integrated tax paid on export of goods or services, not to refund of unutilized input tax credit under section 54. The rule requires the proper officer to verify the correctness of the claim before processing, but does not mandate a separate pre-audit as a condition for refund. The rejection on this ground was erroneous. (Paras 14-18) C) Goods and Services Tax - Limitation - Refund Claims - Section 54(1) CGST Act - The court noted that the refund applications were filed within the prescribed period of two years from the relevant date. The rejection on the ground of limitation was not raised by the revenue. (Para 8)
Issue of Consideration
Whether the rejection of refund claims of unutilized input tax credit for export of services on the ground of non-compliance with pre-audit requirement under rule 96(10) of the CGST Rules is sustainable in law.
Final Decision
The court allowed the writ petition, quashed the five impugned orders dated 26.06.2020, and remanded the matter to respondent No.4 for fresh consideration on merits in accordance with law, after giving the petitioner an opportunity of hearing. The refund claims are to be decided within eight weeks from the date of receipt of the order.
Law Points
- Refund of unutilized input tax credit
- zero-rated supply
- export of services
- pre-audit requirement
- section 16(3) IGST Act
- section 54 CGST Act
- rule 89 CGST Rules
- rule 96(10) CGST Rules
- unjust enrichment
- limitation period
