Facts of the Case

The petitioner, FCI OEN Connectors Ltd., had imported goods under the Advance Authorization Scheme without payment of customs duties for use in the manufacture of export products. Due to restrictions imposed during the COVID-19 pandemic, the petitioner could not fulfill the export obligation within the prescribed time.

Subsequently, the petitioner paid the applicable customs duty and additional customs duty on the imported goods that did not qualify under the export obligation. Since these duties were paid after the implementation of the GST regime, the petitioner filed refund applications under the CGST Act.

However, the refund applications were returned by the department on the ground that the claim was not covered under Section 142 of the CGST Act, 2017.

 

Issues Involved

  1. Whether refund of customs duties paid after the implementation of GST in respect of imports under the Advance Authorization Scheme can be claimed under Section 142(3) of the CGST Act, 2017.
  2. Whether the department was justified in rejecting the refund applications without examining them on merits.
  3. Whether such refund claims deserve reconsideration in the light of judicial precedents relied upon by the petitioner.

 

Petitioner’s Arguments

  • The petitioner submitted that the customs duties were paid after the GST regime came into force.
  • Therefore, the refund claim could only be processed under Section 142(3) of the CGST Act, 2017, and not through the transitional credit mechanism.
  • The petitioner relied upon various judgments of the Madras High Court and decisions of Tribunals recognizing entitlement to such refunds under Section 142(3).
  • It was contended that the department erred in refusing to entertain the refund applications solely on the ground that they were not covered by Section 142.

 

Respondent’s Arguments

  • The department submitted that if the petitioner resubmitted the refund applications, the competent authority would consider the claims in accordance with law.
  • It was also stated that due consideration would be given to the judicial precedents relied upon by the petitioner while deciding the refund applications.

 

Court Order / Findings

The Kerala High Court disposed of the writ petition with the following directions:

  • The petitioner was permitted to resubmit the refund applications.
  • The competent authority was directed to examine the refund claims in accordance with law.
  • The authority was specifically directed to consider the judicial precedents that may be relied upon by the petitioner while deciding the refund applications.
  • If the refund applications were resubmitted on or before 30.12.2022, the department was directed to pass appropriate orders within three months thereafter.

 

Important Clarification

  • Refund claims relating to customs duties paid after the implementation of GST should not be rejected merely because they arise after the transition to GST.
  • Authorities are required to examine such refund claims under Section 142(3) of the CGST Act, 2017, wherever applicable.
  • Refund applications must be decided on their merits after considering applicable judicial precedents instead of being returned without proper adjudication.
  • The judgment reinforces that procedural objections should not defeat legitimate refund claims arising from the GST transition.

 

Sections Involved

  • Section 142(3) of the Central Goods and Services Tax Act, 2017
  • Advance Authorization Scheme under the Foreign Trade Policy
  • Customs Act, 1962 (Refund of Customs Duties)

Link to download the order -https://www.mytaxexpert.co.in/uploads/1782890118_158compressed.pdf

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