Facts of the Case

The Petitioner, SK Creations, challenged the Order-in-Appeal dated 07.03.2023, which upheld the Order-in-Original dated 10.06.2022. The original authority had partially sanctioned the refund claim while rejecting a portion on the ground that export proceeds were not realized within the prescribed period of nine months.

The Petitioner contended that exports were made to Nepal, and the transaction was conducted in Indian Rupees (INR). The sale proceeds were fully received in INR, thereby satisfying the condition of realization of export proceeds.

Issues Involved

  1. Whether refund can be denied under GST law on the ground of non-realization of export proceeds when payment is received in INR.
  2. Whether exports to Nepal in INR satisfy the requirement of “realization of export proceeds”.
  3. Whether rejection of refund was justified despite actual receipt of invoice value.

Petitioner’s Arguments

  • The Petitioner argued that export proceeds had been duly realized.
  • Since exports were made to Nepal, payment in INR is permissible, and the same was fully received.
  • The rejection of refund on the ground of non-realization was factually incorrect and legally unsustainable.
  • The authorities failed to consider that currency realization conditions differ for exports to Nepal.

Respondent’s Arguments

  • Initially, the Respondents supported the impugned orders stating that export proceeds were not realized within the stipulated time.
  • However, pursuant to directions of the Court, verification was conducted.
  • The Respondents later confirmed that:
    • The entire export proceeds were received, and
    • Amounts matched with export invoices, all in INR.

Court’s Findings / Order

  • The Court recorded that the Respondents verified and accepted the Petitioner’s claim.
  • It was established that:
    • Export proceeds were fully realized in INR.
    • The rejection of refund was incorrect.

Order Passed:

  • The Court set aside:
    • Order-in-Original dated 10.06.2022 (to the extent of rejection of refund), and
    • Order-in-Appeal dated 16.03.2023.
  • The matter was remanded back for reconsideration of the refund claim.
  • The authority was directed to:
    • Reassess the claim in accordance with law,
    • Complete the exercise within 8 weeks, and
    • Consider Section 56 of the CGST Act, 2017 (interest on delayed refunds). 

Important Clarification

  • Exports to Nepal in INR are valid for realization purposes under GST framework.
  • Mere non-recognition of INR realization cannot be a ground for refund denial if:
    • Invoice value is fully received, and
    • Transaction is legally permissible.
  • Authorities must conduct proper factual verification before rejecting refund claims.

Sections Involved

  • Section 54, Central Goods and Services Tax Act, 2017 – Refund provisions
  • Section 56, CGST Act, 2017 – Interest on delayed refunds

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62729052024CW83062023_171517.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.