Rule 96(10) restricting IGST refund challenged before Madras HC

The Petitioner, a 100% EOU was engaged in exporting major portion of its manufactured products and clearing minor portion for sale in the Domestic Tariff Area (DTA). The Petitioner imported capital goods and input for manufacturing its products and availed exemption of BCD and IGST paid on such imports under the relevant notifications.

Invoking the extended period of limitation, the DRI initiated investigations against the Petitioner seeking to deny refund of IGST in light of restrictions envisaged u/r. 96(10) of the CGST Rules as amended by Notification No. 54/2018 dated 09 October 2018. The DRI sought details of refund received by the Petitioner and requested the Petitioner to voluntarily pay customs duty in the form of IGST and Compensation Cess.

Aggrieved, the Petitioner preferred a Writ before the Madras HC challenging the vires of Rule 96(10). The said Rule inter alia provides that the claimant shall not have availed the benefit of IGST exemption in terms of certain customs notifications. The Petitioner contended that the said Rule violates the provisions in the parent statute because the only prescription in Section 16 of IGST Act and Section 54 of CGST Act was to the extent of outlining the form and manner for claiming refund and not for restricting refund.

It was further argued by the Petitioner that the only intent was to block IGST refund for exporters who had imported inputs under Advance Authorisation Scheme. However, in the process, amended Rule 96(10) has disentitled exporters who do not import inputs under Advance Authorisation scheme which was never the intent.

The Writ has been admitted by the Madras HC.

Comstar Automotive Technologies Private Limited vs. Union of India

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