Gujarat High Court
Shah Paperplast Industries Ltd vs Union Of India on 13 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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Reserved On : 10/10/2025
Pronounced On : 13/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 18892 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 17246 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 17080 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 96 of 2025
With
R/SPECIAL CIVIL APPLICATION NO. 8319 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✓ X
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SHAH PAPERPLAST INDUSTRIES LTD. & ANR.
Versus
UNION OF INDIA & ORS.
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Appearance:
UCHIT N SHETH(7336) for the Petitioner(s) No. 1,2
MS HETVI H SANCHETI(5618) for the Respondent(s) No. 1,2,3,4
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
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1. Heard learned advocate Mr.Uchit N.
Sheth for the petitioners and learned
advocate Ms. Hetvi H. Sancheti for the
respondents.
2. Rule returnable forthwith. Learned
advocate Ms. Hetvi Sancheti waives service
of notice of rule on behalf of the
respondents.
3. This group of petitions involve
similar issue of denial of refund of tax
in view of Circular No.172/04/2022-GST
dated 06.07.2022 issued under section 168
of the Central Goods and Service Tax Act,
2017 (For short "the GST Act").
4. For the sake of convenience, Special
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Civil Application No.18892 of 2023 is
treated as a lead matter.
Facts :
5. Brief facts of Special Civil
Application No.18892 of 2023 are that the
petitioners are engaged in the business of
manufacture and export of Tissue Paper,
Wrapping Paper, Disposable Plastic
Products. etc. being 100% Export Oriented
Undertaking(EOU).
6. The petitioners purchased raw
materials from the registered suppliers
under the GST Act which was utilised for
manufacture of the finished products for
the purpose of export.
7. Section 54(3) of the GST Act provides
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for grant of refund of unutilised input
tax credit in case of zero-rated supplies
made without payment of tax. The
petitioners are accordingly entitled to
claim refund of unutilised input tax
credit in respect of exports made without
payment of tax. Supplies made by the
registered person to a 100% EOU also
qualified as deemed exports under the
provisions of the GST Act. In case of
deemed exports, the supply can also be
made without payment of tax provided the
necessary procedures in this regard are
followed. If however, supplies are made to
100% EOU on payment of tax, refund of such
tax can be claimed either by the supplier
or by the recipient as per the third
proviso to Rule 89(1) of the Central Goods
and Services Tax Rules, 2017 (For short
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"the GST Rules").
8. The suppliers of the raw materials
supplied the goods to the petitioners on
payment of tax. Therefore, the petitioners
were entitled to refund of tax paid to the
suppliers as per Rule 89(1) of the GST
Rules. Alternatively, the refund could
also be claimed of unutilised input tax
credit under section 54(3) of the GST Act
since it is not disputed that the
petitioners ultimately exported the goods
manufactured out of the supplies of raw
materials received on payment of tax.
9. The petitioners filed a refund
application on 11.06.2022 for the month of
April, 2022 claiming refund of tax under
section 54(3) of the GST Act on the basis
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that the export had been made without
payment of tax and the petitioners were
entitled to claim the refund of unutilised
input tax credit. The petitioners also
filed an undertaking along with the refund
application that the petitioners had not
purchased the goods without payment of tax
under the deemed export Notification
No.48/2017 dated 18.10.2017 and Circular
No.14/2017 dated 06.11.2017 and the
suppliers had not claimed the refund of
such tax. The provisional refund was
granted on 02.07.2022 pursuant to the
refund application.
10. The Central Board of Indirect Taxes
and Customs (CBIC) issued Circular No.
172/04/2022-GST dated 06.07.2022 wherein
it was provided in para 2.2 that in case
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of deemed export, the tax paid would not
be considered as input tax credit and
therefore, same would not be considered
while calculating the refund under Rule
89(4) or Rule 89(5) of the GST Rules.
11. Respondent no.4-Assistant
Commissioner, Central GST & Excise,
Vadodara-I issued the show cause notice
dated 20.07.2022 seeking to withdraw the
refund already granted for the month of
April, 2022 alleging that the tax paid on
deemed exports would not be considered as
input tax credit.
12. The petitioners filed preliminary
objections against the withdrawal of the
refund. However, it was informed by the
respondent authority that in view of
circular dated 06.07.2022, refund granted
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to the petitioners would be withdrawn.
13. The petitioners therefore preferred
Special Civil Application No.17246 of 2022
challenging the Circular No.172/04/2022-
GST dated 06.07.2022 as well as notice for
withdrawing refund for the month of April,
2022. During the pendency of the petition,
the respondent authority passed the
impugned order dated 18.08.2022
withdrawing the refund for the month of
April, 2022 amounting to Rs.28,40,959/-.
14. The petitioners therefore, amended
Special Civil Application No.17246 of 2022
to challenge the said order. By order
dated 07.09.2022, notice was issued by the
Court and ad-interim relief against
coercive recovery was granted.
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15. In the meantime, the refund granted
for the period from December, 2021 to
March, 2022 was sought to be reviewed by
the authority on the basis of circular
dated 06.07.2022. By order dated
29.12.2022 passed under section 107(2) of
the GST Act, relying upon the circular
dated 06.07.2022, order dated 07.07.2022
passed by the Deputy Commissioner
sanctioning the refund was reviewed by the
Principal Commissioner, Central GST &
Central Excise, Vadodara-1 and it was
found that appeal be preferred against the
order dated 07.07.2022 sanctioning the
refund claim amounting to Rs.35,90,385/-
under Rule 89(4) of the GST Rules on the
ground that there was sanction of
erroneous refund under Rule 89(4) instead
of Rule 89(4A)/proviso to Rule 89(1) of
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the GST Rules.
16. On the basis of the review order, an
appeal was preferred by the Revenue for
challenging the refund order. The
petitioners made submissions dated
28.08.2023 to the appeal filed by the
respondents and pointed out that for the
prior period, writ petitions were pending
before this Court and therefore, appeal
may be kept pending or in the alternative,
the petitioners made submissions on merits
of the case contending that the
petitioners are entitled to refund of the
accumulated input tax credit of inputs and
input services under section 54(3) of the
GST Act for zero-rated supplies made
without payment of tax.
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17. The appellate authority however, by
the impugned order dated 06.09.2023
allowed the appeal of the department and
directed withdrawal of the refund already
granted to the petitioners along with
interest.
18. Being aggrieved, the petitioners have
preferred this petition with the following
prayers:
"A. This Hon'ble Court may be
pleased to strike down and declare
impugned Para 2.2 of Circular No.
172/04/2022-GST dated 6.7.2022
issued under Section 168 of the
Central Goods and Services Tax
Act, 2017 as ultra-vires the
provisions of Section 16(1) of the
IGST Act read with Section 54 of
the CGST Act and the rules made
thereunder; Annexure"A"
B. This Hon'ble Court may be
pleased to declare that the
Petitioners being exporters making
export without payment of tax are
entitled to refund of unutilized
input tax credit in accordance
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with the provisions of the
statutory provisions;
C. Without prejudice to the above
and in the alternative this
Hon'ble Court may be pleased to
declare that impugned Para 2.2 of
Circular No. 172/04/2022-GST dated
6.7.2022 issued under Section 168
Annexure"A" of the Central Goods
and Services Tax Act, 2017 applies
prospectively only to exports made
after date of issuance of the
circular;
D. This Hon'ble Court may be
pleased to issue writ of
certiorari or writ in the nature
of certiorari or any other
appropriate writ or order quashing
and setting aside impugned order
dated 6.9.2023 (annexed at
Annexure B) passed by appellate
authority for recovering refund
granted to the Petitioners for the
period from December 2021 to March
2022 as being wholly without
jurisdiction, arbitrary and
illegal;
E. Pending notice, admission and
final hearing of this petition,
this Hon'ble Court may be pleased
to stay the operation, execution
and implementation of impugned
order dated 6.9.2023 (annexed at
Annexure B);
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F. Ex parte ad interim relief in
terms of prayer E may kindly be
granted;
G. Such further relief(s) as
deemed fit in the facts and
circumstances of the case may
kindly be granted in the interest
of justice for which act of
kindness your petitioners shall
forever pray."
19. Special Civil Application No.17246 of
2022 is filed for the period prior to the
impugned order passed by the appellate
authority whereas Special Civil
Application No.17080 of 2023 is filed
against the appeal order for the period of
refund claimed for the month of May, 2022.
Special Civil Application No.96 of 2025 is
filed against the appellate order of
withdrawal of the refund for the period
from June, 2018 to May, 2019 whereas
Special Civil Application No.8319 of 2025
is filed by Kumar World Trade Pvt. Ltd.
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for rejection of the refund application on
the same ground for the period from
August, 2022 to March, 2023.
Submissions of the petitioners :
20. Learned advocate Mr. Uchit N. Sheth
for the petitioners submitted that
Circular dated 06.07.2022 is ultra vires
to section 16(1) of the GST Act which
provides that any registered person shall
be entitled to input tax credit on supply
of goods or services or both which are
used or intended to be used in the course
or furtherance of business and the said
amount shall be credited to the Electronic
Credit Ledger of such person. It was also
pointed out that section 16 of the
Integrated Goods and Services Tax Act,
2017 (For short "the IGST Act") also
provides for refund of tax after payment
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of tax or refund of unutilised input tax
credit without payment of tax. It was
submitted that para 2.2 of the circular
dated 06.07.2022 which provides that tax
credit shall not be considered for
calculating the refund on the ground that
the purchases made by the petitioner is
for the deemed export and therefore,
refund cannot be granted under Rule 89(4)
or Rule 89(5) of the GST Rules, is
contrary to the provisions of the GST Act
and the IGST Act and therefore, the
circular is ultra vires to the provisions
of the GST Act.
21. Learned advocate Mr. Sheth submitted
that third proviso to Rule 89(1) of the
GST Rules provides for refund of tax on
deemed exports by the recipient of the
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deemed export supplies or the supplier of
deemed export supplies and hence, circular
barring refund in case of deemed exports
is contrary to the Rule 89(1) of the GST
Rules.
22. It was further submitted in the
alternative that the impugned circular
cannot be given a retrospective effect by
the respondent authority as the circular
was not in force at the time when the
export transactions were made by the
petitioners for the period under
consideration in Special Civil Application
No.17246 of 2022 and Special Civil
Application No.18892 of 2023 i.e. from
December, 2021 to April, 2022.
23. It was submitted that the action of
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the appellate authority of withdrawal of
the refund granted to the petitioners on
the ground that refund application ought
to have been filed under Rule 89(4A) of
the GST Rules and not under Rule 89(4) of
the GST Rules is illegal and incorrect
because Rule 89(4A) applies only to cases
where the suppliers have taken benefit of
deemed export Notification No.48/2017
dated 18.10.2017 whereas in the facts of
the present case, neither the supplier
nor the recipient has taken the benefit of
the deemed export notification and
therefore, Rule 89(4A) of the GST Rules
has no applicability.
24. It was submitted that merely because
the suppliers have sold the goods to the
petitioners upon payment of GST instead of
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taking benefit of the deemed export
notification, the petitioners cannot be
barred from claiming the refund on the
exports made by the petitioners under
section 54(3) of the GST Act.
25. Learned advocate Mr. Sheth in the
alternative submitted that the show cause
notice under section 73 of the GST Act
could have been issued by the respondent
in case of non-payment of tax or erroneous
automatic refund of tax but in cases where
there exists a quasi-judicial order
adjudicating and sanctioning the refund
application of the petitioner, section 73
would not be applicable and only remedy
which would have been available to the
respondents was to file an appeal against
the refund sanctioning order. It was also
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pointed out that in cases where order
granting refund is not challenged by the
Assessing Authority, the higher authority
cannot suo-motu review the order and
withdraw the grant of refund.
26. In support of his submissions,
reliance was placed on the following
decisions:
1) Collector of Central Excise, Kanpur v.
Clock (India) Pvt. Ltd., C-7, Panki
Industrial Area, Kanpur reported in (2000)
6 Supreme Court Cases 650.
2) Priya Blue Industries ltd. v.
Commissioner of Customs (Preventive)
reported in (2005) 10 Supreme Court Cases
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3) ITC Limited v. Commissioner of Central
Excise, Kolkata IV reported in (2019) 17
Supreme Court Cases 46.
4) Patanjali Foods Ltd. v. Union of India
and others (Judgment dated 12.02.2025
passed in Special Civil Application
No.17298 of 2024).
5) Triupra Ispat (A unit of Lohia Group)
v. Union of India and others reported in
2021 SCC OnLine Tri 659.
6) Commissioner of Central GST and
Central Excise v. Krishi Rasayan Exports
Pvt. Ltd. reported in 2023 SCC OnLine J&K
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7) Commissioner of Central Excise,
Shillong v. Jellalpore Tea Estate reported
in 2011 SCC OnLine Gau 18.
27. Learned advocate Mr. Sheth also
referred to and relied upon the decision
of Hon'ble Apex Court in case of Eicher
Motors Ltd. & another v. Union of India
and others reported in (1999) 2 SCC 361 as
well as decision in case of Jayam &
Company v. Assistant Commissioner and
another reported in (2016) 15 SCC 125 and
in case of Union of India v. Vkc
Footsteps India Private Limited
reported in (2022) 2 SCC 603 wherein it
is held as under:
"99. We must be cognizant of the
fact that no constitutional right
is being asserted to claim a
refund, as there cannot be. Refund
is a matter of a statutory
prescription. Parliament was
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within its legislative authority
in determining whether refunds
should be allowed of unutilised
ITC tracing its origin both to
input goods and input services or,
as it has legislated, input goods
alone. By its clear stipulation
that a refund would be admissible
only where the unutilised ITC has
accumulated on account of the rate
of tax on inputs being higher than
the rate of tax on output
supplies, Parliament has confined
the refund in the manner which we
have described above. While
recognising an entitlement to
refund, it is open to the
legislature to define the
circumstances in which a refund
can be claimed. The proviso to
Section 54(3) is not a condition
of eligibility (as the assessees'
the counsel submitted) but a
restriction which must govern the
grant of refund under Section
54(3). We, therefore, accept the
submission which has been urged by
Mr N. Venkataraman, learned ASG."
Submissions of the respondents:
28. On the other hand learned advocate
Ms. Hetvi Sancheti for the respondents
submitted that the jurisdiction under
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sections 73 and 74 of the GST Act can
be validly invoked to recover an
erroneous refund granted under section
54 of the GST Act even in the absence
of an appeal preferred against the
refund order. It was submitted that
sections 73 and 74 of the GST Act
empowers the proper officer to issue a
show cause notice to determine the
amount of tax not paid, short paid or
erroneously refunded due to reasons
such as non-levy, short-levy or
erroneous refund whether by reason of
fraud, collusion, willful misstatement,
suppression of facts or otherwise.
29. It was submitted that section 54 of
the GST Act provides for grant of
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refunds subject to scrutiny and
verification by the proper officer,
however, an erroneous refund granted
under the provisions of the GST Act
does not attain finality which
precludes the recovery proceedings
under section 73 or section 74 of the
GST Act as both the provisions operate
independently to safeguard the revenue
interests.
30. It was submitted that remedy of
appeal under section 107 of the GST Act
or review under section 108 of the GST
Act against a refund order is a
distinct mechanism available to the
department but is not a precondition
for invoking section 73/74 of the GST
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Act to recover the amount erroneously
refunded.
31. In support of his submissions,
reliance was placed on the decision of
Hon'ble Madras High Court in case of
M/s. Premier Cotton Textiles v.
Commissioner of Central Excise reported
in 2019 (368) E.L.T. 465 (Madras).
32. Reliance was also placed on the
decision of Hon'ble Supreme Court in
case of Grasim Industries Limited v.
Commissioner of Central Excise reported
in (2011) 14 Supreme Court Cases 685
wherein the Supreme Court has held that
show cause notice under section 11A of
the Central Excise Act, 1944 which is
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akin to section 73 of the GST Act can
be issued for recovery of an erroneous
refund even without an appeal under
section 35E of the Central Excise Act,
1944 which is akin to section 108 of
the GST Act. It was pointed out that
Hon'ble Apex Court emphasised in the
said decision that section 11A operates
as a recovery mechanism independent of
the appellate or review process,
ensuring that erroneous refunds do not
escape scrutiny due to procedural
technicalities.
33. Learned advocate Ms. Sancheti also
further relied upon the decision of
Hon'ble Apex Court in case of Asian
paints (India) Ltd. v. Commissioner of
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Central Excise reported in 2002 (142)
E.L.T. 522 (SC), wherein the Hon'ble
Apex Court upheld the decision of the
Larger Bench of the CESTAT to the
effect that section 35E and section 11A
of the Central Excise Act, 1944
operate in distinct realms.
34. It was therefore, submitted that
the judgments relied upon by the
petitioners regarding invoking section
35E of the Central Excise Act, 1944 or
any other pari-materia provisions of
other Acts are regarding classification
of taxable goods or services, wherein
self-assessment orders which were based
either on wrong classification or wrong
value of goods and services, tax was
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paid extra and refund was sought on the
same ground. It was pointed out that in
case of Priya Blue Industries Ltd.
(supra), it was held that self-
assessment orders at the behest of the
assessee cannot be modified or changed
without filing appeal and further tax
collected cannot be refunded on the
ground of being wrongly collected on
refund application being made by the
assessee without challenging the self-
assessment order itself. It was
submitted that in the facts of the said
case, it was held that assessees are
not vested with any such powers for
opening the self-assessment orders
and section 74 of the GST Act vests
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specific powers with the department to
recover erroneous refund sanction.
35. It was submitted that in the facts
of the case, no contentious issue has
been adjudicated upon between the
department and the assessee by the
appellate authority and passing of an
order under Form RFD-01 by the
adjudicating authority cannot mean that
issue of refund has been adjudicated
upon.
36. It was submitted that it is a
settled legal position that "if law
prescribes certain thing to be done in
a certain manner, it has to be done in
that manner" and such principle is
applicable in the facts of the case
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because as per the law, refund
application ought to have been made
under Rule 89(4A) of the GST Rules and
therefore, the petitioners were bound
by the same irrespective of the
hardships or any other reason.
37. It was submitted that the deemed
exports are required to be made under
tax invoice upon payment of tax and
following the procedure as provided
under Circular dated 6.11.2017,
therefore, in case of deemed exports,
the supply cannot be made without
payment of tax though either the
supplier or recipient can claim refund
of tax paid on deemed exports under
Rule 89(1) of the GST Rules.
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38. It was further submitted that in
cases where supply is not regarded as
deemed export, the petitioner is
entitled to refund of tax under Rule
89(4A) of the GST Rules. But in the
facts of the case, the petitioners have
claimed the refund under Rule 89(4) of
the GST Rules read with section 54(3)
of the GST Act instead of Rule
89(1)/89(4A) of the GST Rules.
39. It was further submitted that
Circular dated 06.07.2022 is a
clarificatory circular which elucidates
the already existing GST law, thus such
clarificatory circular cannot be said
to be ultra vires the provisions of GST
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or IGST Act.
40. Learned advocate Ms. Sancheti
submitted that after enforcement of the
GST laws, no special treatment or
benefit is granted to taxpayers
registered as 100% EOU as such units
are treated as normal taxpayer. Hence,
no differentiation lies merely because
the petitioner is a 100% EOU.
41. Reliance was placed on the
Notification No.48/2017 dated
18.10.2017 issued in furtherance of
the decision of 22nd GST Council meeting
wherein the supplies made to 100% EOU
was declared to be regarded as deemed
export supply. It was submitted that in
the 22nd GST Council meeting held on
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06.10.2017, it was decided that the
supplies made by a registered person to
EOUs would be considered as deemed
exports and refund of tax paid on such
supplies could be claimed either by the
recipient or the supplier.
42. It was submitted that the
petitioners have wrongfully filed the
refund claim under Rule 89(4) of the
GST Rules as the petitioners ought to
have filed the refund claim under Rule
89(1) in case of deemed export supply
or Rule 89(4A) in case of other supply
not regarded as deemed export as per
Circular dated 06.07.2022.
43. With regard to contention of the
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petitioners that circular dated
06.07.2022 would not be applicable
retrospectively, it was submitted by
learned advocate Ms. Sancheti that said
circular is merely clarificatory in
nature and therefore, the question of
giving retrospective effect does not
arise.
44. Reliance was placed on the decision
of Hon'ble Supreme Court in case of
WPIL Ltd Ghaziabad v. Commissioner of
Central Excise, Meerut in Civil Appeal
No.4228-4229 of 1999.
45. In support of her submissions
reliance was also placed on the
following decisions:
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1) M/s. Premier Cotton Textiles
(supra).
2) Grasim Industries Limited
(supra)
3) Vkc Footsteps India Private
Limited (supra)
Analysis :
46. The questions that arises for the
consideration in this group of matters
can be framed as under:
1) Whether the refund claim filed by
the petitioner was rightly disallowed
by the respondents on the ground that
the petitioners did not file the refund
claim under Rule 89(4A) of the GST
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Rules?
2) Whether the refund claim filed by
the petitioners could have been
rejected applying para 2.2 of the
Circular No. 172/04/2022-GST dated
06.07.2022 issued by the respondents with
the retrospective effect?
3) Whether the respondents were justified
in exercising suo motu powers for
reviewing the orders sanctioning the
refund claim of the petitioners under
section 107(2) of the GST Act directing
the authorised officer to prefer an appeal
under section 107(3) of the GST Act?
4) Whether the respondent authorities
were justified in issuance of notice under
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section 73 of the GST Act for recovery of
refund issued to the petitioners without
challenging the order on the ground that
the refund has erroneously been made?
47. In order to answer the above
questions, it would be germane to refer to
the relevant provisions of the GST Act,
IGST Act, GST Rules as well as
notifications/circulars relied upon by
both the sides:
Central Goods and Service Tax Act,
2(39) "deemed exports" means such
supplies of goods as may be notified
under section 147.
Deemed Exports
147 The Government may, on the
recommendations of the Council, notify
certain supplies of goods as deemed
exports, where goods supplied do not
leave India, and payment for such
supplies is received either in Indian
rupees or in convertible foreign
exchange, if such goods are manufactured
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in India.
Eligibility and condition for taking
input tax credit.
16(1) 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.
"Refund of tax.
54.(1) Any person claiming refund of any
tax and interest, if any, paid on such
tax or any other amount paid by him, may
make an application before the expiry of
two years from the relevant date in such
form and manner as may be prescribed:
Provided that a registered person,
claiming refund of any balance in the
electronic cash ledger in accordance
with the provisions of sub-section (6)
of section 49, may claim such refund in
[such form and] manner as may be
prescribed.
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
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input tax credit shall be allowed in
cases other than-
(1) 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 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.
Appeals to Appellate Authority.
107(2) The Commissioner may, on his own
motion, or upon request from the
Commissioner of State tax or the
Commissioner of Union territory tax,
call for and examine the record of any
proceedings in which an adjudicating
authority has passed any decision or
order under this Act or the State Goods
and Services Tax Act or the Union
Territory Goods and Services Tax Act,
for the purpose of satisfying himself as
to the legality or propriety of the said
decision or order and may, by order,
direct any officer subordinate to him to
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apply to the Appellate Authority within
six months from the date of
communication of the said decision or
order for the determination of such
points arising out of the said decision
or order as may be specified by the
Commissioner in his order.
Integrated Goods and Services Tax Act,
Zero rated supply.
16(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
30 [for authorised operations) to a
Special Economic Zone developer or a
Special Economic Zone unit
16(3) A registered person making zero
rated supply shall be eligible to claim
refund of unutilised input tax credit on
supply of goods or services or both
without payment of integrated tax, under
bond or Letter of Undertaking, in
accordance with the provisions of
section 54 of the Central Goods and
Services Tax Act or the rules made
thereunder, subject to such conditions,
safeguards and procedure as may be
prescribed:
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Central Goods and Services Tax Rules,
Application for refund of tax, interest,
penalty, fees or any other amount
89(1) Any person, except the persons
covered under notification issued under
section 55, claiming refund of any
balance in the electronic cash ledger in
accordance with the provisions of sub-
section (6) of section 49 or] 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 [, subject to the
provisions of rule 10B,] an application
electronically in FORM GST RFD-01
through the common portal, either
directly or through a Facilitation
Centre notified by the Commissioner
89(4) In the case of zero-rated supply
of goods or services or both without
payment of tax under bond or letter of
undertaking in accordance with the
provisions of sub-section (3) of section
16 of the Integrated Goods and Services
Tax Act, 2017(13 of 2017), refund of
input tax credit shall be granted as per
the following formula- Refund Amount =
(Turnover of zero-rated supply of goods
+ Turnover of zero-rated supply of
services) × Net ITC Where,- Adjusted
Total Turnover
(A) "Refund amount" means the maximum
refund that is admissible,
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(B) "Net ITC" means input tax credit
availed on inputs and input services
during the relevant period
(C) "Turnover of zero-rated supply of
goods means the value of zero-rated
supply of goods made during the relevant
period without payment of tax under bond
or letter of undertaking or the value
which is 1.5 times the value of like
goods domestically supplied by the same
or, similarly placed, supplier, as
declared by the supplier, whichever is
less;
(D) "Turnover of zero-rated supply of
services" means the value of zero-rated
supply of services made without payment
of tax under bond or letter of
undertaking, calculated in the following
manner, namely:-
Zero-rated supply of services is the
aggregate of the payments received
during the relevant period for zero-
rated supply of services and zero-rated
supply of services where supply has been
completed for which payment had been
received in advance in any period prior
to the relevant period reduced by
advances received for zero-rated supply
of services for which the supply of
services has not been completed during
the relevant period;
(E) "Adjusted Total Turnover" means the
sum total of the value of-
(a) the turnover in a State or a Union
territory, as defined under clause (112)
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of section 2, excluding the turnover of
services; and
(b) the turnover of zero-rated supply of
services determined in terms of clause
(D) above and non-zero-rated supply of
services,
[excluding the value of exempt supplies
other than zero-rated supplies during
the relevant period;]]
(F) "Relevant period" means the period
for which the claim has been filed.
Explanation. For the purposes of this
sub-rule, the value of goods exported
out of India shall be taken as-
(1) the Free on Board (FOB) value
declared in the Shipping Bill or Bill of
Export form, as the case may be, as per
the Shipping Bill and Bill of Export
(Forms) Regulations, 2017; or
(ii) the value declared in tax invoice
or bill of supply,
whichever is less.)
89(4A) In the case of supplies received
on which the supplier has availed the
benefit of the Government of India,
Ministry of Finance, notification No.
48/2017-Central Tax dated the 18th
October, 2017 published in the Gazette
of India, Extraordinary, Part II,
section 3, sub-section (i), vide number
G.S.R. 1305(E) dated the 18th October,
2017, refund of input tax credit,
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availed in respect of other inputs or
input services used in making zero-rated
supply of goods or services or both,
shall be granted.
89(5) In the case of refund on account
of inverted duty structure, refund of
input tax credit shall be granted as per
the following formula -
Maximum Refund Amount = {(Turnover of
inverted rated supply of goods and
services) × Net ITC + Adjusted Total
Turnover} - 69[{tax payable on such
inverted rated supply of goods and
services × (Net ITC ITC availed on
inputs and input services)}].
Explanation. For the purposes of this
sub-rule, the expressions-
(a) Net ITC shall mean input tax credit
availed on inputs during the relevant
period b[***]; and
"[(b) "Adjusted Total turnover" and
"relevant period" shall have the same
meaning as assigned to them in sub-rule
(4).]]
Notification No. 48/2017-Central Tax
New Delhi, the 18th October, 2017
G.S.R. (E). In exercise of the powers conferred
by section 147 of the Central Goods and Services
Tax Act, 2017 (12 of 2017), the Central
Government, on the recommendations of the
Council, hereby notifies the supplies of goods
listed in column (2) of the Table below as deemed
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exports, namely:-
Table
S.No. Description of supply
(1) (2)
1. Supply of goods by a registered person
against Advance Authorisation
2. Supply of capital goods by a registered
person against Export Promotion Capital
Goods Authorisation
3. Supply of goods by a registered person to
Export Oriented Unit
4. Supply of gold by a bank or Public Sector
Undertaking specified in the notification
No. 50/2017-Customs, dated the 30th June,
2017 (as amended) against Advance
Authorisation
Explanation -
For the purposes of this notification,
1. "Advance Authorisation" means an authorisation
issued by the Director General of Foreign Trade
under Chapter 4 of the Foreign Trade Policy 2015-
20 for import or domestic procurement of inputs
on pre-import basis for physical exports
2. Export Promotion Capital Goods Authorisation
means an authorisation issued by the Director
General of Foreign Trade under Chapter 5 of the
Foreign Trade Policy 2015. 20 for import of
capital goods for physical exports.
3. "Export Oriented Unit" means an Export
Oriented Unit or Electronic Hardware Technology
Park Unit or Software Technology Park Unit or
Bio-Technology Park Unit approved in accordance
with the provisions of Chapter 6 of the Foreign
Trade Policy 2015-20.
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Circular No. 14/14/2017-GST
F. No. 349/21/2016 GST (Policy Wing)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
GST Policy Wing
New Delhi, dated the 6th November, 2017
The Principal Chief Commissioners / Chief
Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)
The Principal Director Generals / Director
Generals (All)
Madam/Sir,
Sub Procedure regarding procurement of supplies
of goods from DTA by Export Oriented Unit (EOU) /
Electronic Hardware Technology Park (EHTP) Unit /
Software Technology Park (STP) Unit/Bio-
Technology Parks (BTP) Unit under deemed export
benefits under section 147 of CGST Act, 2017-reg.
In accordance with the decisions taken by the GST
Council in its 22nd meeting held on 06.10.2017 at
New Delhi to resolve certain difficulties being
faced by exporters post- GST, it has been decided
that supplies of goods by a registered person to
EOUs etc. would be treated as deemed exports
under Section 147 of the CGST Act, 2017
(hereinafter referred to as 'the Act') and refund
of tax paid on such supplies can be claimed
either by the recipient or supplier of such
supplies. Accordingly, Notification No. 48/2017-
Central Tax dated 18.10.2017 has been issued to
treat such supplies to EOU/EHTP/STP/BTP units as
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deemed exports. Further, rule 89 of the CGST
Rules, 2017 (hereinafter referred to as "the
Rules') has been amended vide Notification No.
47/2017- Central Tax dated 18.10.2017 to allow
either the recipient or supplier of such supplies
to claim refund of tax paid thereon.
2. For supplies to EOU/EHTP/STP/BTP units in
terms of Notification No. 48/2017- Central Tax
dated 18.10.2017, the following procedure and
safeguards are prescribed -
(i) The recipient EOU/EHTP/STP/BTP unit shall
give prior intimation in a prescribed proforma in
"Form-A" (appended herewith) bearing a running
serial number containing the goods to be
procured, as pre-approved by the Development
Commissioner and the details of the supplier
before such deemed export supplies are made. The
said intimation shall be given to -
(a) the registered supplier;
(b) the jurisdictional GST officer in charge of
such registered supplier; and
(c) its jurisdictional GST officer.
(ii) The registered supplier thereafter will
supply goods under tax invoice to the recipient
EOU/EHTP/STP/BTP unit.
(iii) On receipt of such supplies, the
EOU/EHTP/STP/BTP unit shall endorse the tax
invoice and send a copy of the endorsed tax
invoice to -
(a) the registered supplier;
(b) the jurisdictional GST officer in charge of
such registered supplier, and
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(c) its jurisdictional GST officer.
(iv) The endorsed tax invoice will be considered
as proof of deemed export supplies by the
registered person to EOU/EHTP/STP/BTP unit.
(v) The recipient EOU/EHTP/STP/BTP unit shall
maintain records of such deemed export supplies
in digital form, based upon data elements
contained in "Form-B" (appended herewith). The
software for maintenance of digital records shall
incorporate the feature of audit trail. While the
data elements contained in the Form-B are
mandatory, the recipient units will be free to
add or continue with any additional data fields,
as per their commercial requirements. All
recipient units are required to enter data
accurately and immediately upon the goods being
received in, utilized by or removed from the said
unit. The digital records should be kept updated,
accurate, complete and available at the said unit
at all times for verification by the proper
officer, whenever required. A digital copy of
Form - B containing transactions for the month,
shall be provided to the jurisdictional GST
officer, each month (by the 10th of month) in a
CD or Pen drive, as convenient to the said unit.
3. The above procedure and safeguards are in
addition to the terms and conditions to be
adhered to by a EOU/EHTP/STP/BTP unit in terms of
the Foreign Trade Policy, 2015- 20 and the duty
exemption notification being availed by such
unit.
4. It is requested that suitable trade notices
may be issued to publicize the contents of this
circular.
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5. Difficulty, if any, in implementation of the
above instructions may please be brought to the
notice of the Board. Hindi version would follow."
Circular No.172/04/2022-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and
Customs
GST Policy Wing
New Delhi, Dated the 6th July, 2022
To
The Principal Chief Commissioners/ Chief
Commissioners/ Principal Commissioners/
Commissioners of Central Tax (All) / The
Principal Directors Generals/Directors Generaal
(All)
Madam/Sir,
Subject: Clarification on various issue
pertaining to GST-reg.
Various representations have been received from
the field formations seeking clarification on
certain issues with respect to -
i. refund claimed by the recipients of supplies
regarded as deemed export;
ii. interpretation of section 17(5) of the CGST
Act;
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iii. perquisites provided by employer to the
employees as per contractual agreement; and
iv. utilisation of the amounts available in the
electronic credit ledger and the electronic cash
ledger for payment of tax and other liabilities.
2. In order to clarify the issue and to ensure
uniformity in the implementation of the
provisions of law across the field formations,
the Board, in exercise of its powers conferred by
section 168 (1) of the Central Goods and Services
Tax Act, 2017 (hereinafter referred to as "CGST
Act"), hereby clarify the issues as under:
xxx
S. NO. Issue Clarification
Refund claimed by recipients of supplies regarded
as deemed export
2 Whether the ITC The ITC of tax paid
availed by the on deemed export
recipient of deemed supplies, allowed to
export supply for the recipients for
claiming refund of claiming refund of
tax paid on supplies such tax paid, is
regarded as deemed not ITC in terms of
exports is to be the provisions of
included in the "Net Chapter V of the
ITC" for computation CGST Act, 2017.
of refund of Therefore, such ITC
unutilised ITC under availed by the
rule 89(4) & rule 89 recipient of deemed
(5) of the CGST export supply for
Rules, 2017. claiming refund of
tax paid on supplies
regarded as deemed
exports is not to be
included in the "Net
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ITC" for computation
of refund of
unutilised ITC on
account of zero-
rated supplies under
rule 89(4) or on
account of inverted
rated structure
under rule 89(5) of
the CGST Rules,
2017.
48. The undisputed facts are that the
petitioners are 100% Export Oriented Unit.
The petitioners filed refund claim in view
of Notification No.48/2017 under section
54 of the GST Act read with Rule 89(4) of
the GST Rules. The supplier of the goods
to the petitioners did not avail the input
tax credit and refund was sanctioned by
the authorised officer and thereafter
under section 107(2), the refund sanction
order was reviewed on the ground that as
the petitioners are 100% EOU, would be
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eligible to file refund claim either under
proviso to Rule 89(1) or Rule 89(4A) of
the GST Rules which provides that in case
of supplies received on which the supplier
has availed the benefit of the
Notification No.48/2017, refund of input
tax credit availed in respect of other
inputs or input services used in making
zero-rated supply of goods or services or
both shall be granted as the petitioners
did not file the refund application under
Rule 89(4A) or proviso to Rule 89(1) which
stipulates that in respect of supplies
regarded as deemed exports, the
application for refund can be filed by the
recipient of deemed export supplies or the
supplier of deemed export supplies in
cases where the recipient does not avail
input tax credit on such supplies.
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49. It appears from the facts of the case
that the petitioners are not the deemed
exporters but are the exporter of the
goods resulting into zero-rated supply as
per section 16(1) of the IGST Act and all
the inward supplies to the petitioners are
made with payment of GST charged by the
suppliers who have not taken benefit of
any notification as deemed exporter. It is
also not in dispute that the petitioners
are exporting the goods at zero-raX ted
supply without payment of taxes under
Letter of Undertaking and the input tax
credit of the inputs, capital goods and
services got accumulated for which refund
claim was filed.
50. It is also not in dispute in facts of
the case that the suppliers of the raw
materials to the petitioners who
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manufactured the finished products have
not shown such supplies as deemed export
but the supplies have been shown as
regular B2B supplies i.e. in regular form
only. The suppliers of the goods to the
petitioners have never followed the
procedure as per Circular No.14/14/2017
dated 6.11.2017 nor any invoices are
endorsed as an EOU unit by the petitioners
as per the procedure prescribed in the
said circular.
51. Therefore, in facts of the case, zero-
rated supplies made by the petitioners is
not coming in the purview of the deemed
exports because the petitioners have
exported the goods and therefore, entitled
to refund of the unutilised input tax
credit as per the provisions of section
54(3) of the GST Act read with Rule 89(4)
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of the GST Rules.
52. So far as para. 2.2 of the Circular
No.172/04/2022-GST dated 06.07.2022 is
concerned, it only clarifies that input
tax credit of the tax paid on deemed
export supplies allowed to the recipients
for claiming refund of such tax paid, is
not input tax credit in terms of
provisions of Chapter-V of the GST Act and
therefore, such input tax credit availed
by the recipient of deemed export supply
for claiming refund of tax paid on
supplies regarded as deemed exports is not
to be included in the Net ITC for
computation of refund of unutilised ITC on
account of zero-rated supplies under Rule
89(4) or on account of inverted rated
structure under Rule 89(5) of the GST
Rules. Such clarification was made in view
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of the issue as to whether the input tax
credit availed by the recipient of deemed
export supply for claiming refund of tax
paid on supplies regarded as deemed
exports is to be included in the Net ITC
for computation of refund of unutilised
ITC under Rule 89(4) and Rule 89(5) of the
GST Rules or not.
53. Rule 89(4) and Rule 89(5) of the GST
Rules refers to the formula for
computation of eligible refund in case of
zero-rated supplies of goods or services
or both without payment of tax under bond
or Letter of Undertaking in accordance
with the provision sub-section(3) of
section 16 of the IGST Act.
54. So far as the facts of the case are
concerned, the petitioners have not
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claimed any refund of the input tax credit
on the deemed export supply. It appears
that the respondents have lost sight of
the fact that the petitioners are the
exporters of the finished goods and the
refund claim is filed by the petitioners
being 100% EOU of zero-rated supply
without payment of tax. The petitioners
are therefore, not governed by para no.
2.2 of the Circular dated 06.07.2022. Had
the suppliers of the raw materials to the
petitioners claimed the refund being the
deemed exporters regarding input tax
credit paid on such deemed export
supplies, then the clarificatory circular
dated 06.07.2022 would have been
applicable. When the petitioners are not
the deemed export suppliers, Rule 89(4A)
would also not be applicable to the
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petitioners as Rule 89(4A) has been
omitted by the Central Goods and Services
Tax (Second Amendment) Rules, 2024 with
effect from 08.10.2024.
55. Therefore, the reasonings assigned by
the appellate authority for applicability
of Rule 89(4A) of the GST Rules is also
contrary to the provisions of the GST Act,
more particularly, section 2(39) of the
GST Act which defines "deemed exports" to
mean such supplies of goods as may be
notified under section 147 and section 147
empowers the Central Government to notify
the supply of goods as deemed export where
the goods supplied do not leave India and
payment for such supplies is either
received in Indian rupees or in
convertible foreign exchange, if such
goods are manufactured in India.
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Therefore, the supply of raw materials by
the suppliers of the petitioners would
amount to deemed export if the suppliers
of the raw materials to the petitioners
would have claimed the refund of the tax
paid on such supplies. However, in facts
of the case, the petitioners who have
actually exported the goods have claimed
the refund and therefore, the reliance
placed by the respondent authorities on
the basis of supplies made to the
petitioners by the suppliers to attract
the provisions of section 2(39) read with
section 147 of the GST Act and Rule 89(4A)
of the GST Rules, would not be applicable.
56. In view of above analysis of the
provisions of the GST Act and the GST
Rules, question no.1 is answered in favour
of the petitioners to the effect that
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respondents were not justified in
disallowing the refund claim of the
petitioners on the ground that the
petitioners did not file such claim under
Rule 89(4A) of the GST Rules.
57. As the petitioners are exporters of
the goods and has never claimed the input
tax credit under Notification No.48/2017
as deemed exporter, para no.2.2 of
clarificatory Circular No.172/04/2022-GST
dated 06.07.2022 would not be applicable
in the facts of the case and therefore,
challenge to such circular is without any
basis. We are therefore not deciding the
question no.2 as to whether such circular
would be applicable with retrospective
effect or not in facts of the case.
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58. When we have already answered the
issues on merits in favour of the
petitioners to the effect that petitioners
are entitled to refund claim of the ITC
and the goods are exported without payment
of tax under Rule 89(1)/89(4) of the GST
Rules, whether the respondents were
justified in review of the refund sanction
order under section 107(2) of the Act or
issue notice under section 73/74 of the
GST Act for recovery of the refund paid to
the petitioners would become academic and
therefore, we are not dealing with the
contentions raised and decisions relied
upon by both the sides and the same are
kept open to be dealt with in appropriate
case.
59. In view of foregoing reasons,
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following orders are passed:
1) Insofar as Special Civil Application
No.17246 of 2022 is concerned, order dated
18.08.2022 withdrawing the refund granted
under the GST Act is hereby quashed and
set aside and notice dated 19.08.2022
proposing to partially reject the refund
for the month of May, 2022 is also hereby
quashed and set aside.
2) Insofar as Special Civil Application
No.18892 of 2023 is concerned, order dated
06.09.2023 passed by the appellate
authority for recovering refund granted to
the petitioners for the period from
December 2021 to March, 2022 is hereby
quashed and set aside.
3) Insofar as Special Civil Application
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No.96 of 2025 is concerned, the show cause
notice dated 18.08.2023 and order dated
27.12.2023 passed by the respondents for
recovery of the refund granted to the
petitioner for the period from June, 2018
to May, 2019 are hereby quashed and set
aside.
4) Insofar as Special Civil Application
No.17080 of 2023 is concerned, order dated
06.09.2022 rejecting the refund claim of
the petitioner confirmed by the appellate
order dated 31.07.2023 for the month of
May,2022 are hereby quashed and set aside.
5) Insofar as Special Civil Application
No.8319 of 2025 order-in-original dated
17.05.2024 and order-in-appeal dated
26.02.2025 are hereby quashed and set
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aside. The prayer with regard to challenge
to vires of para 2.2 of the Circular dated
06.07.2022 and applicability of such
circular prospectively as well as the
question relating to issuance of show
cause notice under section 73/74 of the
GST Act for exercise of powers of review
under section 107(2) of the GST Act are
not decided and kept open to be dealt with
in an appropriate case.
6) Consequentially, the respondents shall
pay the refund as per the claims made by
the petitioners in accordance with law
within 12 weeks from the date of receipt
of a copy of this judgment.
60. All the petitions stand disposed of
accordingly. Rule is made absolute to
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the aforesaid extent. No order as to
costs.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
After pronouncement of the judgement,
learned advocate Mr. Shashvata Shukla prays
for stay of the Judgement and Order.
Considering the reasons assigned in the
order, the request is rejected.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
RAGHUNATH R NAIR
