M/S.Wipro Ltd vs The Assistant Commissioner on 13 December, 2024

Judgment Summary

Case Title: M/S.Wipro Ltd vs The Assistant Commissioner, Office of the Assistant Commissioner of GST & CE
Date of Judgment: 13 December, 2024
Court: High Court of Judicature at Madras
Coram: The Honourable Mr. Justice C. Saravanan

1. Outcome

The writ petitions were allowed. The Court quashed the impugned Notice of Rejection, Orders of Rejection, and Show Cause Notices issued by the respondent. The respondent was directed to grant the refund of IGST paid by the petitioner on its export of services. This refund is subject to verification that the petitioner's supplying units (sister concern/Head Office) have not independently availed any export incentives for the same transactions. The process is to be completed within three months.

2. Core Issue

The central legal question was whether a unit located in a Special Economic Zone (SEZ), which is a recipient of Input Tax Credit (ITC) from its Head Office (registered as an Input Service Distributor - ISD), is eligible to:
1. Avail such ITC.
2. Utilize the availed ITC to pay IGST on its "zero-rated" export of services.
3. Subsequently claim a cash refund of the IGST so paid, as per the provisions of Section 16(3)(b) of the IGST Act, 2017.

3. Key Facts

• Petitioner: M/s. Wipro Ltd. (a registered SEZ unit) is engaged in the export of IT and IT-enabled services.
• Transaction: The petitioner received input services and consequently availed ITC, which was distributed by its Head Office, registered as an Input Service Distributor (ISD).
• Petitioner's Action: The petitioner utilized this ITC to pay IGST on its export of services, treating them as "zero-rated supplies" under Section 16(3)(b) of the IGST Act.
• Claim: The petitioner filed applications for a refund of the IGST paid on these exports.
• Respondent's Action: The Assistant Commissioner rejected the refund claims, issued show cause notices, and sought to recover a provisional refund already sanctioned. The primary ground for rejection was that an SEZ unit is not eligible to avail ITC on its inputs/input services and therefore cannot claim a refund of tax paid using such credit.

4. Arguments

Petitioner (M/s. Wipro Ltd.):
* The export of services by any entity, including an SEZ unit, is a "zero-rated supply" under Section 16(1)(a) of the IGST Act.
* As a registered person making zero-rated supplies, the petitioner is legally entitled to claim a refund under either of the two options provided in Section 16(3) of the IGST Act.
* There is no provision in the GST laws that prohibits an SEZ unit from availing ITC, especially when the tax was paid by its supplying units and passed on.
* Denying the refund defeats the very purpose of zero-rating exports, which is to make them competitive in the international market by relieving them of domestic tax burdens.

Respondent (The Assistant Commissioner):
* There is no explicit provision in the GST Acts allowing an SEZ unit to avail ITC.
* Supplies made to an SEZ unit are zero-rated, and the benefit of refund is available to the supplier to the SEZ, not the SEZ unit itself, as per the second proviso to Rule 89(1) of the CGST Rules.
* Under the SEZ Act, 2005, an SEZ unit is entitled to procure goods and services without payment of tax. Therefore, the situation of availing ITC and claiming a refund should not arise.
* Since the petitioner was not eligible to avail ITC in the first place, its subsequent utilization for tax payment and the claim for refund are invalid.

5. Court’s Reasoning

• The Court found that there is no bar under the IGST Act or CGST Act that prohibits an SEZ unit from availing ITC that has been lawfully passed on to it by its ISD.
• The petitioner, being a distinct registered person under GST, is eligible to avail ITC distributed by its ISD under Section 20 of the CGST Act.
• A registered person making a "zero-rated supply" has a statutory right to claim a refund under Section 16(3) of the IGST Act. The petitioner validly chose the option under Section 16(3)(b) to pay IGST and claim its refund.
• The respondent's interpretation was found to be contrary to the legislative intent behind zero-rating exports. The purpose of the refund provision is to provide an incentive for exports and ensure that taxes do not get embedded in the cost of exported services.
• The Court referenced the Supreme Court's decision in Unichem Laboratories Ltd., holding that tax authorities should not deprive an assessee of a benefit available in law merely to augment revenue.
• As a safeguard against double benefit, the Court directed the respondent to verify that the petitioner's supplying units had not claimed any separate export incentive for the same transaction before processing the refund.

6. Statutory References

• Central Goods and Services Tax (CGST) Act, 2017: Sections 2(60), 2(61), 2(63), 16, 19, 20, 25(5), 54, 73(1), 73(9).
• Integrated Goods and Services Tax (IGST) Act, 2017: Sections 2(6), 2(23), 16, 16(1)(a), 16(2), 16(3)(b).
• Central Goods and Services Tax (CGST) Rules, 2017: Rule 89(1), 89(2)(f).
• Special Economic Zones (SEZ) Act, 2005: Sections 26(1)(c), 51(1).
• Constitution of India: Article 226.

7. Precedents Cited

Relied upon by the Petitioner / Court:
* M/s. ATC Tires Private Ltd. Vs. Joint Commissioner of GST & Central Excise (Appeals) & Anr. (2022) 4 TMI 1194
* Unichem Laboratories Ltd. v. Collector of Central Excise, Bombay (2002) 145 ELT 502 (SC)
* Britannia Industries Ltd. Vs. Union of India 2020 (42) GSTL 3 (Guj)
* Amit Cotton Industries Vs. Principal Commissioner of Customs 2019 (29) GSTL Guj
* Union of India Vs. Kamalakshi Finance 1992 Supp (1) SCC 443

Relied upon by the Respondent:
* Adani Power Ltd. Vs. Commissioner of Central Tax – GST Telangana 2020 (372) ELT 266 (T)
* Vaachi International Pvt. Ltd. 2020 (36) GSTL 38 (A.A.R.GST)
* Shyamragu & Co. (India) Pvt. Ltd. Vs. Union of India 2010 (256) E.L.T.193 (Kar.)