Urjita Electronics Private Limited vs The Joint Commissioner Of Gst And on 2 January, 2025
AI Legal Insights
This GST case law from the Madras High Court addresses the complex issue of GST refunds for SEZ units under the IGST Act, 2017 and CGST Act, 2017. The core issue revolves around whether an SEZ unit can claim a refund of GST erroneously paid on supplies meant to be zero-rated, considering that Section 16(3) typically designates the supplier as the refund claimant. The court's decision clarifies the circumstances under which SEZ units can directly claim such refunds, emphasizing the need for supplier declarations to prevent dual claims. This case impacts refund procedures for zero-rated supplies to SEZ units.
This GST case law clarifies the eligibility of SEZ units to claim GST refunds on zero-rated supplies when suppliers erroneously pay tax. It impacts how SEZ units manage GST payments and refunds, potentially reducing working capital burdens, while also requiring careful coordination with suppliers to avoid dual refund claims.
- SEZ units can claim GST refunds on zero-rated supplies if suppliers erroneously pay tax.
- Refunds are contingent on suppliers declaring they haven't claimed and won't claim refunds.
- Coordinate with suppliers to ensure they don't claim refunds under Section 16(3)/(4) IGST Act.
- Assistant Commissioner must reconsider refund claims with interest within 60 days.
- Supplies to SEZ units are zero-rated, primarily benefiting the supplier via refund mechanisms.
QCan an SEZ unit claim GST refund on zero-rated supplies?
Yes, the Urjita Electronics case clarifies that SEZ units can claim GST refunds on zero-rated supplies if the supplier erroneously paid the tax. However, this is contingent on the supplier providing a declaration that they have not claimed and will not claim a refund on the same supply.
QWhat is Section 16(3) of the IGST Act?
Section 16(3) of the IGST Act, 2017, generally allows suppliers making zero-rated supplies to claim a refund of unutilized input tax credit. The Urjita Electronics case addresses the interplay of this section with the refund claims of SEZ units receiving such supplies, particularly when tax was erroneously paid.
Ruling Summary
Outcome**
The Writ Petitions were allowed. The impugned common orders dated 27.04.2021, which rejected the refund claims, were set aside. The case was remitted back to the Assistant Commissioner for a fresh order, directing them to allow the refund claims along with interest, subject to the petitioner furnishing a disclaimer from the suppliers confirming they have not claimed, nor will they claim, any refund under Section 16(3) or Section 16(4) of the IGST Act, 2017, read with Section 54 of the CGST Act, 2017. This exercise is to be completed within 60 days.
2. Core Issue
The core issue was whether an SEZ unit, as the recipient of goods and services, is eligible to claim a refund of GST (IGST, CGST, SGST) that was erroneously paid by its Domestic Tariff Area (DTA) suppliers on supplies made to the SEZ unit, given that such supplies are "zero-rated" and the existing statutory provisions primarily allow the supplier to claim refunds.
3. Key Facts
* Petitioner: Urjita Electronics Private Limited, an SEZ unit engaged in the manufacture of Radio Frequency (RF) Equipments.
* Issue Origin: Due to the petitioner's SEZ status not being reflected in the GST portal, its DTA suppliers incorrectly charged and paid GST (IGST, CGST, SGST) on supplies made to the petitioner.
* Refund Claim: The petitioner filed refund claims for the GST amounts of Rs.1,52,333/- (for Oct-Dec 2018) and Rs.2,18,663/- (for Jan-Mar 2019), which it had effectively borne.
* Department's Stance: The Assistant Commissioner and subsequently the Joint Commissioner (Appeals) rejected the refund claims. They held that under Section 16(3) of the IGST Act, 2017, and Rule 89(2)(f) of the CGST Rules, 2017, only the supplier is eligible to claim such refunds for supplies made to SEZ units, and SEZ units/developers cannot claim a refund of unutilized Input Tax Credit (ITC) from non-SEZ suppliers. Concerns about potential dual refunds were also raised.
4. Arguments (Taxpayer vs Revenue)
* Taxpayer (Urjita Electronics Private Limited):
* As an SEZ unit, all supplies received are "zero-rated" and tax-exempt under the SEZ Act, 2005. The GST was paid by mistake by the suppliers and the burden was ultimately borne by the petitioner.
* The petitioner is entitled to the refund under Section 54(1) of the CGST Act, 2017, read with Explanation 2(g) to Section 54 of the CGST Act, 2017, which provides for a "relevant date" for a "person, other than the supplier" to claim a refund.
* The issue is covered by prior decisions of the High Court, namely Platinum Holdings Private Limited, M/s.ATC Tires Private Limited, and M/s.Thryve Digital Health LLP, which held that there is no bar for SEZ units to claim refunds.
* Revenue (Joint Commissioner of GST and Central Excise & Assistant Commissioner of Central Tax):
* SEZ units benefit from a special scheme with exemptions from taxes (Sections 7 and 26 of SEZ Act, 2005, and relevant notifications).
* Supplies to SEZ are "Zero-rated" for the supplier, who has the option to supply without tax under bond/LUT (claiming ITC refund) or on payment of IGST (claiming tax refund).
* Section 16(3) of the IGST Act, 2017, and Rule 89(2)(f) of the CGST Rules, 2017, explicitly stipulate that the supplier is eligible to claim the refund for supplies to SEZ. Rule 89(2)(f) also requires a declaration that tax has not been collected from the SEZ unit.
* Allowing the SEZ unit to claim the refund could lead to dual claims (by both the supplier and the recipient SEZ unit).
* The petitioner failed to provide proof that their suppliers have not claimed any refund.
* The onus is on the petitioner to prove entitlement and furnish disclaimers from suppliers.
* The precedents cited by the petitioner are not directly applicable.
5. Court’s Reasoning
* Overriding Effect of SEZ Act: The court emphasized that Section 51 of the SEZ Act, 2005, grants it an overriding effect over other enactments. Section 7 of the SEZ Act exempts goods/services procured by an SEZ unit from DTA from specified enactments (implicitly including GST for zero-rated supplies).
* Zero-rated Status: Supplies to SEZ units are "Zero-rated Supplies" under Section 16(1)(b) of the IGST Act, 2017, meaning they should ideally be tax-free.
* Recipient's Right to Refund: The court critically examined Explanation 2(g) to Section 54 of the CGST Act, 2017, which defines "relevant date" for a "person, other than the supplier." This statutory provision explicitly recognizes the right of a person other than the supplier to claim a refund, provided they bore the incidence of tax.
* Pari Materia Interpretation: The court drew parallels with similar provisions in Section 11B of the Central Excise Act, 1944, and Section 27 of the Customs Act, 1962, which also permit refunds to persons who bore the tax incidence, even if they are not the direct supplier/importer, provided the principle of unjust enrichment is addressed.
* Preventing Dual Benefit: While acknowledging the Revenue's concern about dual benefits, the court ruled that this could be adequately addressed by requiring the SEZ unit to furnish a disclaimer from its suppliers, confirming that the suppliers have not claimed or will not claim a refund for the same transactions.
* Conclusion: The court found no impediment in the statutory scheme to allow the refund of tax borne by the SEZ unit (petitioner) on supplies made to it, as long as the double benefit issue is resolved. The court clarified that the precedents cited, while not directly on all fours, supported the underlying principle.
6. Statutory References
* Constitution of India: Article 226
* Special Economic Zone Act, 2005: Sections 7, 26, 51; First Schedule; Section 2(c), (g), (za), (zc) (cited in notification explanation).
* Central Goods and Services Tax Act, 2017: Sections 10, 16, 17(5), 18, 39, 49(6), 50, 54(1), 54(3), 54(5), 54(6), 54(10), 54(14), 74, 129, 130; Explanation 1 & 2 (including Explanation 2(g)).
* Integrated Goods and Services Tax Act, 2017: Sections 2(5), 16(1), 16(1)(a), 16(1)(b), 16(2), 16(3), 16(4), 16(4)(i), 16(4)(ii).
* Central Goods and Services Tax Rules, 2017: Rules 89, 89(1), 89(2)(f), 91.
* Central Excise Act, 1944: Section 11B(1), 11B(2) and its provisos/explanations.
* Customs Act, 1962: Section 27(1), 27(1A), 27(1B), 27(2), 27(3), 27(4), 27(5), 27A and its provisos/explanations.
* Finance Act, 1994
* Customs Tariff Act, 1975
* Companies Act, 2013: Section 135
* Foreign Exchange Management Act, 1999
* Notifications: Notification No.18/2017 IGST (Rate) dated 05.07.2017; Notification No.64/2017-Cus; Notification No.1/2023-I.T., dated 31.07.2023; Notification No.5/2023-I.T., dated 26.10.2023.
7. Precedents Cited
1. Platinum Holdings Private Limited, Represented by its Authorized Signatory Vs. Additional Commissioner of GST & Central Excise (Appeals-II), Chennai and another in W.P.Nos.13284 of 2020 etc., batch dated 11.08.2021, 2021 (10) TMI 630.
2. M/s.ATC Tires Private Limited, Represented by its Authorized Signatory Vs. Joint Commissioner of GST & Central Excise (Appeals), Madurai and another in W.P (MD) No.949 of 2022 dated 08.03.2022, 2022 (4) TMI 1994.
3. M/s.Thryve Digital Health LLP, Represented by its Authorized Signatory Vs. Joint Commissioner (Appeals-II) and others in W.P.Nos.16611 and 16615 of 2023 dated 16.11.2023, 2023 (12) TMI 594.
Key Legal Principles
- **Revenue (Joint Commissioner of GST and Central Excise & Assistant Commissioner of Central Tax):**
- SEZ units benefit from a special scheme with exemptions from taxes (Sections 7 and 26 of SEZ Act, 2005, and relevant notifications).
- Supplies to SEZ are "Zero-rated" for the *supplier*, who has the option to supply without tax under bond/LUT (claiming ITC refund) or on payment of IGST (claiming tax refund).
- Section 16(3) of the IGST Act, 2017, and Rule 89(2)(f) of the CGST Rules, 2017, explicitly stipulate that the *supplier* is eligible to claim the refund for supplies to SEZ. Rule 89(2)(f) also requires a declaration that tax has *not* been collected from the SEZ unit.
- Allowing the SEZ unit to claim the refund could lead to dual claims (by both the supplier and the recipient SEZ unit).
- The petitioner failed to provide proof that their suppliers have not claimed any refund.