Order Date – 07 May 2025

Parties: Power Engineering (India) Pvt. Ltd. Vs Union of India & Ors.

Facts –

• The Petitioner, Power Engineering (India) Pvt. Ltd., claimed refund of IGST paid on exported goods under Section 54 of the CGST Act read with Rule 96 of the CGST Rules.
• The Department denied refund of the IGST paid on exports, invoking Rule 96(10) of the CGST Rules, alleging violation since the Petitioner availed duty-free imports.
• The Petitioner challenged the denial, claiming that benefit under Notification Nos. 78/2017 and 79/2017 does not disentitle it from IGST refund on exports.

Issue –

• Whether an EOU that imports goods without payment of IGST under Notification No. 78/2017-Cus. is barred by Rule 96(10) of the CGST Rules from claiming IGST refund ?

Order –

• The Divisional Bench of Hon’ble High Court observed that had the petitioner being issued a show cause notice as contemplated under sub-section (1) of Section 73, and determination of this show cause notice pursuant to the representation/stand adopted by the petitioner, all the issues pertaining to the applicability of Rule 96 (10) of the CGST Rules 2017 would have been open for consideration by the concerned officer.
• However, since the impugned order has straight away drawn a conclusion that the petitioner had wrongly availed refund, which is liable to be recovered from it along with interest and penalty under Section 74 of the CGST Act 2017, in absence of adhering to the procedure prescribed under the Act of 2017 to be read along with Rules 2017, the court satisfied that the necessary procedure to be followed before the demand is raised and the recovery is ordered, has not been adhered with.
• In the wake of the aforesaid without touching into the other issues which are raised in the petition particularly the validity of Rule 96 (10) of the CGST Rules, 2017 as well as its applicability in the case of the petitioner and by keeping this issue open, the court quash and set aside the impugned order dated 10.07.2024 by giving liberty to the Revenue to follow the procedure under Sections 73 and 74 of the Act of 2017, to be initiated by the issuance of show cause notice pursuant to which the petitioner shall be afforded with an opportunity to submit its representation, which shall be subjected to adjudication by the proper officer in accordance with law.
• Writ Petition is allowed in the above terms.