Introduction

The core issue addressed in this petition revolves around the value of goods to be considered while determining the refund of Integrated Goods and Services Tax (IGST). The petitioner, a jewellery processor and manufacturer, contends the decision by the Adjudicating Authority, which significantly reduced their refund claim.

Background

The petitioner is engaged in the business of importing gold and exporting gold jewellery in alignment with the Foreign Trade Policy of the Government of India. Regularly filing returns, the petitioner claims refunds on Input Tax Credit (ITC) for IGST paid on imported gold. For the period June 2018 to September 2018, the petitioner filed a refund claim of Rs. 21,00,000/- on 27^th July 2020 using Form GST-RFD-01.

The Refund Claim Dispute

The application was deemed proper by the adjudicating authority. However, the authority sanctioned only Rs. 88,295/- of the claimed amount, citing instructions from Board Circular No. 37/11/2018-GST dated 15th March 2018. This circular mandates that the lower of the values declared in the export invoice and shipping bill should be considered for determining the export turnover. This directive aimed to resolve discrepancies in values declared in tax invoices versus shipping bills, causing refund claims to stall.

Petitioner’s Argument

The petitioner acknowledged discrepancies between the values in the GST invoice and the shipping bill, agreeing that the lower value should be taken. However, they argued that respondent no. 1 considered the wrong value in calculating the refund. According to the petitioner, the correct Free on Board (FOB) value in the GST invoice was USD 224846.75, not the USD 6479.39 value taken by respondent no. 1.

Invoice Analysis

The invoice indicated:

• FOB value of goods: USD 224846.75
• Less gold supplied by the party free of cost: USD 219017.61
• Balance payable by the buyer: USD 6479.39

Respondent no. 1 had interpreted the balance payable as the FOB value, which the petitioner disputed, arguing the invoice clearly stated the FOB value as USD 224846.75.

Court’s Observation

The court observed that the rules did not specify net realization value for refund purposes but rather the FOB value declared in the GST invoice. The petitioner’s stance was upheld, emphasizing that the correct value should be the FOB value declared in the invoice, and any discrepancy with the shipping bill should result in the lower of the two values being sanctioned.

Illustration for Clarity

Consider a customer purchasing jewellery worth Rs. 5,00,000/- but providing Rs. 3,00,000/- worth of broken gold pieces as part payment. The jeweller’s invoice would reflect:

• Total value of jewellery: Rs. 5,00,000/-
• Advance received in broken gold: Rs. 3,00,000/-
• Net amount payable: Rs. 2,00,000/-

The court noted that the correct approach would consider the total value of Rs. 5,00,000/- and not just the net amount payable, analogous to the petitioner’s situation.

Conclusion

The court quashed and set aside the impugned order dated 25th August 2020, remanding the matter to respondent no. 1 for reprocessing the refund application in accordance with the established principles. The petition was disposed of with no order as to costs, directing the authority to consider the correct value in future refund calculations.

GST Case Law Au Finja Jewels versus Asst. Commissioner

Citation-2024 TAXONATION 1356 (BOMBAY)

CLICK HERE TO READ FULL CASE LAW 

OR 

SUBSCRIBE GST E-LIBRARY (INDIA'S HIGHEST GST CASE LAW DATA)

FOR MORE UPDATE ON GST/ IT JOIN OUR FREE WHATSAPP GROUP BY CLICKING ON THIS LINK https://chat.whatsapp.com/C8VB6F6VHme3A061UDQKhj