QUESTION

EOU Unit is engaged in business of Chemicals. Direct refund claim can not be filed at the time of Export Goods, but refund of input tax credit is claimed through RFD 01 as per Central Tax Notification No.48/2017 DT.18/10/2017. A letter is given to the department to give 90% provisional refund of the total refund amount as per Section 54(6) read with Rule 91(2). But the department is not giving 90% of the provisional refund amount and is giving 100% refund amount in 60 days. What could be the solution to claim the provisional refund amount timely?

ANSWER

Facts of the case:

EOU is making exports u/s 16(3)(a) of IGST Act. The claim for refund of unutilised ITC is claimed clause (i) of section 54(3) CGST Act.

Law Applicable:

1. Sub-section (6) of section 54 CGST dictates that;

"Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under subsection (5) for final settlement of the refund claim after due verification of documents furnished by the applicant."

Interpretation:

The provisions given under section 54(6) are not binding in nature on the proper officer. The word used by the lawmaker is "may" which implies that the proper officer has a discretion as to whether or not he wants to permit the grant of 90% provisional refund.
However, the proper officer can not be selective with personal discretion under the provisions of this subsection. A personal selection to grant or withhold the provisional refund goes against the spirit of natural justice. In the light of this, rule 91 prescribes the cases where the provisional refund shall be granted.
The rule specifies that refund shall be granted if during any period of five years immediately preceding the tax period to which the claim for refund relates, the applicant has not been prosecuted for any offence under the Act or under an existing law where the amount of tax evaded exceeds two hundred and fifty lakh rupees.

Conclusion:

If the applicant EOU has rightfully claimed the provisional refund under rule 91 and section 54(6) then the same can not be withheld. A representation shall be made to the higher authority to claim the provisional refund. (Reply dt. 28/01/2022)