• Dated 07^th May, 2026

ALLOWABILITY OF IGST REFUND DESPITE AVAILMENT OF HIGHER DUTY DRAWBACK

BRIEF FACTS:

The petitioner, exported stainless steel kitchen and household articles during July to September 2017 after payment of IGST. The petitioner claimed refund of IGST paid on such zero-rated exports under Section 16 of the IGST Act read with Section 54 of the CGST Act and Rule 96 of the CGST Rules. However, while filing shipping bills, the petitioner selected "Column A" and availed higher duty drawback at 9% instead of lower drawback under "Column B". Due to availing higher drawback, the department withheld the IGST refund on the ground that granting both benefits would amount to double benefit. The petitioner thereafter approached the Bombay High Court seeking refund of IGST amounting to Rs. 45,88,237/-.

ASSESSEE'S CONTENTION:

The petitioner contended that refund of IGST on exports is governed by Section 16(3)(b) of the IGST Act, Section 54 of the CGST Act and Rule 96 of the CGST Rules, and none of these provisions prohibit grant of IGST refund merely because higher drawback was claimed. It was argued that the restriction relating to higher drawback exists only in Section 54(3), which deals with refund of unutilized ITC, and not in Section 54(1), which governs refund of IGST paid on exports. The petitioner further submitted that drawback provisions and GST refund provisions operate independently and, at most, excess drawback could be recovered separately under drawback laws, but IGST refund could not be denied. The petitioner also relied upon several High Court decisions allowing IGST refund in similar situations.

DEPARTMENT'S CONTENTION:

The department argued that the petitioner had voluntarily selected "Column A" and availed higher drawback which included customs as well as erstwhile excise/service tax components. Therefore, grant of IGST refund in addition to higher drawback would result in impermissible double benefit. The department relied upon various judicial precedents and circulars stating that exporters who avail higher drawback cannot simultaneously retain IGST refund unless the differential drawback amount is repaid or adjusted.

DECISION:

The Bombay High Court observed that the issue was already settled through various judicial precedents. The Court held that where exporters avail higher drawback and also seek IGST refund, refund can be granted only after repayment or deduction of the differential drawback component to avoid double benefit. Since the petitioner had availed higher drawback on its own volition and had not refunded the differential drawback amount, full IGST refund could not be granted directly. Accordingly, the Court directed the department to grant IGST refund after deducting the differential drawback amount along with interest at 7% per annum from the date of shipping bill till actual refund.

BTA's COMMENT:

The judgment clarifies that exporters cannot simultaneously enjoy higher duty drawback and full IGST refund where such benefits overlap and result in double benefit. However, the Court also protected the exporter's substantive right to IGST refund by directing adjustment of the excess drawback instead of outright rejection of refund. The ruling reinforces the principle that procedural or technical issues should not defeat legitimate export benefits, provided the excess drawback component is reversed or adjusted appropriately.

Case Reference - Kunal Housewares Pvt. Ltd. v. Union of India 2026) [41 Centax 439 (Bom.) Writ Petition No. 2215 of 2023, decided on 26.08.2024 by the Bombay High Court.]

Author - Madhurima Bose