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Dated: 12.03.2025

Madras High Court reaffirmed that exporters IGST refund cannot be denied by Customs department due to system errors between GSTN and ICEGATE

Introduction

On February 24, 2025, the Madras High Court (Division Bench) delivered a significant judgment in W.A.(MD) No. 701 of 2020, upholding Vedanta Limited’s claim for a refund of additional IGST (Integrated Goods and Services Tax) paid on exports. The ruling, which directed the Commissioner of Customs, Tuticorin, to refund ₹2,02,94,956 to Vedanta, reinforces the principle that exporters should not be denied refunds due to system-related errors between GSTN and ICEGATE.

This case sets an important precedent for exporters and GST practitioners, emphasizing that legitimate tax refunds cannot be withheld due to technical glitches in the GST refund processing system.

Case Background

1. Who Were the Parties Involved?

• Appellants: Commissioner of Customs, Tuticorin & GST Authorities
• Respondent: Vedanta Limited, engaged in manufacturing and exporting copper anodes, cathodes, and copper rods

2. Dispute Summary

• Vedanta exported goods in August 2017, paying IGST and later claiming a refund under Section 54 of the CGST Act, 2017 and Section 16(3)(b) of the IGST Act, 2017.
• Due to price revisions in 61 shipping bills, an additional ₹2.02 crore IGST was paid.
• The Customs Department denied the refund, citing data transmission issues between GSTN (Goods and Services Tax Network) and ICEGATE (Indian Customs Electronic Gateway).

3. Why Was the Refund Denied?

• Customs argued that since the revised IGST details were not reflected on ICEGATE, they could not verify the refund claim.
• The department claimed that Circular No. 40/2018-Customs, which provides for refund correction mechanisms, did not apply to Vedanta’s case.
• Vedanta approached the Madras High Court (Single Judge Bench) and won the case, prompting Customs to appeal before the Division Bench.

Madras High Court’s Observations & Ruling

1. Technical Glitches Cannot Deny Legitimate Refunds

• The Court noted that data transmission errors between GSTN and ICEGATE have been widely acknowledged.
• The CBIC (Central Board of Indirect Taxes and Customs) had issued Circular No. 40/2018-Customs, providing alternative mechanisms for refund processing in such cases.
• The Court criticized the Customs Department for failing to implement these corrective measures.

2. Judicial Precedents Supporting Export Refunds

• The Court cited several landmark cases, including:
  • Amit Cotton Industries v. Principal Commissioner of Customs (Gujarat High Court, 2019) – Refund cannot be denied due to system glitches.
  • Venus Jewel Case (Bombay High Court, 2024) – Data mismatches between GSTN and ICEGATE should not obstruct refunds.
  • Ford India Pvt. Ltd. v. Assistant Commissioner (Madras High Court, 2011) – Procedural requirements should not hinder exporters from receiving legitimate refunds.

3. Principle of Zero-Rated Exports

• The Court reaffirmed the fundamental GST principle: Only goods should be exported, not taxes.
• The rejection of Vedanta’s refund would have defeated the purpose of zero-rated exports, discouraging exporters.

4. Customs’ Appeal Dismissed

• The Court upheld the Single Judge’s ruling in favor of Vedanta, ordering the refund to be processed within eight weeks.
• The Division Bench emphasized that CBIC circulars are binding on Customs authorities, and they cannot arbitrarily deny refunds.

Conclusion:

The Madras High Court’s ruling in favor of Vedanta Limited is a significant victory for exporters facing delays and rejections in IGST refunds. By reinforcing the principle that technical system errors cannot be a ground for denial, the judgment provides much-needed clarity and relief to businesses engaged in international trade.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: Madras High Court

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