Gujarat HC Export Refund FIRCs Ruling
Kuehne Plus Nagel Private Limited vs. Union of India [S.C.A.. No. 13427 of 2024]
Background of the Case
The Appellant, Kuehne Plus Nagel Pvt. Ltd., a company engaged in international and domestic freight forwarding, warehousing, and logistics services, filed a refund claim of Rs. 1,82,99,406 for the period from April to June 2021 towards unutilized Input Tax Credit (ITC) accumulated on export of services. The appellant operates under a globally recognized clearing mechanism approved by the Reserve Bank of India (RBI), wherein foreign currency receivables from group entities abroad are netted off against payables to them, and only the net amount is remitted to India. This arrangement is in place since 1997 and has explicit RBI approvals. The appellant duly filed the refund application on the GST portal along with all necessary supporting documents, including Chartered Accountant certificates, reconciliation statements, and bank confirmations.
Although the refund was acknowledged and additional documents were submitted on request, the application was rejected by the adjudicating authority on the sole ground of non-submission of FIRCs for each export invoice, a decision which was later upheld by the appellate authority despite the appellant’s repeated explanations and additional evidence.
Arguments by the Appellant
The appellant contended that it had complied with all the substantive conditions for refund under the GST law and that the authorities had erroneously rejected the claim purely on technical grounds. It was submitted that the requirement to submit FIRCs was not feasible under the RBI-approved net-off mechanism, as only consolidated inward remittances are reflected in the bank’s advice and EEFC account. The appellant provided Chartered Accountant certificates certifying the quantum of foreign exchange received, supported by monthly reconciliation and a certificate from Standard Chartered Bank confirming the remittances received. It was argued that such documentary evidence, especially when the fact of export and receipt of convertible foreign exchange is not disputed, should be considered sufficient compliance.
The appellant also pointed out that no deficiency memo was ever issued, and the refund was denied solely based on an inflexible reading of procedural requirements under Rule 89(2)(c) and Circular No. 125/44/2019, despite fulfilling all the substantive requirements for refund.
Respondent’s Response
The respondents, defended the rejection on the ground that Rule 89(2)(c) of the CGST Rules explicitly requires the submission of FIRCs as evidence of receipt of foreign exchange. They contended that the alternative documents provided by the appellant, such as Chartered Accountant certificates or bank confirmations, could not replace the mandated FIRCs for each export invoice. The department emphasized that the requirement was not merely procedural but integral to verifying the legitimacy of the refund claim.
They also argued that Circular No. 125/44/2019 issued by the CBIC provides binding instructions that necessitate adherence to specified documentation, and that deviation from such circulars would undermine the uniform implementation of refund provisions. As the FIRCs were not provided, they maintained that the refund claim was rightly rejected both at the adjudicating and appellate levels.
Court Findings and Decision
The Gujarat High Court held that the rejection of the refund claim was unjustified, as the appellant had fulfilled the substantial conditions under the GST law. The Court observed that when the fact of export and receipt of convertible foreign exchange is undisputed, the authorities should not insist on rigid procedural compliance, especially when valid alternative evidence is placed on record. The Court emphasized that FIRCs are not the only acceptable mode of proof, particularly in cases where the RBI permits a net-off mechanism for foreign exchange remittance. It noted that the appellant had submitted credible documentation including bank certificates and CA-authenticated reconciliation, which sufficiently demonstrated the realization of export proceeds.
The Court ruled that procedural lapses cannot override substantive compliance and quashed both the adjudicating and appellate orders. Consequently, it directed the department to process and grant the refund of Rs. 1,82,99,406 along with applicable interest to the appellant.
Gujarat HC Export Refund FIRCs Ruling
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