Order Rejecting Refund to Be Set Aside as Assessee Was Eligible for Refund of Compensation Cess Paid on Goods Exported | HC

Case Details: Crystal Overseas vs. Union of India - [2025] 171 taxmann.com 233 (Bombay)

Judiciary and Counsel Details

• Somasekhar Sundaresan & B.P. Colabawalla, JJ.
• Rahul C. Thakar & C. B. Thakar, Advs. for the Petitioner.
• Siddharth Chandrashekhar & Saket R. Ketkar, Advs. for the Respondent.

Facts of the Case

The assessee, having its principal place of business in Maharashtra, was engaged in the export of beverages. The purchases were made on payment of GST and Compensation Cess. Since the export qualified as a zero-rated supply, the assessee applied for a refund of unutilized Input Tax Credit (ITC), including Compensation Cess. A show cause notice was issued proposing to disallow the refund. In response, the assessee submitted a reply. However, the adjudicating authority, while passing the refund order, granted a refund only for CGST and SGST, denying the refund of Compensation Cess. Aggrieved, the assessee filed an appeal before the appellate authority, which was rejected on the grounds that ‘input tax’ as defined under Section 2(62) of the CGST Act, 2017 does not include Compensation Cess. Consequently, the assessee filed a writ petition before the High Court challenging the denial.

High Court Held

The Hon’ble High Court held that the issue was squarely covered by Circular No. 1/1/2017-Compensation Cess, dated 26-07-2017, which explicitly allows an exporter to claim a refund of Compensation Cess paid on exported goods. Accordingly, the impugned orders rejecting the refund claim were quashed and set aside. The respondents were directed to grant the refund of Compensation Cess along with interest under Section 56 of the CGST Act, 2017 within a period of four weeks.