ITC refund cannot be denied to 100% EOU making zero-rated exports withdrawal order set aside {[2025] 180 taxmann.com 582 (Gujarat)}
Facts:
- Petitioner was a 100% Export Oriented Unit (EOU) manufacturing goods and exporting them under LUT without payment of GST (zero-rated exports).
- It procured inputs from domestic suppliers on payment of GST and claimed refund of unutilised ITC under Section 54(3) read with Rule 89(4).
- A provisional refund was granted.
- Later, the department withdrew the refund by treating the inward supplies to the EOU as “deemed exports” and said refund should have been claimed under Rule 89(4A), relying on a GST circular.
Issue
Whether a 100% EOU making actual zero-rated exports can be denied refund of unutilised ITC by treating its input supplies as “deemed exports,” even though those supplies were not actually made under the deemed-export procedure
Held
- High Court held that the EOU was an actual exporter, not a deemed-export recipient.
- The domestic suppliers did not follow the deemed-export procedure, so the inputs cannot be treated as deemed exports.
- The EOU is entitled to refund of unutilised ITC under the normal zero-rated export route (Section 54(3) + Rule 89(4)).
- Department’s withdrawal of refund based on the circular was incorrect and unsustainable.
- The refund withdrawal order was quashed and the EOU’s refund claim was restored.
