Facts of the Case

The petitioner, M/s Elite International, engaged in export transactions, effected three exports under specific invoices during the relevant period. The export proceeds were realized partly in foreign currency and partly in Indian Rupees through banking channels, including a freely convertible Vostro account.

The petitioner filed a refund claim amounting to ₹16,10,541 along with statutory interest. However, a show cause notice was issued, and subsequently, the refund application was rejected by the adjudicating authority. The appellate authority upheld the rejection primarily on the ground that export proceeds were realized in INR instead of freely convertible foreign currency. 

Issues Involved

  1. Whether refund of accumulated ITC can be denied when export proceeds are realized in Indian Rupees.
  2. Whether realization through a freely convertible Vostro account satisfies the requirement of “export proceeds in convertible foreign exchange.”
  3. Applicability and interpretation of Circular No. 88/07/2019-GST.

Petitioner’s Arguments

  • The petitioner contended that export proceeds realized in INR through a freely convertible Vostro account are valid as per RBI guidelines.
  • Relied on Circular No. 88/07/2019-GST, which clarifies that realization in INR is permissible where allowed by RBI.
  • Submitted that rejection solely on the ground of realization in INR is contrary to statutory provisions and circulars.
  • Highlighted that relevant documents including eBRCs were duly furnished at the appellate stage. 

Respondent’s Arguments

  • The respondents argued that export benefits require realization in freely convertible foreign currency.
  • It was contended that the eBRCs reflected realization in INR, making the petitioner ineligible for refund.
  • Further argued that the circular refers to “specific exports,” and its applicability requires verification. 

Court Findings / Judgment

  • The Delhi High Court observed that Circular No. 88/07/2019-GST clearly permits realization of export proceeds in INR, provided it is routed through a freely convertible Vostro account in accordance with RBI guidelines.
  • The Court held that the rejection of refund solely on the basis that proceeds were received in INR is unsustainable in law.
  • The impugned orders dated 23.11.2022 and 25.10.2023 were quashed.
  • The matter was remanded back to the adjudicating authority for fresh consideration in light of the circular and relevant legal position. 

Court Order

  • Writ Petition Allowed
  • Orders rejecting refund set aside
  • Matter remanded for fresh adjudication
  • Direction to complete proceedings within six weeks
  • Refund, if found admissible, to be granted along with statutory interest

Important Clarification by Court

  • Realization of export proceeds in INR does not automatically disqualify refund claims, if:
    • It is permitted under RBI guidelines, and
    • Routed through a freely convertible Vostro account.
  • The issue of “specific exports” remains open for examination by authorities.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/61027112024CW28692024_130814.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.