Remand of SEZ Refund Claims: HC Rebukes Revenue for Disregarding Binding Precedent

Binding Precedent: Can an Appellate Authority disregard a binding judgment of another High Court (specifically the Gujarat HC in Britannia Industries) solely because the Revenue has filed an appeal against it in the Supreme Court?
Refund Eligibility: Whether an SEZ unit is eligible to claim a refund of Input Tax Credit (ITC) distributed by its Input Service Distributor (ISD), or if such a refund must be claimed only by the supplier.
Endorsement: Whether the department can raise a new ground (lack of endorsement for authorized operations) for the first time before the High Court.

Petitioner: Lupin Limited, an SEZ unit.
The Claim: Lupin filed multiple refund claims for unutilized ITC (accumulated via ISD distribution) on zero-rated supplies.
Rejection: The Assistant Commissioner rejected the refunds, holding that SEZ units cannot claim refunds of ISD credit directly; only the supplier can claim it after endorsement.
Appellate Order: The Appellate Authority upheld the rejection. Crucially, it refused to apply the favorable Gujarat High Court ruling in Britannia Industries Ltd. v. Union of India, arguing that the department had challenged the judgment in the Supreme Court.
New Ground: Before the Bombay High Court, the Revenue raised a fresh argument that the refund claims lacked the mandatory endorsement from the Specified Officer certifying that the services were received for “authorised operations” under Section 16 of the IGST Act—a point never raised by the lower authorities.

The Bombay High Court quashed the rejection orders and remanded the matter.
Violation of Judicial Discipline: Citing the landmark principle in Godavaridevi Saraf, the Court held that a High Court judgment is binding on all tribunals and authorities nationwide unless there is a conflicting judgment from another High Court or a stay by the Supreme Court.
- Merely filing an appeal in the Supreme Court does not suspend the binding effect of a High Court ruling. The Appellate Authority committed a grave error by ignoring Britannia Industries.
Remand for Facts: Since the department raised a factual dispute regarding endorsement for authorised operations (which is a mandatory pre-condition for zero-rating benefits), the Court remanded the matter for verification.
Directions: The Assistant Commissioner was directed to:
1. Verify if the services were used for authorised operations and if proper endorsements exist.
2. Apply the legal principle laid down in Britannia Industries (that SEZ units can claim refunds of ISD credit).

HC Judgments Bind All: Tax officers cannot ignore a High Court ruling just because the department disagrees with it. Until stayed, it is the law of the land.
SEZ Refund Route: The Britannia Industries ruling (affirmed here) clarifies that since an ISD cannot file a refund claim (it only distributes credit), the recipient SEZ unit is the proper person to claim the refund of such distributed credit under Section 54.
Endorsement is Key: For SEZ refunds, the “Authorized Operations” endorsement by the Specified Officer is not a formality; it is the substantive proof required to claim zero-rated benefits.