IGST Refund Directed despite Wrong Drawback Code in Shipping Bill; Cost imposed on Officers for negligence

Issue

Whether a clerical error by a Customs House Agent (CHA) in selecting the wrong Drawback Code (3215 ‘A’ instead of 3215 ‘B’) in the Shipping Bill can be a ground to deny the refund of IGST paid on exports (Zero Rated Supplies), and whether Customs authorities are bound to correct such errors.

Facts

The Transaction: The petitioner exported goods on payment of IGST (Zero Rated Supply) and was entitled to a refund of the tax paid.
The Error: The CHA inadvertently selected Drawback Code 3215 ‘A’ in the Shipping Bill.
- Code A: Implies higher drawback is claimed (often barring IGST refund).
- Code B: Implies lower drawback is claimed (allowing IGST refund).
The Consequence: Due to the wrong code, the ICEGATE system automatically blocked the IGST refund, granting only the drawback amount.
The Block: Despite the petitioner’s request to correct the error under Section 149 of the Customs Act (which allows amendment of documents), the authorities took no action.

Decision

Substance over Form: The High Court held that a substantive benefit (IGST refund on exports) cannot be denied due to a mere procedural or clerical lapse by an agent.
Duty to Correct: The authorities failed in their duty to rectify the error when pointed out. The Court directed them to pass an order amending the Shipping Bill from Code 3215 ‘A’ to 3215 ‘B’.
System Update: They were further directed to communicate this change to the ICEGATE system to trigger the release of the IGST refund.
Cost Imposed: Citing negligence on the part of the authorities for dragging the exporter to court over a rectifiable error, the Court imposed a cost of Rs. 10,000 on the Department.
Ruling: In favour of the assessee.

Key Takeaways

Code ‘A’ vs Code ‘B’: This is a common pitfall for exporters. Code ‘A’ usually signifies that you are availing CENVAT/ITC facilities or higher drawback, which might conflict with IGST refund rules. Always ensure your CHA selects the code ending in ‘B’ (representing lower drawback) if you intend to claim a refund of IGST paid on exports.

Section 149 of Customs Act: This section is a powerful tool. It allows you to request amendments to shipping bills even after the goods have been exported, provided the amendment is based on documents that existed at the time of export.

HIGH COURT OF GUJARAT

Kothari Infotech (P.) Ltd.

Union of India

BHARGAV D. KARIA and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 10341 of 2023

OCTOBER 9, 2025

Karankumar J Sukawala and Mukund Kumar Chouhan for the Petitioner. Utkarsh R Sharma for the Respondent.

ORDER

Bhargav D. Karia, J. Heard learned advocate Mr. Karankumar Sukawala for the petitioner and learned advocate Mr.Utkarsh Sharma for the respondents.

2. By way of this petition under Articles 226 and 227 of the Constitution of India, the petitioner has prayed for the following reliefs :-

“11 (A) Your Lordship may be pleased to admit this petition.

(B) Your Lordship may be pleased to allow this petition.

(C) Your Lordship may be pleased to issue a writ of mandamus or any other appropriate writ directing the respondent authorities to immediately sanction the refund of IGST amounting to Rs.24,21,913/- paid in regards to the goods exported i.e. ‘Zero Rated Supplies” made by Shipping Bill No. 7379752 dated 15.07.2017 from Air Cargo Complex Sahar (East) Mumbai.

(D) Your Lordship may be pleased to direct the respondent authorities to pay interest @ 9% to the petitioner herein on the amount of refund of IGST mentioned hereinabove from the date of Shipping Bills until the date on which the amount of refund is paid to the petitioner herein, as the same is arbitrarily and illegally withhold by the respondent authorities.

(E) Your Lordship may be pleased to grant an ex-parte ad-interim relief in favour of the petitioner herein in terms of the prayer clause ‘C’ and ‘D’ hereinabove.

(F) Since the petitioner are constrained to approach Your Lordship by way of this petition only because of illegal act of respondent authorities. Your Lordships may be pleased to direct the respondent authorities to pay a cost of this litigation to the petitioner herein.”

3. The brief facts of the case are as under :-

3.1. The petitioner is a Company registered under the provisions of the Companies Act, 1956 and is a trader of Printing, Writing and Drawing Ink falling under HSN 3215.90.90. The petitioner is also registered under the provisions of the Goods and Service Tax Act, 2017 (For Short “the GST Act”). The petitioner exported Digital Printing Ink to Italy by Tax Invoice dated 13.07.2017. The said goods were cleared on payment of IGST for export i.e. ‘Zero Rated Supplies’ by Shipping Bill No. 7379752 dated 15.07.2017.

3.2. The petitioner thereafter filed Outward Supply Return in Form GSTR-01 and discharged the duty liability vide Form GSTR-3B under the provisions of the GST Act for the month of July, 2017. It appears that during the transitional period, the GST Act came into effect on 01.07.2017, however the Customs House Agent (CHA) was not conversant with the provisions of the GST Act and therefore, he made an inadvertent mistake while punching the drawback rate and punched 3215’A’ instead of 3215’B’.

3.3. The Schedule appended with Notification No. 131/2016-Customs (NT) dated 31.10.2016, shows the duty drawback against Tariff Entry 3215’A’ i.e. drawback rate when CENVAT facility has not been availed and the duty drawback against Tariff Entry 3215’B’ i.e. drawback rate when CENVAT facility has been availed. Tariff Entry 3215’A’ prescribed higher rate of drawback whereas Tariff Entry 3215’B’ provides lower rate of drawback for availing the CENVAT facility. However, in the facts of the case, the drawback rate is at the rate of 1.50% of FOB (Free on Board). The petitioner, therefore, received drawback at the rate of 1.50% of FOB and did not get the IGST refund.

3.4. It is the case of the petitioner that due to inadvertent mistake by the Customs House Agent in punching the option of the drawback rate, the petitioner had received only drawback at the rate of 1.50% of FOB whereas IGST paid on the ‘Zero Rated Supplies’ was not refunded to the petitioner.

3.5. The petitioner therefore, made inquiry with the office of the Deputy Commissioner of Customs ((Refund IGST) respondent no. 3 herein for release of IGST refund against the export made vide Shipping Bill No. 7379752 dated 15.07.2017.

3.6. The petitioner also addressed a letter dated 12.02.2019 to do the necessary correction in aforesaid Shipping Bill. The said letter is annexed at Anenxure-H (page 46 to the petition). However, no correction was made by the respondent authorities in the Shipping Bill though prayed by the petitioner way back in the month of February, 2019 and accordingly, the petitioner did not receive the IGST refund.

4. There is no explanation tendered even on the record with regard to non-amending the Shipping Bill as requested by the petitioner. The petitioner also raised a grievance on CPGRAMS on 04.02.2023 and reply was received on 27.02.2023 informing the petitioner that in respect of Shipping Bill in question, PFMS (Public Fund Monetary System) rejected the refund application of the petitioner in view of the wrong entry selected by the petitioner and it was also informed that it has not updated the Bank Account on ICEGATE portal. It is the case of the petitioner that the Bank Account of the petitioner on the ICEGATE portal was updated and hence the respondent ought to have passed modification order by exercising the powers under Section 149 of the Customs Act, 1962 (For Short “the Customs Act”) to amend the Shipping Bill by changing the Tariff Entry from 3215’A’ to Tariff Entry 3215’B’. The petitioner, therefore, being aggrieved has preferred this petition with the aforesaid prayers.

5. During the pendency of this petition, the petitioner has preferred another application pursuant to the oral direction issued by this Court on 12.08.2025. However, the same is also not considered by the respondent authorities for the reasons best known to them. The petitioner has placed the said application on record so as to issue the necessary direction to the respondent authorities to carry out correction while exercising the powers under Section 149 of the Act, which reads as under :-

149. Amendment of documents.—Save as otherwise provided in sections 30 and 41, the proper officer may, in his discretion, authorise any document, after it has been presented in the custom house to be amended:

Provided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorised to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be.”

6. Inspite of the aforesaid provision, the respondent authorities for the reasons best known to them are sitting tight over the matter by not carrying out amendment though requested by the petitioner in the month of February, 2019 and repeated in the month of August, 2025.

7. When the matter is called out today, learned advocate Mr. Utkarsh Sharma for the respondents submitted that he has instructions that if the directions are issued by the Court then only the respondent authorities shall carry out the amendment and otherwise, the respondent authorities are unable to carry out the amendment in the Shipping Bill in question as prayed by the petitioner.

8. It was further submitted that the respondent authorities have also instructed him that the petitioner is otherwise eligible for the refund, but unless and until, this Court gives direction to the respondent, no amendment can be carried out by the respondent authorities while exercising powers under Section 149 of the Customs Act.

9. In view of the above, following directions are issued :-

(a)

The respondent authorities are directed to pass the order amending the Shipping Bill No. 7379752 dated 15.07.2017 as per the request made by the petitioner and thereafter communicate the same to the ICEGATE and make necessary changes in ICEGATE so as to enable the GST authority to issue the refund order on the IGST paid by the petitioner on the Shipping Bills in question for the exports made in the year 2017.

(b)

As the respondent authorities have remained negligent and adopted lackadaisical approach, this Court deems it fit to impose cost quantified at Rs.10,000/- (Rupees Ten Thousand only) upon the respondents to be paid to the Gujarat State Legal Services Authority within a period of four weeks from today. The compliance report of payment made towards costs shall be placed on record.

10. With the aforesaid directions, the petition stands disposed of. Notice is discharged.