Delhi HC: Consolidated FIRCs are Valid; Quashes ITC Denial and Remands Case.

Delhi HC: Consolidated FIRCs are Valid; Quashes ITC Denial and Remands Case.

Issue

Whether Input Tax Credit (ITC) can be denied and a demand raised against an exporter for failing to provide a one-to-one, invoice-wise correlation between export invoices and Foreign Inward Remittance Certificates (FIRCs), even when consolidated proof of foreign exchange realization is available.

Facts

• The CGST Department reversed the Input Tax Credit (ITC) claimed by the petitioner for the period 2017–18 to 2021–22.
• The department’s basis was that the petitioner did not furnish individual FIRCs or Bank Realization Certificates (BRCs) to match each export invoice.
• Authorities noted that lump-sum INR credits from the petitioner’s foreign branch did not correspond directly with specific invoices, months, or years.
• The petitioner contended that they had previously submitted the necessary documents during GST refund claims for the same period, which were accepted and sanctioned by the department.

Decision

• The Delhi High Court held that FIRCs/BRCs do not need to match each export invoice individually. It ruled that periodic or consolidated remittance proofs are acceptable as long as they fully account for the total export proceeds.
• The Court found the previous proceedings to be procedurally flawed.
• It set aside (quashed) the demand order and the reversal of ITC.
• The case was remanded back to the Revenue authority for fresh consideration, with directions to issue a new personal hearing notice and re-adjudicate the matter properly.

Key Takeaways

• Substance Over Form: This judgment prioritizes the substance of the transaction (actual receipt of foreign exchange) over the procedural form (invoice-wise reconciliation). As long as total export proceeds are realized and proven, the manner of remittance documentation is secondary.
• Consolidated Proof is Sufficient: Exporters are not required to provide a separate FIRC/BRC for every single export invoice. Consolidated or periodic proofs are legally valid.
• Procedural Fairness is Non-Negotiable: The court’s decision to remand the case underscores the importance of proper procedure. Orders passed without adequate consideration of the assessee’s submissions are liable to be quashed.
• Inconsistent Stance by Revenue: The fact that the same documents were accepted for refunds but rejected for ITC verification highlights a departmental inconsistency, which the court implicitly corrected.