M/s Prime Perfumery Works vs. Assistant Commissioner of Central
Tax & Another
Adv.
Yogesh Verma (CS/LLB/M.Com/B.Com/PGDCA)
Introduction
The Karnataka High Court,
in its judgment dated 2 December 2025, delivered an important ruling protecting
exporters from denial of GST refund on purely procedural grounds. In M/s
Prime Perfumery Works vs. Assistant Commissioner of Central Tax & Another,
the Court held that non-furnishing of Letter of Undertaking (LUT) prior to
export is not a fatal defect and that substantive benefit of zero-rated supply
cannot be denied when exports are undisputed. The judgment reiterates the
binding nature of CBIC Circular dated 15 March 2018 and reinforces that
procedural lapses cannot override substantive statutory benefits under GST.
Case
Details
The writ petition was
filed as Writ Petition No. 11076 of 2024 (T-RES) before the High Court
of Karnataka at Bengaluru. The petitioner was M/s Prime Perfumery Works,
a partnership firm engaged in export of goods, represented by its partner. The
respondents were the Assistant Commissioner of Central Tax, Bengaluru South
Commissionerate, and the Union of India through CBIC. The matter was
decided by Hon’ble Justice S. R. Krishna Kumar.
Facts of
the Case
The petitioner exported
goods during the financial year 2022–23 and filed a refund application on 3
December 2023 seeking refund of IGST in respect of zero-rated supplies. The
department issued a show cause notice dated 28 December 2023 proposing rejection
of the refund claim. The petitioner submitted a detailed reply on 11 January
2024 explaining that exports were genuine and fully compliant.
However, the Assistant
Commissioner rejected the refund application vide order dated 31 January 2024
in Form GST RFD-06, solely on the ground that the petitioner had not
furnished a Bond or Letter of Undertaking (LUT) prior to export as
required under Rule 96A of the CGST Rules. Aggrieved by the rejection of refund
on this singular procedural ground, the petitioner approached the High Court.
Petitioner’s
Submissions
The petitioner contended
that the rejection of refund was arbitrary and contrary to law. It was argued
that the exports were undisputed and fully supported by shipping bills and
export documentation. The petitioner placed strong reliance on CBIC Circular
dated 15.03.2018, particularly paragraph 4 and 4.1, which clearly state
that delay in furnishing LUT can be condoned and that export under LUT may be
permitted on an ex post facto basis.
It was submitted that the
requirement of furnishing LUT prior to export is directory and not mandatory,
and denial of refund defeats the very objective of zero-rated supplies under
Section 16 of the IGST Act. The petitioner argued that the adjudicating
authority completely ignored the binding circular while passing the impugned
order.
Stand of
the Department
The department defended
the refund rejection order and argued that furnishing LUT prior to export is
mandatory under Rule 96A of the CGST Rules. It was contended that since the
petitioner failed to comply with this statutory requirement before effecting exports,
the refund was rightly rejected and no interference was called for.
Analysis by
the Court
The High Court examined
the impugned refund rejection order and noted that the only ground for
rejection was non-submission of LUT prior to export. The Court carefully
analysed CBIC Circular dated 15 March 2018, which was issued to ensure
uniform implementation of refund provisions across field formations.
The Court observed that
paragraph 4.1 of the Circular categorically clarifies that substantive
benefits of zero rating cannot be denied merely due to delay in furnishing LUT,
provided exports are otherwise established. The Court emphasised that the
Circular permits condonation of delay and allows exporters to furnish LUT on an
ex post facto basis after considering the facts and circumstances of each case.
Finding on
Nature of LUT Requirement
The Court held that
non-furnishing of LUT prior to export is not an incurable defect and
cannot be treated as a mandatory condition so as to deny refund outright. The
Court observed that when the department itself has recognised through a
circular that LUT can be furnished subsequently, rejecting the refund without
considering the Circular amounts to non-application of mind and arbitrariness.
The Court further held
that refund provisions must be interpreted in a manner that promotes exports
and not in a way that frustrates legitimate claims on hyper-technical grounds.
Final
Decision of the Court
The Karnataka High Court
allowed the writ petition and set aside the refund rejection order dated 31
January 2024. The matter was remitted back to the Assistant Commissioner
for fresh consideration of the refund application, after permitting the
petitioner to furnish LUT/Bond along with an application for condonation of
delay, in accordance with law and keeping in mind the CBIC Circular dated
15.03.2018.
Conclusion
This judgment is a
significant relief for exporters facing refund denials due to procedural lapses
such as delayed filing of LUT. The Karnataka High Court has reaffirmed that GST
is a facilitative tax regime and that substantive benefits of zero-rated supplies
cannot be denied on technical grounds when exports are genuine and undisputed.
The ruling strengthens the legal position that CBIC Circulars are binding on
departmental officers and that refund claims must be processed with a pragmatic
and exporter-friendly approach.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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