Document Fragment View

Matching Fragments

34. Thereafter personal hearing was held on 23.12.2022 wherein also the petitioner reiterated the submissions made in reply to the show cause notice.

35. The respondent adjudicating authority thereafter passed the impugned order-in-original dated 13.01.2023 confirming the demand of GST (Compensation Cess) of Rs.18,63,12,078/- under section 74(1) of the GST Act read with section 11 of the Goods and Services (Compensation to the States) Act,2017 (For short "the NEUTRAL CITATION C/SCA/6701/2023 CAV JUDGMENT DATED: 09/05/2025 undefined Compensation Cess Act") along with appropriate rate of interest under section 50(1) of the GST Act, 2017 read with section 11 of the Compensation Cess Act on the confirmed demand and penalty of equal amount read with section 122(2)(b) of the GST Act. The findings in the impugned order are summarised as under:

41. It was submitted that the Compensation Cess Act is to provide for compensation to the States for loss of NEUTRAL CITATION C/SCA/6701/2023 CAV JUDGMENT DATED: 09/05/2025 undefined revenue arising on account of the implementation of the goods and service tax. It was pointed out that section 11 of the Compensation Cess Act provides that the provisions of the GST Act and IGST Act and the rules made thereunder would apply mutatis mutandis in relation to levy and collection of the Cess leviable under section 8 of the Compensation Cess Act. It was therefore, submitted that as per the provisions of section 2(5) of the IGST Act which defines export of goods as taking goods out of India to a place outside India, would also be applicable for the purpose of levy of Compensation Cess. Therefore, sale made by the merchant exporter to overseas customer NEUTRAL CITATION C/SCA/6701/2023 CAV JUDGMENT DATED: 09/05/2025 undefined is export of goods and therefore, is zero rated supply under section 16 of the IGST Act, not liable to GST and Compensation Cess when supplied against LUT.

45. Learned Senior Advocate Mr. Sridharan therefore submitted that similar analogy would apply to the petitioners who supplied the goods to merchant exporters for the purpose of actual export and therefore, petitioners would also be entitled to the same benefit as merchant exporter would be entitled to under the NEUTRAL CITATION C/SCA/6701/2023 CAV JUDGMENT DATED: 09/05/2025 undefined provisions of GST Act, IGST Act or Compensation Cess Act.

67. Learned Senior Advocate Mr. Sridharan also referred to sections 8 and 10(1) of the Compensation Cess Act to submit that the Compensation Cess, if any, collected from the petitioners will be available as credit to the merchant exporters and will be refunded to them as the goods are exported and such Compensation Cess would not be credited to the Goods and Services Tax Compensation Fund to be distributed to the States as compensation for loss of NEUTRAL CITATION C/SCA/6701/2023 CAV JUDGMENT DATED: 09/05/2025 undefined revenue. It was therefore, submitted that the amount which cannot be distributed to the States in accordance with the purpose of the Act, the same cannot be levied itself at the threshold stage under section 8(1) of the Compensation Cess Act.