Case Of: Shah Paperplast Industries Ltd
Issued By: Gujarat High Court
Order No: RSCA N0. 18892 of 2023
Date: 13th Nov 2025
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100% EOUs Making Zero-Rated Supplies Entitled to ITC Refund: Deemed-Export Restrictions Not Applicable
The petitioner, a 100% Export Oriented Unit (EOU) manufacturing and exporting tissue paper, procured raw materials on payment of GST and filed refund claims under Section 54(3) of the CGST Act, asserting that their exports were zero-rated and made without payment of tax.
The department initially granted provisional refund, acknowledging the ITC accumulation arising from input purchases used for export.
Subsequently, a show cause notice was issued withdrawing the refund. The department relied heavily on CBIC Circular 172/04/2022-GST (06.07.2022), which provides guidance on refund treatment for deemed exports.
Authorities contended that the petitioner’s supplies should be viewed under the deemed export mechanism, and therefore the ITC arising from such transactions could not form part of the refund computation. This reclassification became the core trigger for the dispute.
The High Court clarified that the petitioner exported finished goods outside India – an activity squarely covered as zero-rated supply under Section 16 of the IGST Act, not as deemed exports. The department’s attempt to recharacterise these supplies was held factually and legally incorrect.
The Court emphasised that Circular 172/04/2022 applies only to deemed exports, where the supplier pays GST and the recipient claims the refund. Since the petitioner was making actual exports, the circular had no application.
Importantly, the Court reaffirmed that circulars cannot override statutory rights. Section 54(3) expressly permits refund of unutilised ITC where goods are exported without payment of tax. Administrative instructions cannot curtail this entitlement.
All orders withdrawing the provisional refund were set aside, and authorities were directed to process the refund as originally claimed. The ruling reinforces that EOUs exporting without payment of GST are fully eligible for ITC refunds, and misapplication of deemed-export principles cannot defeat this statutory benefit.