In a judgment that meaningfully clarifies the evidentiary threshold for refund of unutilized Input Tax Credit (ITC) on export of services, the Hon’ble Gujarat High Court has held that refund claims under Section 54 of the CGST Act, 2017 cannot be denied merely due to the non-submission of the Foreign Inward Remittance Certificate (FIRC), when the receipt of convertible foreign exchange is otherwise verifiable and duly certified by a Chartered Accountant.
This ruling, delivered in Kuehne + Nagel (P.) Ltd. v. Union of India & Ors. [2025] 175 taxmann.com 1041 (Guj.), provides judicial validation for exporters facing refund rejection on technical grounds, despite substantive fulfilment of conditions under the GST law.
Case Citation
Kuehne + Nagel (P.) Ltd. v. Union of India & Ors.
[2025] 175 taxmann.com 1041 (Gujarat)
Judgment Date: 26 March 2025
Coram: Hon’ble Mr. Justice Bhargav D. Karia and Hon’ble Mr. Justice D. N. Ray
Counsel: Ankit Shah, Dhaval Shah, Prakash Shah
Factual Background
The petitioner, a logistics and freight forwarding service provider, had filed a refund claim for unutilized ITC relating to zero-rated export of services for the period April 2021 to June 2021. While the refund application was accompanied by the requisite documentary evidence and a Chartered Accountant’s certificate confirming receipt of convertible foreign exchange, the claim was rejected by the department solely on the ground that FIRC was not submitted, in terms of CBIC Circular No. 125/44/2019-GST dated 18 November 2019.
Legal Framework Considered
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Section 54, CGST Act, 2017 – Refund of unutilized ITC on zero-rated supplies.
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Rule 89, CGST Rules, 2017 – Prescribes the refund application process and required documentation.
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Section 2(6), IGST Act, 2017 – Defines "export of services", requiring the receipt of consideration in convertible foreign exchange.
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CBIC Circular No. 125/44/2019-GST – Prescribes furnishing of FIRC/BRC as supporting documentation in refund claims.
Key Judicial Findings
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Receipt of Convertible Foreign Exchange Was Not in Dispute
The Court noted that the core requirement of export under Section 2(6) of the IGST Act—receipt of consideration in convertible foreign exchange—was clearly met. The department did not dispute the actual inflow of foreign exchange. -
Chartered Accountant's Certificate is Valid and Acceptable Proof
The certificate issued by the Chartered Accountant was based on the petitioner’s verified accounts and banking records. The Court held that insistence on FIRC to the exclusion of all other evidence is excessive and not mandated by statute. -
Administrative Circular Cannot Override Statutory Right
The Court clarified that CBIC Circular No. 125/44/2019-GST is directory and must be read in harmony with the CGST and IGST Acts. It cannot operate to restrict a taxpayer’s statutory entitlement to refund when core conditions are satisfied. -
Refund Must Be Processed Without Insisting on FIRC
Authorities were directed to process the refund claim without further delay, accepting the CA certificate as sufficient proof of receipt of foreign exchange.
Insights and Implications
This decision delivers several valuable insights that could influence refund adjudication and procedural expectations across jurisdictions:
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Substance prevails over form: The High Court has reaffirmed that refund eligibility must be decided based on substantive compliance with the law, not rigid adherence to procedural formats, particularly when alternative evidence is credible and consistent.
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CA certification holds evidentiary value: In the absence of FIRC, a Chartered Accountant’s certification of foreign exchange receipt, supported by accounting and banking records, is now judicially recognized as valid proof—this provides clarity in numerous practical scenarios where FIRCs are delayed or not available.
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Executive circulars must yield to law: CBIC circulars, while facilitating uniformity, cannot create additional conditions or deny statutory benefits. Refund processing must remain aligned with the parent legislation and cannot be subordinated to procedural instructions.
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Wider relevance for service exporters: The ruling is likely to benefit businesses in the technology, logistics, consulting, and creative sectors, where export revenue flows may be certified through alternate banking documentation or audit validation, but not always via standard FIRC channels.
Conclusion
The Gujarat High Court’s ruling in Kuehne + Nagel (P.) Ltd. strengthens the jurisprudence on the primacy of statutory interpretation over procedural rigidity in GST refund matters. It provides legal clarity and administrative guidance at a time when exporters often face procedural bottlenecks, despite being substantively compliant.
By emphasizing legal sufficiency over formal documentation, the judgment reinforces the principle that tax administration must facilitate compliance, not obstruct it on technicalities.
