Aurobindo Pharma Gets HC Relief in Compensation Cess Refund Dispute, GST Orders Quashed

The cess had been paid on coal used in the manufacturing process of medicines that were supplied to Special Economic Zone (SEZ) units and exported outside India.

Aurobindo Pharma had approached the High Court after the State GST authorities declined to grant a refund of compensation cess paid on inputs, holding that the exports were undertaken on payment of Integrated GST (IGST) and that the finished pharmaceutical products were not subject to compensation cess. The rejection orders were subsequently upheld at the appellate level, prompting the company to invoke the writ jurisdiction of the court.

The State tax department sought to justify the rejection of the refund claims by placing reliance on a circular issued by GST authorities.

However, during the hearing, the State acknowledged that subsequent judicial pronouncements, particularly by the Gujarat High Court, had clarified the legal position and recognized the right of exporters to claim a refund of unutilized compensation cess paid on inputs used in zero-rated supplies.

After considering the submissions, the Bench observed that the controversy stood settled in view of the consistent judicial view taken by other High Courts.

Setting aside the orders passed by both the original and appellate authorities, the High Court remitted the matter to the original authority for fresh consideration, reports Deccan Chronicle.

Subsequently, the court directed that Aurobindo Pharma be given an opportunity of hearing and that a reasoned decision on the refund claims be taken within a period of four months.