Refund Rejection on Non-Statutory Conditions: Tata Steel

Refund Rejection on Non explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A refund of ₹1,23,22,617 of accumulated Compensation Cess was rejected on four grounds. The Court took each one and asked which provision required it — and none of them did.

"Refund of accumulated ITC of Compensation Cess on the inputs used in the manufacture of exported goods under LUT cannot be denied based on non-statutory conditions. Export of goods does not require realization of export proceeds or irrelevant declarations." — Tata Steel Ltd. v. State of Jharkhand [(2025:JHHC:10211-DB)], WP (T) No. 2900 of 2024, Jharkhand High Court.

The claim

The assessee manufactured and exported "steel and sponge iron for which it required coal as a raw material." Goods were "exported under a Letter of Undertaking (LUT) without payment of tax, resulting in the accumulation of ITC of Compensation Cess."

Coal is the reason cess accumulates. It carries Compensation Cess as an input, while exported steel and sponge iron do not carry it as an output — so under a zero-rated regime the cess piles up in the ledger with nothing to set it against.

"For the FY 2021–22, the petitioner filed a refund application on 30.01.2023 for refund of the accumulated cess amounting to ₹1,23,22,617, along with relevant documents under Section 54."

The four grounds, and the four answers

1. No proof of payment within 180 days of export.

"proof of payment is only required for export of services and not of goods (Refer Rule 89(2)(b) and 89(2)(c) of the CGST Rules). The rejection… concerning non-furnishing of the receipt of payment within 180 days of export had no legs to stand in the eye of the law."

The rules distinguish the two expressly. Rule 89(2)(b) — for services exported under LUT — requires "a statement containing the number and date of invoices and relevant Bank Realisation Certificates (BRCs)." Rule 89(2)(c) — for goods — requires "Shipping Bills, Export General Manifest (EGM), and invoice details… and no requirement to realize export proceeds."

2. No proof of export within 90 days of invoice.

"it transpired from a perusal of the reconciliation statement, that the export was made within 90 days of invoice. While Rule 96A specifies 90 days, actual export beyond that period did not invalidate the refund claim, especially if proof of export existed."

Two answers in one. Factually the condition was met; and legally, breach of the rule 96A timeline does not by itself destroy a refund claim supported by proof of export.

3. No declaration of non-prosecution.

"No provision in the Act or Rules mandated a declaration regarding non-prosecution where goods are exported without payment of tax under LUT."

4. No statement under para 43(c) of Circular No. 125/44/2019-GST.

"it applied only when ITC had been reversed, which was not the case here."

The circular's own text confines it: para 43(c) applies "In cases where ITC on inputs is availed initially but later reversed (due to non-fulfilment of export obligations, etc.)" — and is "Inapplicable if ITC was never reversed, as was the case in Tata Steel."

The Compensation Cess point

Section 11 of the GST (Compensation to States) Act, 2017 "provides for the refund of Compensation Cess paid on inward supplies used for making zero-rated outward supplies (exports)."

Section 11(2) "states that no refund of Compensation Cess shall be allowed except in the case of zero-rated supply or inverted duty structure, and subject to prescribed conditions and manner."

And the entitlement: "If exports are made without payment of tax (under LUT), refund of accumulated ITC of Compensation Cess is expressly permitted. There is no requirement for an additional declaration or undertaking unless prescribed in the rules."

The last clause is the whole case in one line. Section 11(2) makes the refund "subject to prescribed conditions" — and "prescribed" means prescribed by rules, not by an adjudicating officer.

The principle

"the rejection of the refund claim was based on non-existent and irrelevant conditions, which is impermissible under GST law."

"Grounds such as insistence on proof of payment, declarations, and undertakings, when not mandated by law, are extraneous and unsustainable."

"The verdict emphasises that the Revenue cannot insist on non-mandated declarations or procedural hurdles not rooted in statutory provisions."

Read alongside the inverted-duty refund ruling, the pattern is consistent — a circular cannot add a restriction the notification did not impose, and an officer cannot add a document the rules do not require. Circulars and section 54(3) →

The practical use is in how a rejection is answered. For each ground, name the rule that supposedly requires the document; where none exists, that ground has nothing to stand on. Rule 89(1)(c) confirms the application itself is simply "filed in FORM GST RFD-01 electronically on the GST portal", and rule 89(4) supplies the formula for the maximum refund on zero-rated supplies.

Key takeaways

• A refund of ₹1,23,22,617 of accumulated Compensation Cess was wrongly rejected on four non-statutory grounds.
• Rule 89(2)(b) requires BRCs for export of services; rule 89(2)(c) requires shipping bills and EGM for goods, with no realisation requirement.
• Rule 96A's 90-day timeline does not invalidate a refund claim where proof of export exists.
• No provision requires a non-prosecution declaration for exports under LUT.
• Para 43(c) of Circular No. 125/44/2019-GST applies only where credit was reversed.
• Section 11(2) of the Compensation Cess Act allows refund for zero-rated supply or inverted duty structure, on prescribed conditions only.
• Exports under LUT expressly permit refund of accumulated cess credit.
• The Revenue cannot insist on procedural requirements not rooted in the statute or rules.
• Applications go in FORM GST RFD-01; rule 89(4) gives the maximum refund formula.

Read next

• GST Refund to a Bank Account After Registration Is Cancelled
• Inverted Duty Refund: A Circular Cannot Override Section 54(3)
• Intermediary: IDP Education and the Missing Contract

Disclaimer: Positions stated as on 5 September 2026, based on Tata Steel Ltd. v. State of Jharkhand [(2025:JHHC:10211-DB)], section 54 of the CGST Act, 2017, rules 89 and 96A of the CGST Rules, 2017, section 11 of the GST (Compensation to States) Act, 2017 and Circular No. 125/44/2019-GST, as summarised in the ICAI compilation Significant Judicial and Advance Rulings in GST (Second Edition, February 2026).