Refund of Compensation cess cannot be denied on export of products not leviable to Compensation Cess

Last updated: 17 September 2025

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The Bombay High Court has ruled that exporters can claim a refund of unutilised input tax credit (ITC) for compensation cess paid on raw materials, even if the exported final product is not subject to this cess. The court found that the compensation cess mechanism is distinct from IGST and CGST, and its refund should not be denied simply because the exporter chose to pay IGST on their zero-rated export. This decision ensures that exporters are not penalised for procedural choices when their exported goods are exempt from compensation cess.

Court :
Bombay High Court

Brief :
The Hon'ble Bombay High Court in the case of Sukraft Recycling Private Limited v. Union of India & Ors. [Writ Petition No. 540 of 2024, order dated August 21, 2025] held that unutilized Input Tax Credit (ITC) of compensation cess paid on raw material (coal) used in the manufacture of Kraft Paper exported as a zero-rated supply is refundable.

Citation :
Writ Petition No. 540 of 2024, order dated August 21, 2025

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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