Nature of the Event

Lyka Labs Limited has received a Show Cause-cum-Demand Notice from the Office of the Principal Commissioner of CGST & Central Excise, Mumbai East, demanding a payment of ₹73,22,077/- (Rupees Seventy Three Lakh Twenty Two Thousand Seventy Seven only). The notice alleges the company erroneously claimed refunds of Integrated Goods and Services Tax (IGST) on exports made under Advance Authorizations, contravening Rule 96(10) of the CGST Rules, 2017.

Details of the Authority and Notice

  • Issuing Authority: Assistant Commissioner (AE), CGST Mumbai East
  • Notice Reference: Centralised SCN No. CGST/ME/AE/AC/Lyka/2026-27
  • Date of Receipt: 17/06/2026
  • GSTIN of Company: 27AAACL0820G1ZZ

Alleged Violations

The notice alleges the company availed ineligible IGST refunds on exports made under Advance Authorization, which contravenes Rule 96(10) of the CGST Rules, 2017. This rule restricted refunds if a company had also availed the benefit of certain exemption notifications on imports (Notifications No. 40/2017-Central Tax (Rate), 41/2017-Integrated Tax (Rate), 48/2017-Central Tax, 78/2017-Customs, or 79/2017-Customs). The department alleges this resulted in the availment of a "double benefit."

A separate allegation states the company exported goods with a payment of tax at 0.1%, indicating it acted as a Merchant Exporter having purchased goods under the aforementioned notifications, which also restricted refunds under Rule 96(10).

Company's Defense and Stated Position

In its reply to the department, the company contended that:

  • Rule 96(10) was omitted vide Notification No. 20/2024 dated 8th October 2024 without any saving clause, which it argues nullifies all pending proceedings.
  • The rule created an unjustified distinction between exporters and was arbitrary.
  • It relied on a Kerala High Court judgment (Sance Laboratories Pvt. Ltd. v. UOI & Ors) that declared the rule ultra vires.
  • The company is exercising its right to defend the allegations and states that "There is no material impact on financials, operations or other activities of the Company."

Quantification of the Demand

The total demand of ₹73,22,077 is broken down into two components:

1. IGST Refunds against Advance Licenses (FY 2021-22 to 2024-25): ₹67,92,481/-

This amount is detailed across 13 specific advance licenses (e.g., LYK/21-22/072, LYK/24-25/0057) with their issue dates, shipping bill numbers, values, and IGST amounts.

2. IGST Refunds for Exports with 0.1% Tax Rate (FY 2020-21 to 2023-24): ₹5,29,596/-

This is based on the taxable value of exports declared in GSTR-1 at the 0.1% rate:

  • FY 2020-21: ₹47,049,768 (IGST: ₹47,051)
  • FY 2021-22: ₹194,962,936 (IGST: ₹194,961)
  • FY 2022-23: ₹273,832,048 (IGST: ₹273,842)
  • FY 2023-24: ₹13,740,866 (IGST: ₹13,741)

Legal Provisions Cited in the Notice

The notice is issued under Sub-section (1) of Section 74 & Section 74A of the CGST Act, 2017, read with Section 20 of the IGST Act, 2017. The department invokes these sections citing "wilful-misstatement and suppression of material facts."

  • Section 74 pertains to demands related to fraud or wilful misstatement for periods up to FY 2023-24. The demanded amount under this section is ₹51,96,246 (Advance Licenses) + ₹5,29,596 (0.1% rate) = ₹57,25,842.
  • Section 74A pertains to demands for FY 2024-25 onwards. The demanded amount under this section is ₹15,96,235 (Advance Licenses for Apr-Oct 2024).

What the Company Must Do

The company is called upon to show cause within 30 days of receipt of this notice as to why:

1. The amounts should not be demanded and recovered.

2. Interest under Section 50 of the CGST Act should not be demanded on the total amount.

3. Penalty should not be imposed under Section 74/74A read with Section 122(2)(b) of the CGST Act.

The company must produce evidence in support of its defense and indicate if it wishes to be heard in person.

Other Notices

This notice does not bar the department from issuing further demand notices based on subsequent information. The notice is issued without prejudice to any other action under GST laws.