2020(10)LCX0092
Gujarat High Court
COSMO FILMS LIMITED
Versus
UNION OF INDIA & 3 other(s)
R/SPECIAL CIVIL APPLICATION NO. 15833 of 2018 decided on 20/10/2020
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 15833 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
1 | Whether Reporters of Local Papers may be allowed to see the judgment ? | YES |
2 | To be referred to the Reporter or not ? | YES |
3 | Whether their Lordships wish to see the fair copy of the judgment ? | NO |
4 | Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? | NO |
COSMO FILMS LIMITED
Versus
UNION OF INDIA & 3 other(s)
Appearance:
MR. ABHISHEK RASTOGI WITH MR. PRATUSH SAHA WITH MR. MR
NACHIKET A DAVE(5308) FOR THE PETITIONER(S) NO. 1
MR NIRZAR S DESAI(2117) for the Respondent(s) No. 1,3,4
NOTICE SERVED(4) for the Respondent(s) No. 2
CORAM:
HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 20/10 / 2020
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Rule
returnable forthwith. The Learned Standing Counsel Mr. Nirzar
Desai waived service of notice of rule on behalf of the respondent nos. 1, 3 and
4.
2. Having regard to the controversy raised in this petition in narrow compass,
with the consent of the learned advocates for the respective parties, the same
is taken up for final hearing .
3. By this petition, under Article 226 of the Constitution of India, the
petitioner has prayed for the following reliefs:
“a) this Hon'ble Court may be pleased to issue an appropriate writ, order or
direction quashing and setting aside the amendments in sub-rule (10) of Rule 96
of the CGST Rules and GGST Rules substituted vide Notification Number
54/2018Central Tax, dated 9 October 2018 and Notification No.54/2018-State
Tax, No. (GHN99) / GSTR-2018(33)TH, dated 9 October 2018, to the extent it
denies the option of rebate claim to the Petitioner for importing goods under AA
License, as being ultra vires of the CGST Act, GGST Act and Rules made
thereunder and the Constitution;
b) this Hon'ble Court may be pleased to issue a writ, order or direction staying
any demand against Rebate benefits availed by the Petitioner due to
retrospective operation of the impugned Notifications on Rule 96(10) of the CGST
and the GGST Rules;
c) this such further and other reliefs be granted as this Hon'ble Court may deem
fit and proper.”
4. The short facts of the case are as under:
4.1. The petitioner is a public limited company engaged in the business of
manufacturing and sale of flexible packaging films. The petition is filed
through its Director and Authorized person Mr. Anil Kumar Jain.
4.2. The petitioner is the holder of Advance Authorization Licenses (for short
‘the AA License’) granted in terms of the Foreign Trade Policy, issued and
amended from time to time.
4.3. The petitioner has obtained AA Licenses and imports goods without payment
of import duty in terms of Notification No.79/2017-Customs, dated 13th October
2017. It is the case of the petitioner that, with effect from 1st July 2017, the
Central Goods and Service Tax Act,2017 (for short ‘the CGST Act’) and the
Gujarat Goods and Services Tax Act, 2017 (for short ‘the GGST Act’) are enacted
for indirect tax on goods and services. The provisions with respect to export of
goods or services are contained under the Integrated Goods and Services Tax Act,
2017 (for short ‘the IGST Act’). Section 16 of the IGST Act deals with export of
goods and services and provides benefits against the export of goods or services
which can be claimed through either, (a) supply without payment of IGST and
claim refund of unutilized input tax credit at the end of the period (“Refund”)
and (b) Supply on payment of IGST and claim refund of such IGST paid (“Rebate”).
4.4. For the purpose of procedure for granting refund of IGST on the goods and
services exported out of India, Rule 96 of the Central Goods and Services Tax
Rules, 2017 (for short ‘the CGST Rules’) provides the mechanism, as per the
procedure prescribed under Section 54 of the CGST Act and GGST Act. sub-rule
(10) of Rule 96 of the CGST Rules was introduced vide para3 of Notification
No.54/2018-Central Tax, dated 9th October 2018 issued by the respondent no.1
the Ministry of Finance w.e.f. 23rd October 2017 and corresponding provisions
were also introduced in the GGST Rules by the respondent no.2 State of Gujarat.
4.5. sub-rule (10) of Rule 96 of CGST Rules was inserted by the Central Goods
and Service Tax (3rd Amendment) Rules, 2017 w.e.f. 1st July 2017. Subrule (10)
provides for the exemption for AA license holders importing goods from levy of
custom duties and IGST.
4.6. The petitioner was entitled to import raw materials without payment of IGST
under AA Licenses and pay IGST on exports and claim Rebate (Refund) of the IGST
so paid on exports. The petitioner has received benefits of rebate of IGST at
the relevant point of time. Thereafter, sub-rule (10) of Rule 96 of the CGST
Rules was amended by Notification dated 4th September, 2018 with retrospective
effect from 23rd October, 2017, providing that rebate on exports cannot be
availed by the petitioner, if the inputs procured by the petitioner have enjoyed
AA benefits or Deemed Export Benefits under the said notification. Therefore,
the petitioner was unable to utilize the benefit of dutyfree imports under AA
Licenses and take the benefit of rebate on exports, because of the amendments
made in Rule 96(10) of CGST Rules. It appears that, thereafter, by Notification
No.53/2018Central Tax dated 9th October 2018, subclause (a) and (b) of
sub-rule 10 of Rule 96 of the CGST Rules were merged. Thereafter, vide
Notification No. 54/2018-Central Tax dated 9th October 2018, the sub-rule 10
of Rule 96 of the CGST Rules was again demerged and “with effect from 23rd
October, 2017” thereby indicating that Notification No. 54/2018-Central Tax do
not intend to apply the amendment to Rule 96(10) of the CGST Rules
retrospectively. The petitioner has therefore preferred this petition
challenging the aforesaid notifications and amendments made in sub-rule 10 of
Rule 96 of the CGST Rules, by Notification No. 54/2018 denying the option to
claim rebate to the petitioner for importing goods under AA Licenses being
ultravires the provisions of the CGST Act and the CGST Rules made there under
and Article 14 of the Constitution of India.
5. It would therefore be necessary to refer to the relevant provisions of the
CGST Act, IGST Act and CGST Rules which have been amended by the impugned
notifications as under:
5.1. Section 16 of the IGST Act, 2017 read as under:
“SECTION 16 : Zero rated supply
(1) "zero rated supply" means any of the following supplies of goods or services
or both, namely:
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or
a Special Economic Zone unit.
(2) Subject to the provisions of sub-section (5) of section 17 of the Central
Goods and Services Tax Act, credit of input tax may be availed for making
zerorated supplies, notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim
refund under either of the following options, namely:
(a) he may supply goods or services or both under bond or Letter of Undertaking,
subject to such conditions, safeguards and procedure as may be prescribed,
without payment of integrated tax and claim refund of unutilised input tax
credit; or
(b) he may supply goods or services or both, subject to such conditions,
safeguards and procedure as may be prescribed, on payment of integrated tax and
claim refund of such tax paid on goods or services or both supplied, in
accordance with the provisions of Section 54 of the Central Goods and Services
Tax Act or the rules made thereunder.”
5.2. Section 54 of the CGST Act, 2017 read as under:
“CHAPTER XI
REFUNDS
Section 54 Refund of tax
(1) Any person claiming refund of any tax and interest, if any, paid on such tax
or any other amount paid by him, may make an application before the expiry of
two years from the relevant date in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the
electronic cash ledger in accordance with the provisions of sub-section (6) of
section 49, may claim such refund in the return furnished under section 39 in
such manner as may be prescribed.
(2) A specialised agency of the United Nations Organisation or any Multilateral
Financial Institution and Organisation notified under the United Nations
(Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries
or any other person or class of persons, as notified under section 55, entitled
to a refund of tax paid by it on inward supplies of goods or services or both,
may make an application for such refund, in such form and manner as may be
prescribed, before the expiry of six months from the last day of the quarter in
which such supply was received.
(3) Subject to the provisions of sub-section (10), a registered person may
claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases
other than––
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being
higher than the rate of tax on output supplies (other than nil rated or fully
exempt supplies), except supplies of goods or services or both as may be
notified by the Government on the recommendations of the Council: Provided
further that no refund of unutilised input tax credit shall be allowed in cases
where the goods exported out of India are subjected to export duty:
Provided also that no refund of input tax credit shall be allowed, if the
supplier of goods or services or both avails of drawback in respect of central
tax or claims refund of the integrated tax paid on such supplies.
(4) The application shall be accompanied by-
(a) such documentary evidence as may be prescribed to establish that a refund is
due to the applicant; and
(b) such documentary or other evidence (including the documents referred to in
section 33) as the applicant may furnish to establish that the amount of tax and
interest, if any, paid on such tax or any other amount paid in relation to which
such refund is claimed was collected from, or paid by, him and the incidence of
such tax and interest had not been passed on to any other person:
Provided that where the amount claimed as refund is less than two lakh rupees,
it shall not be necessary for the applicant to furnish any documentary and other
evidences but he may file a declaration, based on the documentary or other
evidences available with him, certifying that the incidence of such tax and
interest had not been passed on to any other person.
(5) If, on receipt of any such application, the proper officer is satisfied that
the whole or part of the amount claimed as refund is refundable, he may make an
order accordingly and the amount so determined shall be credited to the Fund
referred to in section 57.
(6) Notwithstanding anything contained in sub-section (5), the proper officer
may, in the case of any claim for refund on account of zerorated supply of
goods or services or both made by registered persons, other than such category
of registered persons as may be notified by the Government on the
recommendations of the Council, refund on a provisional basis, ninety per cent.
of the total amount so claimed, excluding the amount of input tax credit
provisionally accepted, in such manner and subject to such conditions,
limitations and safeguards as may be prescribed and thereafter make an order
under sub section(5) for final settlement of the refund claim after due
verification of documents furnished by the applicant.
(7) The proper officer shall issue the order under sub-section (5) within sixty
days from the date of receipt of application complete in all respects.
(8) Notwithstanding anything contained in sub-section (5), the refundable
amount shall, instead of being credited to the Fund, be paid to the applicant,
if such amount is relatable to-
(a) refund of tax paid on export exports of goods or services or both or on
inputs or input services used in making such zerorated supplies;
(b) refund of unutilised input tax credit under sub-section (3);
(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued, or where a refund voucher
has been issued;
(d) refund of tax in pursuance of section 77;
(e) the tax and interest, if any, or any other amount paid by the applicant, if
he had not passed on the incidence of such tax and interest to any other person;
or
(f) the tax or interest borne by such other class of applicants as the
Government may, on the recommendations of the Council, by notification, specify.
(9) Notwithstanding anything to the contrary contained in any judgment, decree,
order or direction of the Appellate Tribunal or any court or in any other
provisions of this Act or the rules made thereunder or in any other law for the
time being in force, no refund shall be made except in accordance with the
provisions of sub section(8).
(10) Where any refund is due under sub-section (3) to a registered person who
has defaulted in furnishing any return or who is required to pay any tax,
interest or penalty, which has not been stayed by any court, Tribunal or
Appellate Authority by the specified date, the proper officer may-
(a) withhold payment of refund due until the said person has furnished the
return or paid the tax, interest or penalty, as the case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or any other
amount which the taxable person is liable to pay but which remains unpaid under
this Act or under the existing law.
Explanation.––For the purposes of this sub-section, the expression “specified
date” shall mean the last date for filing an appeal under this Act.
(11) Where an order giving rise to a refund is the subject matter of an appeal
or further proceedings or where any other proceedings under this Act is pending
and the Commissioner is of the opinion that grant of such refund is likely to
adversely affect the revenue in the said appeal or other proceedings on account
of malfeasance or fraud committed, he may, after giving the taxable person an
opportunity of being heard, withhold the refund till such time as he may
determine.
(12) Where a refund is withheld under sub-section (11), the taxable person
shall, notwithstanding anything contained in section 56, be entitled to interest
at such rate not exceeding six per cent. as may be notified on the
recommendations of the Council, if as a result of the appeal or further
proceedings he becomes entitled to refund.
(13) Notwithstanding anything to the contrary contained in this section, the
amount of advance tax deposited by a casual taxable person or a nonresident
taxable person under sub-section (2) of section 27, shall not be refunded
unless such person has, in respect of the entire period for which the
certificate of registration granted to him had remained in force, furnished all
the returns required under section 39.
(14) Notwithstanding anything contained in this section, no refund under sub
section(5) or sub-section (6) shall be paid to an applicant, if the amount is
less than one thousand rupees.
Explanation.-For the purposes of this section,––
(1) “refund” includes refund of tax paid on zerorated supplies of goods or
services or both or on inputs or input services used in making such zerorated
supplies, or refund of tax on the supply of goods regarded as deemed exports, or
refund of unutilised input tax credit as provided under sub-section (3).
(2) “relevant date” means-
(a) in the case of goods exported out of India where a refund of tax paid is
available in respect of goods themselves or, as the case may be, the inputs or
input services used in such goods,––
(i) if the goods are exported by sea or air, the date on which the ship or the
aircraft in which such goods are loaded, leaves India; or
(ii) if the goods are exported by land, the date on which such goods pass the
frontier; or
(iii) if the goods are exported by post, the date of despatch of goods by the
Post Office concerned to a place outside India;
(b) in the case of supply of goods regarded as deemed exports where a refund of
tax paid is available in respect of the goods, the date on which the return
relating to such deemed exports is furnished;
(c) in the case of services exported out of India where a refund of tax paid is
available in respect of services themselves or, as the case may be, the inputs
or input services used in such services, the date of––
(i) receipt of payment in convertible foreign exchange or in Indian rupees
wherever permitted by the Reserve Bank of India, where the supply of services
had been completed prior to the receipt of such payment; or
(ii) issue of invoice, where payment for the services had been received in
advance prior to the date of issue of the invoice;
(d) in case where the tax becomes refundable as a consequence of judgment,
decree, order or direction of the Appellate Authority, Appellate Tribunal or any
court, the date of communication of such judgment, decree, order or direction;
(e) in the case of refund of unutilised input tax credit under clause (ii) of
the first proviso to sub-section (3), the due date for furnishing of return
under section 39 for the period in which such claim for refund arises;
(f) in the case where tax is paid provisionally under this Act or the rules made
thereunder, the date of adjustment of tax after the final assessment thereof;
(g) in the case of a person, other than the supplier, the date of receipt of
goods or services or both by such person; and
(h) in any other case, the date of payment of tax. Refund in certain cases.”
5.3. Rule 96 of the CGST Rules read as under:
“Rule 96, Refund of integrated tax paid on goods [or services]
exported out of India 96.(1) The shipping bill filed by [an exporter of goods]
shall be deemed to be an application for refund of integrated tax paid on the
goods exported out of India and such application shall be deemed to have been
filed only when:
(a) the person in charge of the conveyance carrying the export goods duly files
[a departure manifest or] an export manifest or an export report covering the
number and the date of shipping bills or bills of export; and
(b) the applicant has furnished a valid return in FORM GSTR-3 [or FORM
GSTR-3B, as the case may be].
(2) The details of the [relevant export invoices in respect of export of goods]
contained in FORM GSTR-1 shall be transmitted electronically by the common
portal to the system designated by the Customs and the said system shall
electronically transmit to the common portal, a confirmation that the goods
covered by the said invoices have been exported out of India:
[Provided that where the date for furnishing the details of outward supplies in
FORM GSTR-1 for a tax period has been extended in exercise of the powers
conferred under section 37 of the Act, the supplier shall furnish the
information relating to exports as specified in Table 6A of FORM GSTR-1 after
the return in FORM GSTR-3B has been furnished and the same shall be transmitted
electronically by the common portal to the system designated by the Customs:
Provided further that the information in Table 6A furnished under the first
proviso shall be autodrafted in FORM GSTR-1 for the said tax period.]
(3) Upon the receipt of the information regarding the furnishing of a valid
return in FORM GSTR-3 [or FORM GSTR-3B, as the case may be] from the common
portal, [the system designated by the Customs or the proper officer of Customs,
as the case may be, shall process the claim of refund in respect of export of
goods] and an amount equal to the integrated tax paid in respect of each
shipping bill or bill of export shall be electronically credited to the bank
account of the applicant mentioned in his registration particulars and as
intimated to the Customs authorities.
(4) The claim for refund shall be withheld where,
(a) a request has been received from the jurisdictional Commissioner of central
tax, State tax or Union territory tax to withhold the payment of refund due to
the person claiming refund in accordance with the provisions of sub-section
(10) or sub-section (11) of section 54; or
(b) the proper officer of Customs determines that the goods were exported in
violation of the provisions of the Customs Act, 1962.
(5) Where refund is withheld in accordance with the provisions of clause (a) of
sub-rule (4), the proper officer of integrated tax at the Customs station shall
intimate the applicant and the jurisdictional Commissioner of central tax, State
tax or Union territory tax, as the case may be, and a copy of such intimation
shall be transmitted to the common portal.
(6) Upon transmission of the intimation under sub-rule (5), the proper officer
of central tax or State tax or Union territory tax, as the case may be, shall
pass an order in Part B of FORM GST RFD-07.
(7) Where the applicant becomes entitled to refund of the amount withheld under
clause (a) of sub-rule (4), the concerned jurisdictional officer of central
tax, State tax or Union territory tax, as the case may be, shall proceed to
refund the amount after passing an order in FORM GST RFD06.
(8) The Central Government may pay refund of the integrated tax to the
Government of Bhutan on the exports to Bhutan for such class of goods as may be
notified in this behalf and where such refund is paid to the Government of
Bhutan, the exporter shall not be paid any refund of the integrated tax.
[(9) The application for refund of integrated tax paid on the services exported
out of India shall be filed in FORM GST RFD-01 and shall be dealt with in
accordance with the provisions of Rule 89.
[(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have
(a) received supplies on which the benefit of the Government of India, Ministry
of Finance notification No.48/2017Central Tax, dated the 18th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3, sub
section(i), vide number G.S.R. 1305(E), dated the 18th October, 2017 except so
far it relates to receipt of capital goods by such person against Export
Promotion Capital Goods Scheme or notification No.40/2017 – Central Tax (Rate),
dated the 23rd October, 2017, published in the Gazette of India, Extraordinary,
Part II, Section 3, sub-section (i), vide number G.S.R 1320(E), dated the 23rd
October, 2017 or notification No.41/2017 – Integrated Tax (Rate), dated the 23rd
October, 2017, published in the Gazette of India, Extraordinary, Part II,
Section 3, sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October,
2017 has been availed; or
(b) availed the benefit under notification No. 78/2017-Customs, dated the 13th
October, 2017, published in the Gazette of India, Extraordinary, Part II,
Section 3, sub-section (i), vide number G.S.R. 1272(E), dated the 13th October,
2017 or notification No.79/2017Customs, dated the 13th October, 2017, published
in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i),
vide number G.S.R. 1299 (E), dated the 13th October, 2017 except so far it
relates to receipt of capital goods by such person against Export Promotion
Capital Goods Scheme.]”
5.4. Notification No. 40 of 2017-C.T. (Rate) dated 23 Oct 2017 read as under:
“Reduced CGST Rates prescribed for supply of taxable goods by a registered
supplier to a registered recipient for export subject to specified conditions.
In exercise of the powers conferred by sub-section (1) of section 11 of the
Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this
notification referred to as “the said Act”), the Central Government, on being
satisfied that it is necessary in the public interest so to do, on the
recommendations of the Council, hereby exempts the intraState supply of taxable
goods (hereafter in this notification referred to as “the said goods”) by a
registered supplier to a registered recipient for export, from so much of the
central tax leviable thereon under section 9 of the said Act, as is in excess of
the amount calculated at the rate of 0.05 per cent., subject to fulfillment of
the following conditions, namely :
(i) the registered supplier shall supply the goods to the registered recipient
on a tax invoice;
(ii) the registered recipient shall export the said goods within a period of
ninety days from the date of issue of a tax invoice by the registered supplier;
(iii) the registered recipient shall indicate the Goods and Services Tax
Identification Number of the registered supplier and the tax invoice number
issued by the registered supplier in respect of the said goods in the shipping
bill or bill of export, as the case may be;
(iv) the registered recipient shall be registered with an Export Promotion
Council or a Commodity Board recognized by the Department of Commerce;
(v) The registered recipient shall place an order on registered supplier for
procuring goods at concessional rate and a copy of the same shall also be
provided to the jurisdictional tax officer of the registered supplier;
(vi) the registered recipient shall move the said goods from place of registered
supplier –
(a) directly to the Port, Inland Container Deport, Airport or Land Customs
Station from where the said goods are to be exported; or
(b) directly to a registered warehouse from where the said goods shall be move
to the Port, Inland Container Depot, Airport or Land Customs Station from where
the said goods are to be exported;
(vii) if the registered recipient intends to aggregate supplies from multiple
registered suppliers and then export, the goods from each registered supplier
shall move to a registered warehouse and after aggregation, the registered
recipient shall move goods to the Port, Inland Container Deport, Airport or Land
Customs Station from where they shall be exported;
(viii) in case of situation referred to in condition (vii), the registered
recipient shall endorse receipt of goods on the tax invoice and also obtain
acknowledgement of receipt of goods in the registered warehouse from the
warehouse operator and the endorsed tax invoice and the acknowledgment of the
warehouse operator shall be provided to the registered supplier as well as to
the jurisdictional tax officer of such supplier; and
(ix) when goods have been exported, the registered recipient shall provide copy
of shipping bill or bill of export containing details of Goods and Services Tax
Identification Number (GSTIN) and tax invoice of the registered supplier along
with proof of export general manifest or export report having been filed to the
registered supplier as well as jurisdictional tax officer of such supplier.
2. The registered supplier shall not be eligible for the above mentioned
exemption if the registered recipient fails to export the said goods within a
period of ninety days from the date of issue of tax invoice.”
5.5. Notification No. 41/2017-Integrated Tax (RATE) reads as under:
“INTEGRATED TAX (RATE)
SECTION 6 OF THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017 – POWER TO GRANT
EXEMPTION – EXEMPTION TO INTERSTATE SUPPLY OF TAXABLE GOODS BY A REGISTERED
SUPPLIER TO A REGISTERED RECEIPT FOR EXPORT, FROM SO MUCH OF INTEGRATED TAX
LEVIABLE THEREON UNDER SECTION 5, AS IS IN EXCESS OF AMOUNT CALCULATED AT RATE
OF 0.1 PER CENT
NOTIFICATION NO.41/2017-Integrated Tax (RATE), DATED 23102017
In exercise of the powers conferred by sub-section (1) of section 6 of the
Integrated Goods and Services Tax Act, 2017 (13 of 2017), (hereafter in this
notification referred to as “the said Act”), the Central Government, on being
satisfied that it is necessary in the public interest so to do, on the
recommendations of the Council, hereby exempts the interState supply of taxable
goods (hereafter in this notification referred to as “the said goods”) by a
registered supplier to a registered recipient for export, from so much of the
integrated tax leviable thereon under section 5 of the Integrated Goods and
Services Tax Act, 2017 (13 of 2017), as is in excess of the amount calculated at
the rate of 0.1 per cent, subject to fulfilment of the following conditions,
namely:
(i) the registered supplier shall supply the goods to the registered recipient
on a tax invoice;
(ii) the registered recipient shall export the said goods within a period of
ninety days from the date of issue of a tax invoice by the registered supplier;
(iii) the registered recipient shall indicate the Goods and Services Tax
Identification Number of the registered supplier and the tax invoice number
issued by the registered supplier in respect of the said goods in the shipping
bill or bill of export, as the case may be;
(iv) the registered recipient shall be registered with an Export Promotion
Council or a Commodity Board recognised by the Department of Commerce;
(v) the registered recipient shall place an order on registered supplier for
procuring goods at concessional rate and a copy of the same shall also be
provided to the jurisdictional tax officer of the registered supplier;
(vi) the registered recipient shall move the said goods from place of registered
supplier
(a) directly to the Port, Inland Container Deport, Airport or Land Customs
Station from where the said goods are to be exported; or
(b) directly to a registered warehouse from where the said goods shall be move
to the Port, Inland Container Deport, Airport or Land Customs Station from where
the said goods are to be exported;
(vii) if the registered recipient intends to aggregate supplies from multiple
registered suppliers and then export, the goods from each registered supplier
shall move to a registered warehouse and after aggregation, the registered
recipient shall move goods to the Port, Inland Container Deport, Airport or Land
Customs Station from where they shall be exported;
(viii) in case of situation referred to in condition (vii), the registered
recipient shall endorse receipt of goods on the tax invoice and also obtain
acknowledgement of receipt of goods in the registered warehouse from the
warehouse operator and the endorsed tax invoice and the acknowledgement of the
warehouse operator shall be provided to the registered supplier as well as to
the jurisdictional tax officer of such supplier; and
(ix) when goods have been exported, the registered recipient shall provide copy
of shipping bill or bill of export containing details of Goods and Services Tax
Identification Number (GSTIN) and tax invoice of the registered supplier along
with proof of export general manifest or export report having been filed to the
registered supplier as well as jurisdictional tax officer of such supplier.
2. The registered supplier shall not be eligible for the above mentioned
exemption if the registered recipient fails to export the said goods within a
period of ninety days from the date of issue of tax invoice.”
5.6. Notification No. 48/2017-C.T. dated 18 Oct 2017 reads as under:
“Deemed Exports – Supply of goods against advance authorization, EPCG or
supply to EOU or by Banks/PSUs against advance authorization notified as deemed
exports.
In exercise of the powers conferred by section 147 of the Central Goods and
Services Tax Act, 2017 (12 of 2017), the Central Government, on the
recommendations of the Council, hereby notifies the supplies of goods listed in
column (2) of the Table below as deemed exports, namely :
TABLE
Sr. No. |
Description of supply |
(1) |
(2) |
1 | Supply of goods by a registered person against Advance Authorisation |
2 | Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation |
3 | Supply of goods by a registered person to Export Oriented Unit |
4 | Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017Customs, dated the 30thJune, 2017 (as amended) against Advance Authorisation. |
Explanation
For the purposes of this notification,
1.“Advance Authorisation” means an authorisation issued by the Director General
of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import
or domestic procurement of inputs on preimport basis for physical exports.
2.Export Promotion Capital Goods Authorisation means an authorisation issued by
the Director General of Foreign Trade under Chapter 5 of the Foreign Trade
Policy 2015-20 for import of capital goods for physical exports.
3.“Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware
Technology Park Unit or Software Technology Park Unit or BioTechnology Park
Unit approved in accordance with the provisions of Chapter 6 of the Foreign
Trade Policy, 201520.”
5.7. Notification No. 3/2018-C.T. dated 23 Jan 2018 read as under:
“….
(x) with effect from 23rd October, 2017, in rule 96,
(a) in sub-rule (1), for the words “an exporter”, the words “an exporter of
goods” shall be substituted;
(b) in sub-rule (2), for the words “relevant export invoices”, the words
“relevant export invoices in respect of export of goods” shall be substituted;
(c) in sub-rule (3), for the words “the system designated by the Customs shall
process the claim for refund”, the words “the system designated by the Customs
or the proper officer of Customs, as the case may be, shall process the claim of
refund in respect of export of goods” shall be substituted;
(d) for sub-rule (9), the following sub-rules shall be substituted, namely :
“(9) The application for refund of integrated tax paid on the services exported
out of India shall be filed in FORM GST RFD01 and shall be dealt with in
accordance with the provisions of Rule 89”.
(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have received supplies on which the supplier has availed the
benefit of the Government of India, Ministry of Finance, notification
No.48/2017Central Tax, dated the 18th October, 2017 published in the Gazette of
India, Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R.
1305(E), dated the 18th October, 2017 or notification No.40/2017-Central Tax
(Rate), 23rd October, 2017 published in the Gazette of India, Extraordinary,
Part II, Section 3, sub-section (i), vide number G.S.R. 1320(E), dated the 23rd
October, 2017 or notification No.41/2017-Integrated Tax (Rate), dated the 23rd
October, 2017 published in the Gazette of India, Extraordinary, Part II, Section
3, sub-section (i), vide number G.S.R. 1321(E), dated the 23rd October, 2017 or
notification No.78/2017-Customs, dated the 13th October, 2017 published in the
Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide
number G.S.R. 1272(E), dated the 13th October, 2017 or notification
No.79/2017Customs Tax, dated the 13th October, 2017 published in the Gazette of
India, Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R.
1299(E), dated the 13th October, 2017.”
5. 8. Notification No. 39/2018-C.T. dated 04 Sep 2018 reads as under:
“….
6. In the said rules, with effect from the 23rd October, 2017, in rule 96, for
sub-rule (10), the following sub-rule shall be substituted, namely :
“(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have
(a) received supplies on which the benefit of the Government of India, Ministry
of Finance notification No.48/2017-Central Tax, dated the 18th October, 2017
published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R. 1305(E), dated the 18th October, 2017 or
notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017
published in the Gazette of India, Extraordinary, Part II, Section 3, sub
section(i), vide number G.S.R. 1320(E), dated the 23rd October, 2017 or
notification No.41/2017-Integrated Tax (Rate), dated the 23rd October, 2017
published in the Gazette of India, Extraordinary, Part II, Section 3, sub
section(i), vide number G.S.R. 1321(E), dated the 23rd October, 2017 has been
availed; or
(b) availed the benefit under notification No.78/2017-Customs, dated the 13th
October, 2017 published in the Gazette of India, Extraordinary, Part II, Section
3, sub-section (i), vide number G.S.R. 1272(E), dated the 13th October, 2017 or
notification No.79/2017-Customs, dated the 13th October, 2017 published in the
Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide
number G.S.R. 1299(E), dated the 13th October, 2017.”
5.9. Notification No.53/2018-C.T. dated 09 Oct 2018 reads as under:
“Central Goods and Services Tax Rules, 2018 – Eleventh Amendment of 2018
In exercise of the powers conferred by section 164 of the Central Goods and
Services Tax Act, 2017 (12 of 2017), the Central Government hereby makes the
following rules further to amend the Central Goods and Services Tax Rules, 2017,
namely :
1. (1) These rules may be called the Central Goods and Services Tax (Eleventh
Amendment) Rules, 2018.
(2) They shall be deemed to have come into force with effect from the 23rd
October, 2017.
2. In the Central Goods and Services Tax Rules, 2017, in rule 96, for sub-rule
(10), the following sub-rule shall be substituted and shall be deemed to have
been substituted with effect from the 23rd October, 2017, namely :
“(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have received supplies on which the supplier has availed the
benefit of the Government of India, Ministry of Finance, notification No.
48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of
India, Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R.
1305(E), dated the 18th October, 2017 or notification No.40/2017-Central Tax
(Rate), dated the 23rd October, 2017, published in the Gazette of India,
Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R. 1320(E),
dated the 23rd October, 2017 or notification No.41/2017-Integrated Tax (Rate),
dated the 23rd October, 2017, published in the Gazette of India, Extraordinary,
Part II, Section 3, sub-section (i), vide number G.S.R. 1321(E), dated the 23rd
October, 2017 or notification No. 78/2017-Customs, dated the 13th October,
2017, published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R. 1272(E), dated the 13th October, 2017 or
notification No.79/2017Customs, dated the 13th October, 2017, published in the
Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide
number G.S.R. 1299(E), dated the 13th October, 2017.”
5.10. Notification No.54/2018-C.T.dated 09 Oct 2018 reads as under:
“Central Goods and Service Tax Rules, 2017 Twelfth Amendment of 2018.
In exercise of the powers conferred by Section 164 of the Central Goods and
Services Tax Act, 2017 (12 of 2017), the Central Government thereby makes the
following rules further to amend the Central Goods and Services Tax Rules, 2017,
namely:
1. (1) These rules may be called the Central Goods and Services Tax (Twelfth
Amendment) Rules, 2018.
(2) They shall come into force on the date of their publication in the Official
Gazette.
2. In the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as
the said rules), in Rule 89, for sub rule (4B), the following sub-rule shall be
substituted, namely:
“(4B) Where the person claiming refund of unutilised input tax credit on
account of zero rated supplies without payment of tax has –
(a) received supplies on which the supplier has availed the benefit of the
Government of India, Ministry of Finance, notification No. 40/2017-Central Tax
(Rate), dated the 23rd October, 2017, published in the Gazette of India,
Extraordinary, Part II, Section 3, sub section(i), vide number G.S.R 1320 (E),
dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate),
dated the 23rd October, 2017, published in the Gazette of India, Extraordinary,
Part II, Section 3, sub section(i), vide number G.S.R 1321(E), dated the 23rd
October, 2017; or
(b) availed the benefit of notification No. 78/2017-Customs, dated the 13th
October, 2017, published in the Gazette of India, Extraordinary, Part II,
Section 3, sub-section (i), vide number G.S.R 1272(E), dated the 13th October,
2017 or notification No. 79/2017Customs, dated the 13th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R 1299(E),dated the 13th October, 2017, the
refund of input tax credit, availed in respect of inputs received under the said
notifications for export of goods and the input tax credit availed in respect of
other inputs or input services to the extent used in making such export of
goods, shall be granted.”.
3. In the said rules, in rule 96, for sub-rule (10), the following sub-rule
shall be substituted, namely:
“(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have
(a) received supplies on which the benefit of the Government of India, Ministry
of Finance notification No. 48/2017Central Tax, dated the 18th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017
except so far it relates to receipt of capital goods by such person against
Export Promotion Capital Goods Scheme or notification No. 40/2017-Central Tax
(Rate), dated the 23rd October, 2017, published in the Gazette of India,
Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R 1320 (E),
dated the 23rd October, 2017 or notification No. 41/2017 Integrated Tax (Rate),
dated the 23rd October, 2017, published in the Gazette of India, Extraordinary,
Part II, Section 3, sub-section (i), vide number G.S.R 1321 (E), dated the 23rd
October, 2017 has been availed; or
(b) availed the benefit under notification No. 78/2017-Customs, dated the 13th
October, 2017, published in the Gazette of India, Extraordinary, Part II,
Section 3, sub-section (i), vide number G.S.R 1272(E), dated the 13th October,
2017 or notification No. 79/2017Customs, dated the 13th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017
except so far it relates to receipt of capital goods by such person against
Export Promotion Capital Goods Scheme.”
6.1. The learned advocate Mr. Abhishek Rastogi appearing with the learned
advocate Mr. Nachiket Dave for the petitioner submitted that as per the amended
Rule 96 (10) of the CGST Rules, the petitioner is not entitled to get rebate
benefits under Section 16(3)(b) of the IGST Act in view of the amendment w.e.f.
23rd October 2017 where the petitioner has availed the benefit of upfront IGST
exemption on imports against AA Licenses, as conferred upon the petitioner
through Notification No. 79/2017-Customs dated 13th October, 2017.
6.2. It was submitted that the Domestic Tariff Area (for short ‘DTA’) suppliers
of the petitioner may avail Deemed Export Benefits and claim refund of input
taxes, if they supply goods to the petitioner who holds AA License under
Notification No. 48 of 2017 dated 18th October, 2017, but the petitioner is
denied the benefits under rebate mode under Rule 96 (10) as amended by the
impugned Notification No. 54 of 2018 w.e.f. 23rd October 2017, if the suppliers
of the petitioner avails Deemed Export benefits while supplying materials to the
petitioner from DTA.
6.3. Mr. Rastogi further submitted that, till 23rd October 2017, the petitioner
was eligible to opt for the rebate of IGST paid on exports without any
restriction, however, w.e.f. 23rd October 2017, on account of the amendment in
Rule 96(10) , the petitioner is not able to avail export benefits under the
rebate, if the petitioner imported goods under AA Licenses issued prior to 23rd
October 2017.
6.4. The learned advocate Mr. Rastogi therefore submitted that the action of the
respondents suffers from the vices of excessive delegation by the impugned
notifications denying the benefit of ‘Zerorated’ exports conferred upon the
petitioner through Section 16(3)(b) of the CGST Act by imposing arbitrary
restrictions upon the petitioner, so that they are unable to claim rebate
benefits from the Government.
6.5. It was submitted that the petitioner is entitled to rebate of IGST on
exports under Section 16 of the IGST Act r/w. Section 54 of the CGST Act, as the
benefits against the export of goods can be claimed after payment of IGST on
exports and claim refund of such IGST paid under the rebate mode, as provided
under Section 54 of the CGST Act and the CGST Rules. It was submitted that
neither Section 16 of the IGST Act nor Section 54 of the CGST Act prescribes any
power to issue impugned notifications, so as to deny the impact of zerorating
exports for granting benefits of rebate under Section 16 of the IGST Act, so as
to nullify the benefits under the Advance Authorization Scheme availed by the
exporters, like the petitioner.
6.6. It was submitted that in view of the impugned notifications, the petitioner
is put at a disadvantageous position against regular exporters who are exporting
goods without payment of IGST on the output side and at the same time, claiming
refund of input taxes on the input side thereby effectively incurring no tax
cost either on the input side i.e. on procurements or on the output side i.e. on
exports in terms of Section 16 of the IGST Act, whereas, only because the
petitioner has availed the benefit under Advance Authorization Scheme, in view
of amended Rule 96(10) of the CGST Rules, the petitioner is denied the benefit
of IGST refund /rebate on the output side i.e. export.
6.7. Mr. Rastogi submitted that the petitioner is discriminated qua others who
have not availed the benefits of the Advance Authorization Scheme, which would
result in violation of Article 14 of the Constitution of India, as the regular
exporters are able to avail the option of rebate and recover rebate for
accumulated input tax credit balance. It was submitted that, AA License holders
or regular exporters earn foreign exchange for the country and boost the economy
of the nation and therefore, there should not be any reasonable classification
by subjecting the petitioner to different tax treatments.
6.8. It was submitted that, there is no case of reasonable classification for
the exporters who have availed the benefit of AA License because there is no
nexus which is sought to be achieved, as the rational behind introduction of
sub-rule (10) of Rule 96 is that benefit should not be claimed by both the
suppliers of AA License holders and the AA License holders themselves.
6.9. It was submitted that in case of the suppliers of AA License holders,
refund is claimed against deemed exports under Rule 89 of the CGST Rules,
wherein, it is specifically provided that the AA License holder should not claim
input tax credit. The reliance was placed to third proviso of Rule 89(1) which
reads as under:
“ Third proviso to Rule 89(1)
Provided also that in respect of supplies regarded as deemed exports, the
application may be filed by,
(a) the recipient of deemed export supplies; or
(b) the supplier of deemed export supplies in cases where the recipient does
not avail of input tax credit on such supplies and furnishes an undertaking to
the effect that the supplier may claim the refund.”
Thereafter, reliance was placed on the definition of Net ITC. Rule 89(4A) of the
CGST Rules, which reads as under:
“Definition of Net ITC and Rule 89(4A)
“Net ITC” means input tax credit availed on inputs and input services during the
relevant period other than the input tax credit availed for which refund is
claimed under subrules (4A) or (4B) or both;
(4A) In the case of supplies received on which the supplier has availed the
benefit of the Government of India, Ministry of Finance, notification
No.48/2017 Central Tax dated the 18th October, 2017 published in the
Gazette of India, Extraordinary, Part II, Section 3, sub section(i), vide number
G.S.R 1305 (E) dated the 18th October, 2017, refund of input tax credit, availed
in respect of other inputs or input services used in making zerorated supply of
goods or services or both, shall be granted.”
6.10. Relying upon the above provisions that AA License holders cannot claim
input tax credit in case the vendor / supplier is availing Deemed Export
Benefits and the AA License holder is also required to furnish an undertaking
stating that no input tax credit is claimed. The reliance was also placed on
Circular No. 14/142017GST, dated 6th November 2017, wherein, procedural
safeguards in case of Deemed Export Benefits are provided stipulating
requirements of furnishing intimation with the jurisdictional GST authorities,
maintaining records, submitting copies of invoices, etc. It was submitted that,
there are sufficient safeguards to ensure that both the suppliers of AA License
holders and AA License holders themselves do not claim benefits under the GST
regime simultaneously.
6.11. It was pointed out by Mr. Rastogi that, in case of AA License holders
benefits are availed only to input tax credit to the extent of tax paid on the
inward supply and such benefit under the rebate mode cannot exceed, the input
tax credit balance available with the AA License holder, i.e. the amount of
input tax credit actually availed in the past and therefore, there is no
question of additional benefit being availed in absence of sub-rule (10) of
Rule 96 of the CGST Rules.
6.12. Reliance was placed on the Circular No. 45/19/2018GST dated 30th May 2018
and more particularly para7.1 thereof, emphasizes the objective of introduction
of sub-rule (10) of Rule 96 which reads as under:
“sub-rule (10) of Rule 96 of the CGST Rules seeks to prevent an exporter,
who is receiving goods from suppliers availing the benefit of certain specified
notifications under which they supply goods without payment of tax or at reduced
rate of tax, from exporting goods under payment of integrated tax. This is to
ensure that the exporter does not utilise the input tax credit availed on other
domestic supplies received for making the payment of integrated tax on export of
goods.”
6.13. It was submitted that, the rationale given in the aforesaid notification
is illogical, arbitrary and unreasonable, as benefit under rebate claim cannot
exceed the amount of input tax credit taken which is allowed to be taken by AA
license holders is restricted in case of Deemed Export benefits or Merchant
Export Benefits.
6.14. It was submitted by the learned Advocate Mr. Rastogi that the respondents
have issued the impugned notifications, while exercising powers under Section
164 of the CGST Act, but the provision of Section 164 of the CGST Act can be
invoked only where a provision is specifically required to be prescribed by the
respondents. It was submitted that, sub-section (2) of Section 164 specifically
states that the power to make rules is only to the extent required by the CGST
Act and accordingly, such powers can be exercised only subject to and
subservient to the respective provisions of the GST law. It was therefore
submitted that rebate mode or refund mode prescribed under the Rules should be
in accordance with Section 16 of the IGST Act or Section 54 of the CGST Act.
6.15. Mr. Rastogi therefore submitted that amended sub-rule 10 of Rule 96
restricts rebate claims in case of AA License holders without any reasonable
basis to justify imposition of absolute restriction for not claiming and not the
form and manner for claiming refund.
6.16. Mr. Rastogi without admitting that the respondents have the power to
prescribe safeguards and conditions for refund of tax, submitted that sufficient
safeguards already exist to prevent undue benefits being claimed, as Rule 89 of
the CGST Rules prohibits availment of input tax credit in case of Deemed Export
Benefits are claimed and in case of Merchant Export Benefits and AA benefits,
the quantum of rebate can in no case exceed the input tax credit balance i.e.
the input tax credit earlier availed. It was therefore submitted that, the
amendment of sub-rule (10) of Rule 96 are unreasonable and liable to be stuck
down.
6.17. With regard to the retrospective amendment made in sub-rule (10) of Rule
96 of the CGST Rules w.e.f. 23rd October 2017, it was submitted by Mr. Rastogi
that, though the notification has been issued on 4th September 2018, such
retrospective operation cannot be arbitrary and burdensome. Reliance was placed
on the decision of the Apex Court in the case of Tata Motors Ltd. v. State
of Maharashtra & Ors. reported in AIR 2004 SC 3618, in support of such
submission.
6.18. It was submitted that, the retrospective introduction in sub-rule (10) of
Rule 96 of CGST Rules, the petitioner is unfairly penalized as a consequence of
claiming benefits during the interim period from 23rd October 2017 till 4th
September 2018.
6.19. It was further submitted that the AA License scheme has been introduced by
the respondent no.1 with the objective of boosting exports, enhancing foreign
exchange earnings and attracting more investment in the country, and therefore,
AA License holders are granted with additional fiscal benefits and incentives
visavis regular exporters. It was therefore submitted that to deny the benefits
which are available to regular exports that are not holding the AA Licensee to
the AA License holders, it goes against the policy of granting of AA License and
denial of such benefits defeats the whole purpose of the AA License scheme.
6.20. Mr. Rastogi thereafter submitted that it is a settled legal position that
taxes cannot be exported, as per the norms prescribed by the World Trade
Organization (for short ‘WTO’) which specifically permits remission of duties
and taxes on exported products. The reliance was placed on ArticleXVI of the
General Agreement on Tariffs and Trade, 1994 (Note to Article XVI) and the
provisions of AnnexuresI to III of the Agreement on Subsidies and
Countervailing Measures, the exemption or remission of duties and taxes on
exported products, so as not to bring such measures to be subsidy and hence, is
permitted. It is a settled international practice to export only the goods and
services and not the taxes suffered thereon. It was further submitted that, the
petitioner is unable to get back the transitional credit either through the
refund mode or the rebate mode, the petitioner would be constrained to writeoff
this amount and pass on the burden of such amount to its foreign customers,
which would lead to a situation of export of taxes, which is against the policy
of the respondent no.1.
6.21. Lastly, reliance was placed on the statement of objects and reasons to the
Constitution Amendment Bill introducing the GST regime in India, wherein, it is
specified that removal of the cascading effect of taxes is one of the objectives
of GST and hence, smooth pass through of credits is the stated objective of the
GST regime and denial of benefit on transitional credit to the petitioner
leading to blockage of credits is against the spirit and objective of the GST
regime.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS:
7.1. Learned Standing Counsel Mr. Nirzar Desai appearing for the respondent nos.
1, 3 and 4 submitted that, sub-rule (10) of Rule 96 of CGST Rules only
provides that registered persons, including importers, who are directly
purchasing / importing supplies on which the benefit of reduced tax incidence or
no tax incidence under certain specified notifications has been availed, would
not be eligible for refund of integrated tax paid on export of goods or
services. It was submitted that, the intention of sub-rule (10) of Rule 96 is
to ensure that an exporter is not able to utilize the input tax credit availed
on inward supplies which are used in making domestic output supplies for payment
of IGST on exports and thereby encash the same. It was submitted that, such
exports are free to export under LUT/ Bond and claim refund of any unutilized
input tax credit.
7.2. Mr. Desai thereafter relied upon the following averments made in the
affidavitin-reply filed on behalf of the respondent nos. 1, 3 and 4:
“9. I say that the petitioner challenges that sub-rule (10) of Rule 96 is
beyond the competence of the respondents and is consequently invalid. The said
contention of the petitioner is not correct. In terms of Section 164 of the CGST
Act, the Government, may on the recommendation of the Council, by notification
make rules for carrying out the provisions of the Act. The approval of the GST
Council, which is a Constitutional body constituted under Article 279A of the
Constitution of India and mandated with making all GST related decisions, has
been obtained for all the above measures. The above notifications were issued on
the recommendation of GST Council on the basis of decision taken in its 25th
Meeting, held on 15.01.2018. The subject matter was presented at Serial No.9 of
Agenda item no. 7(i) before GST Council. The decision taken, as recorded in
minutes of meeting, was as under:
“17. For Agenda item 7, the Council approved the proposed changes in CGST
Rules and Forms, as contained in Agenda item 7, except for Serial No.5 of Agenda
item 7(i)(v) relating to purchase value of goods repossessed from a defaulting
borrower”.
Accordingly, insertion of sub-rule (10) has been made in terms of law.
10. I say that the retrospectivity of the amendments made to sub-rule (10) of
rule 96 of the CGST rules was nullified vide issuance of notification
No.53/2018Central Tax dated 09.10.2018, which restored the position of rule
96(10), with retrospective effect (i.e. w.e.f. 23.10.2017) as it existed before
the issuance of Notification No.39/2018Central Tax dated 04.09.2018. Further,
vide notification No. 54/2018Central Tax dated 09.10.2018, an exception was
carved from the restriction imposed by sub-rule (10) of rule 96 for those
exporters who are importing capital goods under the EPCG scheme.
11. I say that the petitioner further challenges that Rule 96(10) of CGST/GGST
Rules, 2017 inserted vide Para 6 of Notification No.39/2018Central Tax/State
Tax, dated 04.09.2018 violates the Article 14 of Constitution of India. In this
regard, I say that it is well-established that Article 14 forbids class
legislation but does not forbid classification. Permissible classification must
be founded on an intelligible differentia which distinguishes persons or things
that are grouped together from others left out of the group, and the differentia
must have a rational relation to the object sought to be achieved by the statute
in question.
I further say that what is disallowed to the petitioner and allowed to others of
the same class should be demonstrated by the petitioner. That is the test for
arbitrariness. The petitioners had no occasion to demonstrate their case in the
test of arbitrariness. Needless to mention, GST laws are a selfcontained
legislations. The laws were promulgated after necessary constitutional
amendments. It cannot, therefore, be said that equals have been treated
unequally or unequals have been treated equally while providing benefit of
Notification No. 39/2018 Central Tax/State Tax, dated 04.09.2018. Only such
provisions of a taxing statute can be struck down on the ground of
discrimination which operate differently on the members of the same class and in
similar situation. If members of the same class are affected equally and
uniformly, the provision cannot be said to suffer from the vice of
discrimination and, therefore, cannot be struck down as violation of Article 14
of the Constitution. In this connection reliance is place on judgment of hon'ble
Supreme Court in case of Amalgamated Tea Estate Co. Vs. State of Kerala, (1974)
CTR (S.C.) 192, wherein it was said that
“as revenue is the first necessity of the State and as taxes are raised for
various purposes and by an adjustment of diverse elements, the court grants to
the State greater choice of classification in the field of taxation than in
other spheres.” and that
“On a challenge to a statute on the ground of Article 14, the court would
generally raise a presumption in favour of its constitutionality. Consequently,
one who challenges the statute bears the burden of establishing that the statute
is clearly violative of Article 14.”
In N. V. Somaraju Vs. Govt. of India 1973 Tax LR 1084 (Andh.Pra.), it was held
that
“While considering the provisions of Article 14 of the Constitution, no precise
or mathematical accuracy is contemplated and what is to be seen is overall
equality given to the same class.” and “in the matter of taxation the
legislature has greater freedom not only to classify the different persons or
subjects in regard to whom or which tax is to be levied but different modes of
taxation can also be adopted.”
In view of the above, I say that Rule 96(10) of CGST/GGST Rules, 2017 inserted
vide Para 6 of Notification No.39/2018-Central Tax/State Tax, dated 04.09.2018
does not violate Article 14 of the Constitution of India.
12. I say that the petitioner further challenges that Rule 96(10) of CGST/GGST
Rules, 2017 inserted vide Para 6 of Notification No.39/2018Central Tax/State
Tax, dated 04.09.2018 violates the Article 19(1)(g) of Constitution of India. In
this regard, I say that Article 19(1)(g) of the Constitution guarantees the
citizens of India a right to carry on any occupation, trade or business. The
petitioners had no carry on any occupation, trade or business. The petitioners
had no occasion to demonstrate their case in the test of arbitrariness. The
petitioner is still entitled to the full enjoyment of this freedom even after
implementation of the notification, ibid, and the legislature has not infringed
his right to trade under Article 19(1)(g) of the Constitution.
13. In view of whatever is stated hereinabove it is stated that the Petitioners
have no case on merits or otherwise and hence, the present Petition deserves to
be dismissed.”
7.3. Relying on the aforesaid averments made in the affidavitinreply, it was
submitted that, no interference is required to be made in the retrospective
amendment of sub-rule (10) of Rule 96 of the CGST Rules. Mr. Desai further
relied upon the decision of the Hon’ble Apex Court in the case of State of
Gujarat v. Reliance Industries Limited reported in (2017) 16 SCC 28, wherein,
the Apex Court has held in context of the Gujarat Value Added Tax Act, 2003, as
under:
“18. The aforesaid discussion leads us to the conclusion that it is a mega
tax credit scheme which is provided under the VAT Act meant for all kinds of
manufactured goods. The material in question, namely, furnace oil, natural gas
and light diesel oil are admittedly subject to VAT under the VAT Act. The
Legislature, however, has incorporated the provision, in the form of Section 11,
to give tax credit in respect of such goods which are used as inputs/ raw
material for manufacturing other goods. Rationale behind the same is simple.
When the finished product, after manufacture, is sold, VAT would be again
payable thereon. This VAT is payable on the price at which such goods are sold,
costing whereof is done keeping in view the expenses involved in the manufacture
of such goods plus the profits which the manufacturer intends to earn. Insofar
as costing is concerned, element of expenses incurred on raw material would be
included. In this manner, when the final product is sold and the VAT paid,
component of raw material would be included again. Keeping in view this
objective, the Legislature has intended to give tax credit to some extent.
However, how much tax credit is to be given and under what circumstances, is the
domain of the Legislature and the courts are not to tinker with the same.
19 This proposition is authoritatively determined by this Court in series of
judgments. We may refer to the judgment in Godrej & Boyce Mfg. Co. Pvt. Ltd. &
Ors. v. Commissioner of Sales Tax and Others, 1992 3 SCC 624 and the relevant
extract which is relevant for our purposes is as follows:
"9. Sri Bobde appearing for the appellants reiterated the contentions urged
before the High Court. He submitted that the deduction of one per cent, in
effect, amounts to taxing the raw material purchased outside the State or to
taxing the sale of finished goods effected outside the State of Maharashtra. We
cannot agree. Indeed, the whole issue can be put in simpler terms. The appellant
(manufacturing dealer) purchases his raw material both within the State of
Maharashtra and outside the State. Insofar as the purchases made outside the
State of Maharashtra are concerned, the tax thereon is paid to other States. The
State of Maharashtra gets the tax only in respect of purchases made by the
appellant within the State. So far as the sales tax leviable on the sale of the
goods manufactured by the appellant is concerned, the State of Maharashtra can
levy and collect such tax only in respect of sales effected within the State of
Maharashtra. It cannot levy or collect tax in respect of goods which are
despatched by the appellant to his branches and agents outside the State of
Maharashtra and sold there. In law (apart from Rules 41 and 41A) the appellant
has no legal right to claim setoff of the purchase tax paid by him on his
purchases within the State from out of the sales tax payable by him on the sale
of the goods manufactured by him. It is only by virtue of the said Rules which,
as stated above, are conceived mainly in the interest of public that he is
entitled to such setoff. It is really a concession and an indulgence. More
particularly, where the manufactured goods are not sold within the State of
Maharashtra but are despatched to outState branches and agents and sold there,
no sales tax can be or is levied by the State of Maharashtra. The State of
Maharashtra gets nothing in respect of such sales effected outside the State. In
respect of such sales, the rulemaking authority could well have denied the
benefit of setoff. But it chose to be generous and has extended the said
benefit to such outState sales as well, subject, however to deduction of one
per cent of the sale price of such goods sent out of the State and sold there.
We fail to understand how a valid grievance can be made in respect of such
deduction when the very extension of the benefit of setoff is itself a boon or
a concession. It was open to the rulemaking authority to provide for a small
abridgement or curtailment while extending a concession. Viewed from this angle,
the argument that providing for such deduction amounts to levy of tax either on
purchases of raw material effected outside the State or on sale of manufactured
goods effected outside the State of Maharashtra appears to be beside the point
and is unacceptable. So is the argument about apportioning the saleprice with
reference to the proportion in which raw material was purchased within and
outside the State. (emphasis added)"
To the same effect are the judgments in the case of Hotel Balaji & Ors. v.
State of Andhra Pradesh & Ors., 1993 Supp 4 SCC 536 and Jayam and Company v.
Assistant Commissioner and Another, 2015 15 SCC 125.
20 The upshot of the aforesaid discussion would be to hold that reduction of 4%
would be applied whenever a case gets covered by subclause (ii) and again when
subclause (iii) is attracted. This, however, would be subject to one
limitation. In those cases where VAT paid on such raw material is 4%, as in the
case of furnace oil, reduction cannot be more than that. After all, Section 11
deals with giving credit in respect of tax that is paid. Therefore, if some
reduction is to be made from the said credit, it cannot be more than the credit
given. Thus, so far as furnace oil is concerned, tax credit shall be reduced by
4%. On the other hand, tax credit given in case of natural gas and light diesel
oil (other fuels), it shall be reduced by 4% under subclause (ii) and 4% under
subclause (iii) of clause (b) of sub-section (3) of Section 11.”
7.4. Mr. Desai also relied upon the decision of the Division Bench of this Court
in case of Willowood Chemicals Pvt. Ltd. v. Union of India rendered on 12th /
19th September, 2018 in Special Civil Application No. 4252 of 2018, wherein,
the constitutionality of second proviso to Section 140 (1) of the CGST Act was
upheld. The reliance was placed on the following observations of the said
judgment which reads as under:
“17 Effectively and essentially, this is what the present provisos of sub
section [1] of Section 140 of the GGST Act do. As per the main provision, credit
would be available on the amount of Value Added Tax and Entry Tax carried
forward in the return. As per the further proviso or the second proviso, such
credit to that extent would not be transferred when necessary declarations are
not furnished by the dealer. The proviso thereafter however ensures that as and
when declarations are filed, the amount equivalent to credit specified in the
second schedule would be refunded to the dealer. We do not find any major change
in the effect of late production of the forms by a dealer in the present
statutory provisions; as compared to the earlier position, nor the statutory
provisions deny the benefit of such credit, even where necessary declarations
are furnished. Thus, no existing or vested right can be said to have been taken
away.
We do not think Section 140 [c] is a charging provision or that for want of
mechanism for computing such charge, the provision itself would fail. The
provision is in the nature of enabling the dealers to take credit of existing
taxes paid by them but not utilized for discharging their tax liabilities. It
contains conditions subject to which the benefit can be enjoyed.
18 This brings us to the petitioners challenge to rule 117 of the CGST Rules and
GGST Rules. The statutory provisions being pari materia in both the Act and the
Rules, in so far as this challenge is concerned, we may refer to provisions
contained in the CGST Act.
19 As noted, under sub section [1] of Section 140 of the CGST Act, a
registered person, other than one who had opted for composition of tax would be
entitled to take credit of the amount of CENVAT credit carried forward in the
return relating to the period ending with the day immediately preceding the
appointed day, furnished by him under the existing law in such manner as may be
prescribed. Under sub section [3] of Section 140, a registered person, who was
not liable to be registered under the existing law and other category of persons
mentioned therein, would be entitled to take, in his electronic credit ledger,
credit of eligible duties in respect of inputs held in stock and inputs
contained in semi finished or finished goods held in stock on the appointed day;
subject to conditions contained in clauses [i] to [v] therein. Sub section [10]
of Section 140 provides that the amount of credit under sub sections [3], [4]
and [6] shall be calculated in such manner as may be prescribed. Counsel for the
petitioners had compared the language used by the legislature in sub sections
[1] and [3] of Section 140 to argue that the expression "in such manner as may
be prescribed" used in sub section [1] was missing in sub section[3].
20 In his contention, therefore, the rules that the subordinate legislature
framed could not have prescribed a time limit for making necessary declarations;
as referred to under sub section [3] of Section 140. Rule 117 of the CGST Rules
pertains to taxes or duty credit carried forward under any existing law or on
goods held in stock on the appointed day. Sub rule (1) of Rule 117 provides that
every registered person entitled to take credit of the input tax under Section
140, shall within ninety days of the appointed day, submit a declaration
electronically in the prescribed format, duly signed, on the common portal
specifying separately the amount of input tax credit to which he is entitled
under the provisions of the said section. Proviso to sub rule [1] envisages
extension of period for making the said declaration on the recommendations of
the Council. We have noted that such time limit was extended from time to time
and finally upto 27th December 2017. A limited extension has thereafter been
granted by the Government by inserting sub rule [1A] in Rule 117, authorizing
the Commissioner to extend the date for submitting the declaration
electronically by a further period not beyond 31st March 2019, in respect of
registered persons who could not submit the said declaration by the due date on
account of technical difficulties on the common portal and in respect of whom,
the Council has made recommendation for such extension. Effectively thus, the
last date for filing the declaration under sub rule [1] of Rule 117 in general
class of persons remained 27th December 2017. For cases falling under sub rule
[1A] of Rule 117, the same could be extended maximum upto 31st March 2019. As
per the petitioners, this prescription of time limit per se is ultra vires the
provisions of the Act and the Constitution of India.
21 In essence, sub rule [1] of Rule 117 lays down a time limit for making
declaration only upon making of which, a person could take benefit of tax credit
in terms of Section 140 of the CGST Act. We are conscious that sub sections [1]
and [3] of Section 140 of the CGST Act use somewhat different phraseology. Under
sub section [1] the legislature has provided that the benefit of credit in the
electronic credit ledger would be available to a registered person in such
manner; as may be prescribed. In contrast, sub section [3] of Section 140 grants
facility of credit in electronic ledger of the specified duties to the specified
class of persons; subject to conditions laid down under clauses (i) to (v) of
the said subsection. It is only in the proviso below clause (v) of sub section
[3] that the legislature has provided that where a registered person, other than
a manufacturer or a supplier of services, is not in possession of an invoice or
any other documents evidencing payment of duty in respect of inputs, then, such
registered person shall; subject to such conditions, limitations and safeguards
as may be prescribed, including that the said taxable person shall pass on the
benefit of such credit by way of reduced prices to the recipient, be allowed to
take credit at such rate and in such manner as may be prescribed. For apparent
reasons, this proviso does not apply to all cases and its effect is local, to
cover cases where a person is not in possession of an invoice or any other
documents evidencing payment of duty in respect of inputs.
22 We can however not be oblivious to Section 164 of the CGST Act, which is the
rule making power and reads as under :
"164. Power of Government to make rules :
[1] The Government may, on the recommendations of the Council, by notification,
make rules for carrying out the provisions of this Act.
[2] Without prejudice to the generality of the provisions of sub section (1),
the Government may make rules for all or any of the matters which by this Act
are required to be, or may be, prescribed or in respect of which provisions are
to be or may be made by rules.
[3] The power to make rules conferred by this section shall include the power to
give retrospective effect to the rules or any of them from a date not earlier
than the date on which the provisions of this Act comes into force.
[4] Any rules made under sub section (1) of sub section(2) may provide that a
contravention thereof shall be liable to a penalty not exceeding ten thousand
rupees."
23 Under sub section [1] of Section 164 of the CGST Act, thus, the Government on
recommendations of the Council, by notification, could make rules "for carrying
out the provisions of the Act". This rule making power is thus couched in the
widest possible manner empowering the Government to make the rules for carrying
out the provisions of the Act." Sub section [2] to Section 164 is equally widely
worded, when it provides that, "without prejudice to the generality of the
provisions of sub section (1), the Government may make rules for all or any of
the matters which by this Act are required to be, or may be, prescribed or in
respect of which provisions are to be, or may be made by the rules." Sub section
[3] of Section 164, to which we are not directly concerned, nevertheless
provides that the power to make rules conferred in the said section would
include the power to give retrospective effect to such rules.
24 It is in exercise of this rule making power, the Government has framed the
CGST Rules, 2017 in which; as noted, sub rule (1) of Rule 117 has prescribed,
besides other things, the time limit for making declaration in the prescribed
form for every dealer entitled to take credit of input tax under Section 140.
Sub rule [1] of Rule 117 thus applies to all cases of credits which may be
claimed by a registered person under section 140 of the Act and is not confined
to sub section [3]. This plenary prescription of time limit within which
necessary declarations must be made is, in our opinion, neither without
authority nor unreasonable.
25 Section 140 of the Act envisages certain benefits to be carried forward
during the regime change. As is well settled, the reduced rate of duty or
concession in payment of duty are in the nature of an exemption and is always
open for the legislature to grant as well as to withdraw such exemption. As
noted in case of Jayam & Company [Supra], the Supreme Court had observed that
input tax credit is a form of concession provided by the legislature and can be
made available subject to conditions. Likewise, in the case of Reliance
Industries Limited [Supra], it was held and observed that how much tax credit
has to be given and under what circumstances is a domain of the legislature. In
case of Godrej & Boyce Mfg. Co. Pvt. Limited [Supra], the Supreme Court had
upheld a rule which restricts availment of MODVAT credit to six months from the
date of issuance of the documents specified in the proviso. The contention that
such amendment would take away an existing right was rejected.
26 While the entire tax structure within the country was thus being replaced by
a new frame work, it was necessary for the legislature to make transitional
provisions. Section 140 of the CGST Act, which is a transitional provision,
essentially preserves all taxes paid or suffered by a dealer. Credit thereof is
to be given in electronic credit register under the new statute, only subject to
making necessary declarations in prescribed format within the prescribed time.
As noted, sub section [1] of Section 164 of the CGST Act authorizes the
Government to make rules for carrying out the provisions of the Act on
recommendations of the Council. Sub section [2] of Section 164 further provides
that without prejudice to the generality of the provisions of sub section [1],
the Government could also make rules for all, or any of the matters, which by
this Act are required to be or may be prescribed or in respect of which,
provisions are to be or may be made by the rules. Combined effect of the powers
conferred to subordinate legislature under sub sections [1] and [2] of Section
164 of the CGST Act would convince us that the prescription of time limit under
sub rule [1] of Rule 117 of the CGST Rules is not ultra vires the Act. Likewise,
such prescription of time limit cannot be stated to be either unreasonable or
arbitrary. When the entire tax structure of the country is being shifted from
earlier framework to a new one, there has to be a degree of finality on claims,
credits, transfers of such credits and all issues related thereto. The
petitioners cannot argue that without any reference to the time limit, such
credits should be allowed to be transferred during the process of migration. Any
such view would hamper the effective implementation of the new tax structure and
would also lead to endless disputes and litigations. As noted in case of USA
Agencies [Supra], the Supreme Court had upheld the vires of a statutory
provision contained in the Tamil Nadu Value Added Tax Act which provided that
the dealer would have to make a claim for input tax credit before the end of the
financial year or before ninety days of purchase; whichever is later. The vires
was upheld observing that the legislature consciously wanted to set up the time
frame for availment of the input tax credit. Such conditions therefore must be
strictly complied with. Thus, merely because the rule in question prescribes a
time frame for making a declaration, such provision cannot necessarily be held
to be directory in nature and must depend on the context of the statutory
scheme.”
7.5. Learned advocate Mr. Nirjar Desai to point out that the similar writ
petition being Special Civil Application No. 10998 of 2018 was filed by the
petitioner before the Delhi High Court which was disposed of by order dated 16th
January 2019 permitting the petitioner to withdraw the said writ petition and
the petition may be treated as representation to the respondent, who should
examine the grievance of the petitioner. It was therefore submitted that, there
is suppression of fact by the petitioner by not disclosing the writ petition
filed before the Delhi High Court for the same subject matter. It was further
submitted that there is no demand notice issued against the petitioner and
therefore, there is no cause of action to file this petition.
ANALYSIS:
8.1. Having considered the submissions made by the learned advocates for both
the sides and having gone through the materials on record, the short question
which arises for the consideration is whether the amendment made by the
Notification No. 54/2018 dated 9th October 2018 amending subrule (10) of Rule 96
of the CGST Rules is valid or not.
8.2. In order to consider the issue of validity of the Notification No. 54/2018
substituting the sub-rule (10) of Rule 96 of CGST Rules, it would be necessary
to refer to the scheme of Advance Authorized Licenses. The Government of India,
Ministry of Finance vide Notification No. 18/2015Customs, dated 1st April 2015
issued in exercise of the powers conferred by Section 25 (1) of the Customs Act,
1962 (for short ‘the Customs Act’) exempted materials imported into India,
against a valid Advance Authorization issued by the Regional Authority in terms
of paragraph4.03 of the Foreign Trade Policy, from the whole of the duty of
customs leviable thereon, which is specified in the First Schedule to the
Customs Tariff Act, 1975 and from the whole of the additional duty leviable
thereon under sub-sections (1), (3) and (5) of Section 3 thereon, and
Integrated Tax leviable thereon under sub-section (7) of section 3 of goods and
service tax compensation Cess leviable thereon under sub-section (9) of Section
3, safeguard duty leviable thereon under Section 8B, countervailing duty
leviable thereon under Section 9 and antidumping duty leviable thereon under
Section 9A of the Customs Tariff Act, subject to the conditions stated in the
said notification.
8.3. After coming into force of GST regime w.e.f. 01.04.2017, Notification No.
79/2017Customs, dated 13th October 2017 was issued amending the Notification
No. 18/2015 by inserting condition (viii) as under:
Sr. No. |
Notification Number and date |
Amendments |
2. |
18/2015Customs, dated the 1st April, 2015 [vide number G.S.R. 254(E), dated the 1st April, 2015] |
In the said notification,
in the opening paragraph.(a) for the words, brackets, figures and
letters “from the whole of the additional duty leviable thereon under
sub-sections (1), (3) and (5) of section 3, safeguard duty leviable
thereon under section 8B and antidumping duty leviable thereon under
section 9A”, the words, brackets, figures and letters “from the whole of
the additional duty leviable thereon under sub-sections (1), (3) and
(5) of section 3, integrated tax leviable thereon under sub-section (7)
of section 3, goods and services tax compensation cess leviable thereon
under sub-section (9) of section 3, safeguard duty leviable thereon
under section 8B, countervailing duty leviable thereon under section 9
and antidumping duty leviable thereon under section 9A” shall be
substituted; |
8.4. Thus condition no. (xii) and
(xiii) were inserted, whereby it was provided that the exemption from Integrated
Tax and the Goods and Services Tax compensation Cess leviable thereon under
sub-section (7) and sub-section (9) of Section 3 of Customs Tariff Act shall
be subject to preimport condition and available upto 31st March 2018.
8.5. Rule 96 of the CGST Rules provides for procedure of refund of Integrated
Tax paid on goods or services exported out of India, as per Section 54 of the
CGST Act. Rule 96 (10) as it originally existed, when the Rules came into force
provided that the persons claiming refund of Integrated Tax paid on export of
goods or services should not have received supplies on which the supplier has
availed the benefit from Government of India, Ministry of Finance, under
Notification No. 48/2017 dated 18th October 2017 or Notification No. 40 of 2017
dated 23rd October 2017 or Notification No. 41 of 2017 Integrated Tax (Rate),
dated 23rd October 2017 or Notification No. 78 of 2017Customs dated 30th
October 2017 or the Notification No. 79 of 2017customs dated 13th October 2017.
8.6. Thereafter, sub-rule (10) of Rule 96 of the CGST Rules was amended by the
Notification No. 39/2018 dated 4th September 2018 w.e.f. 23rd October 2017 and
substitute Rule10 as under:
“6. In the said rules, with effect from the 23rd October, 2017, in rule 96, for
sub-rule (10), the following sub-rule shall be substituted, namely :
“(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have –
(a) received supplies on which the benefit of the Government of India, Ministry
of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017
published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R. 1305(E), dated the 18th October, 2017 or
notification No.40/2017-Central Tax (Rate), dated the 23rd October, 2017
published in the Gazette of India, Extraordinary, Part II, Section 3, sub
section(i), vide number G.S.R. 1320(E), dated the 23rd October, 2017 or
notification No.41/2017 – Integrated Tax (Rate), dated the 23rd October, 2017
published in the Gazette of India, Extraordinary, Part II, Section 3, sub
section(i), vide number G.S.R. 1321(E), dated the 23rd October, 2017 has been
availed; or
(b) availed the benefit under notification No.78/2017-Customs, dated the 13th
October, 2017 published in the Gazette of India, Extraordinary, Part II, Section
3, sub section(i), vide number G.S.R. 1272(E), dated the 13th October, 2017 or
notification No.79/2017Customs, dated the 13th October, 2017 published in the
Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide
number G.S.R 1299(E), dated the 13th October, 2017.”
8.7. Thus, sub-rule (10) of Rule 96 was subdivided in two parts for the person
claiming refund of integrated tax paid on exports of goods or services should
not have received supplies on which the benefit of the Notification No. 48/2017
and availed benefit under Notification No. 78/2017 or 79/2017 dated 13th October
2017.
8.8. It appears that, thereafter, again both the clauses which were substituted
by Notification No. 39/2018 were merged by Notification No. 53/2018 dated 9th
October 2018 which reads as under:
“Notification: 53/2018C.T. dated 09 Oct 2018
Central Goods and Services Tax Rules, 2018 – Eleventh Amendment of 2018
In exercise of the powers conferred by section 164 of the Central Goods and
Services Tax Act, 2017 (12 of 2017), the Central Government hereby makes the
following rules further to amend the Central Goods and Services Tax Rules, 2017,
namely:
1. (1) These rules may be called the Central Goods and Services Tax (Eleventh
Amendment) Rules, 2018.
(2) They shall be deemed to have come into force with effect from the 23rd
October, 2017.
2. In the Central Goods and Services Tax Rules, 2017, in rule 96, for sub-rule
(10), the following sub-rule shall be substituted and shall be deemed to have
been substituted with effect from the 23rd October, 2017, namely :
“(10) The persons claiming refund of integrated tax paid on exports of goods or
services should not have received supplies on which the supplier has availed the
benefit of the Government of India, Ministry of Finance, notification No.
48/2017Central Tax, dated the 18th October, 2017, published in the Gazette of
India, Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R.
1305(E), dated the 18th October, 2017 or notification No. 40/2017 – Central Tax
(Rate), dated the 23rd October, 2017, published in the Gazette of India,
Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R. 1320(E),
dated the 23rd October, 2017, or notification No.41/2017-Integrated Tax (Rate),
dated the 23rd October, 2017, published in the Gazette of India, Extraordinary,
Part II, Section 3, sub-section (i), vide number G.S.R. 1321(E), dated the 23rd
October, 2017 or notification No.78/2017-Customs, dated the 13th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3,
sub-section (i), vide number G.S.R. 1272(E), dated the 13th October, 2017 or
notification No.79/2017Customs, dated the 13th October, 2017, published in the
Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide
number G.S.R. 1299(E), dated the 13th October, 2017.”
[Notification No.53/2018C.T., dated 9102018]”
8.9. Thereafter, by Notification No. 54/2018 dated 9th October 2018 again
sub-rule (10) of Rule 96 was amended by substituting the same, wherein, it is
provided that the persons claiming refund of integrated tax paid on exports of
goods or services should not have received supplies (a) on which the benefits of
Notification No.48/2017 dated 18th October 2017, Notification No. 40/2017 dated
23rd October 2017 or Notification No.41/2017 dated 23rd October has been availed
or (b) availed the benefit under Notification No.78/2017 or Notification
No.79/2017.
8.10. It is pertinent to note that the Notification No. 54/2018 is made
applicable retrospectively from the date when Rule 96 (10) of the CGST Rules
came into force and not with effect from 23rd October 2017, as was amended in
the previous Notifications.
8.11. Section 16 of IGST Act provides for ‘Zero Rated Supply’ and subclause (b)
of sub section(3) of Section 16 provides that, a registered person making zero
rated supply shall be eligible to claim refund, if he has supplied the goods or
services or both, subject to such conditions, safeguards and procedure as may be
prescribed, on payment of integrated tax and claim refund of such tax paid on
goods or services or both supplied.
8.12. Thus on conjoint readings of the provision of Section 16 of the IGST Act,
Section 54 of CGST Act and Rule 96 (10) of CGST Rules, which is substituted by
Notification No. 54/2018 dated 9th October 2018, it is apparent that the person
who has availed the benefits of Notification No.48/2017 dated 18th October 2017
and other Notifications as stated in sub-rule 10 shall not have the benefit of
claiming refund of integrated tax paid on exports of goods or services. The
petitioner has availed benefits under Advance Authorization License scheme as
per the Notification No.18/2015 which was amended by Notification No.79/2017
dated 13th October 2017 and paid integrated tax on the goods procured by the
petitioners for the export purpose.
8.13. Notification No. 48/2017C.T. dated 18th October 2017 has declared the
following goods and the explanation thereto states that, “Advance Authorization”
means an authorization issued by the Director General of Foreign Trade under
Chapter4 of the Foreign Trade Policy 201520 for import or domestic procurement
of inputs on preimport basis for physical exports. Therefore, as the petitioner
has availed the benefits of AA License as per Notification No.40/2017 CT (Rate)
dated 23rd October 2017 and has enjoyed the exemption of GST on the supply of
the goods from the registered supplier for the purpose of export on fulfilling
the conditions prescribed therein. It appears that, thereafter, by Notification
No. 39/2018CT dated 4th September 2018 has substituted the sub-rule (10) of
Rule 96 w.e.f. 23rd October 2017, however, by Notification No. 54/2018, the
application of the substituted subrule (10) of Rule 96 is not made effective
from 23rd October, 2017, but it was made applicable from the inception.
Therefore, the petitioner who has availed the benefit of the Notification No.
39/2018 from 23rd October, 2017 to 4th September, 2018 would not be able to get
the refund of the IGST paid or the input tax credit balance in the accounts of
the petitioner, in view of the Notification No. 54/2018.
8.14. Considering the effect of the Notification No. 54/2018, the contentions
raised on behalf of the respondents that there is no discrimination qua the
petitioner is tenable in law, as by the amendment made by Notification No.
54/2018 it clearly denied the benefit which is granted to the petitioner by the
Notification No.39/2018 was withdrawn as the same was not made applicable from
23rd October, 2017.
8.15. Recently, vide Notification No.16/2020-CT dated 23.03.2020 an amendment
has been made by inserting following explanation to Rule 96(10) of CGST Rules,
2017 as amended (with retrospective effect from 23.10.2017)
“Explanation. For the purpose of this subrule, the benefit of the
notifications mentioned therein shall not be considered to have been availed
only where the registered person has paid Integrated Goods and Services Tax and
Compensation Cess on inputs and has availed exemption of only Basic Customs Duty
(BCD) under the said notifications.”
By virtue of the above amendment, the option of claiming refund under option as
per clause (b) is not restricted to the Exporters who only avails BCD exemption
and pays IGST on the raw materials thereby exporters who wants to claim refund
under second option can switch over now. The amendment is made retrospectively
thereby avoiding the anomaly during the intervention period and exporters who
already claimed refund under second option need to payback IGST along with
interest and avail ITC.
9. In view of above amendment, the grievance of the petitioner raised in this
petition is therefore taken care of. However, it is also made clear that
Notification No. 54/2018 is required to be made applicable w.e.f. 23rd October,
2017 and not prior thereto from the inception of the Rule 96(10) of the CGST
Act. Therefore, in effect Notification No.39/2018 dated 4th September, 2018
shall remain in force as amended by the Notification No.54/2018 by substituting
sub-rule (10) of Rule 96 of CGST Rules, in consonance with sub-section (3) of
Section 54 of the CGST Act and Section 16 of the IGST Act. The Notification
No.54/2018 is therefore held to be effective w.e.f. 23rd October 2017. Rule is
made absolute to the aforesaid extent, with no order as to costs.
(J. B. PARDIWALA, J)
(BHARGAV D. KARIA, J)
Equivalent .