2019 (3) TMI 1822 - HC - GST

Court upholds constitutionality of CGST Act, 2017 provisions, denies interim relief, allows pending refund applications.

TVL. TANSTONNELSTORY AFCONS Versus UNION OF INDIA

The court upheld the constitutionality of the challenged provisions and rules under the CGST Act, 2017. It emphasized the presumption in favor of ... Validity of clause (ii) to proviso to Section 54(3) of the CGST Act, 2017 - HELD THAT:- Writ petitioner has sought for interim directions to the 3rd respondent to be taken on record the petitioner’s claim for refund of unutilized credit, as and when filed, arising under Section 54(3) of the TNGST Act by including input service within the meaning of the term Net ITC, pending disposal of the writ petition. Interim direction as prayed for if granted would amount to granting the main relief itself. hence, prayer sought for in WMP Nos. 9121 & 9123 of 2019 in WP Nos. 8605 & 8608 of 2019, cannot be granted. Post the instant writ petitions on 15-4-2019. Issues Involved:1. Constitutionality of Clause (ii) to proviso to Section 54(3) of the CGST Act, 2017.2. Constitutionality of Rule 89(5) of the CGST Rules, 2017.3. Direction to process and allow refunds by factoring input services in the computation of Net ITC.Detailed Analysis:Issue 1: Constitutionality of Clause (ii) to proviso to Section 54(3) of the CGST Act, 2017- The petitioners filed WP Nos. 8596 & 8597 of 2019 to declare the provisions of impugned clause (ii) to proviso to Section 54(3) of the CGST Act, 2017, as ultra vires the Constitution of India, and violative of the fundamental rights guaranteed under Article 14 and 19(1)(g) of the Constitution.- The court examined various precedents, emphasizing the presumption in favor of the constitutionality of an enactment. The burden of proof lies on the petitioner to show a clear transgression of constitutional principles.Issue 2: Constitutionality of Rule 89(5) of the CGST Rules, 2017- The petitioners filed WP Nos. 8602 & 8603 of 2019 to declare Rule 89(5) of the CGST Rules, 2017, as ultra vires Article 14 of the Constitution and Section 54 of the CGST Act, 2017, due to its exclusion of the component of credit of input services from the definition of Net ITC for claiming refunds.- The court referred to several Supreme Court decisions, reiterating that there is always a presumption in favor of the constitutionality of a statute, and the burden is on the petitioner to prove any violation of constitutional principles.Issue 3: Direction to process and allow refunds by factoring input services in the computation of Net ITC- The petitioners filed WP Nos. 8605 & 8608 of 2019 for a mandamus directing the 3rd respondent to process and allow refunds by including input services in the computation of Net ITC as per Rule 89(5) of the TNGST Rules.- The court dismissed the interim prayer for stay on Rule 89(5) in WMP Nos. 9116 & 9118 of 2019 in WP Nos. 8602 & 8603 of 2019, stating that there is a strong presumption in favor of the constitutionality of legislation.- The court also dismissed the interim directions sought in WMP Nos. 9121 & 9123 of 2019 in WP Nos. 8605 & 8608 of 2019, as granting such interim relief would amount to granting the main relief itself.- However, to save limitation, the court directed the respondents to receive the refund applications and keep them pending until the disposal of the writ petitions.Conclusion:- The court maintained the presumption of constitutionality for the challenged provisions and rules, placing the burden of proof on the petitioners to demonstrate clear constitutional violations.- Interim reliefs sought by the petitioners were denied, but the court allowed the submission and pending status of refund applications until the final disposal of the writ petitions.- The writ petitions were scheduled for further hearing on 15-4-2019.