2020 (10) TMI 1099 - HC - GST

Court upholds validity of CGST & GGST Rules amendments clarifying effective date. No constitutional/international trade violation.

The court upheld the validity of the amendments to sub-rule (10) of Rule 96 of the CGST Rules and GGST Rules through Notification No. 54/2018, clarifying ... Rebate claim - import / export of goods under Advance Authorization (AA) License - N/N. 79/2017­-Customs, dated 13th October 2017 - 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? HELD THAT:- 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. 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. 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No. 54/2018 it clearly denied the benefit which is granted to the petitioner by the Notification No. 39/2018 was withdrawn as the same was not made applicable from 23rd October, 2017. 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. Issues Involved:1. Validity of amendments to sub-rule (10) of Rule 96 of the CGST Rules and GGST Rules.2. Retrospective application of the amendments.3. Discrimination against AA License holders.4. Violation of Article 14 and Article 19(1)(g) of the Constitution of India.5. Compliance with international trade norms.Issue-wise Detailed Analysis:1. Validity of Amendments to Sub-rule (10) of Rule 96 of the CGST Rules and GGST Rules:The petitioner challenged the amendments made to sub-rule (10) of Rule 96 of the CGST Rules and GGST Rules through Notification No. 54/2018 dated 9th October 2018. The petitioner argued that these amendments, which deny the option of rebate claim to AA License holders importing goods, are ultra vires the CGST Act, GGST Act, and the Constitution. The court examined the scheme of Advance Authorization Licenses and the relevant notifications, concluding that the amendments were valid. The amendments were aimed at ensuring that exporters do not utilize input tax credit availed on inward supplies for payment of IGST on exports, thereby preventing double benefits.2. Retrospective Application of the Amendments:The petitioner contended that the retrospective application of the amendments from 23rd October 2017 was arbitrary and burdensome. The court noted that the amendments were initially made effective from 23rd October 2017 through Notification No. 39/2018, but Notification No. 54/2018 did not specify this date. The court held that Notification No. 54/2018 should be effective from 23rd October 2017, aligning with the previous notification. This decision was supported by the recent amendment through Notification No. 16/2020-CT dated 23rd March 2020, which clarified the retrospective application and allowed exporters to switch options.3. Discrimination Against AA License Holders:The petitioner argued that the amendments discriminated against AA License holders by denying them the benefit of IGST refund/rebate on exports, unlike regular exporters. The court found that the amendments aimed to prevent double benefits and were not discriminatory. The court emphasized that the amendments ensured that both suppliers of AA License holders and the AA License holders themselves do not claim benefits simultaneously.4. Violation of Article 14 and Article 19(1)(g) of the Constitution of India:The petitioner claimed that the amendments violated Article 14 (equality before law) and Article 19(1)(g) (right to practice any profession or carry on any occupation, trade, or business) of the Constitution. The court referred to precedents and held that permissible classification must be founded on an intelligible differentia and have a rational relation to the object sought to be achieved. The court concluded that the amendments did not violate these constitutional provisions as they applied uniformly to all members of the same class and did not infringe the petitioner's right to trade.5. Compliance with International Trade Norms:The petitioner argued that the amendments contravened international trade norms, specifically the remission of duties and taxes on exported products as per the World Trade Organization (WTO) guidelines. The court noted that the amendments did not result in the export of taxes, as the petitioner could still avail input tax credit under different conditions. The court emphasized that the amendments were in line with the objective of the GST regime to prevent cascading effects of taxes and ensure smooth pass-through of credits.Conclusion:The court upheld the validity of the amendments made to sub-rule (10) of Rule 96 of the CGST Rules and GGST Rules through Notification No. 54/2018, with the clarification that the amendments should be effective from 23rd October 2017. The court found no violation of constitutional provisions or international trade norms and ruled that the amendments aimed to prevent double benefits and ensure uniform application of tax laws. The petition was disposed of accordingly.