Tax Credit Challenge: CGST Amendment Act Section 28 Scrutinized for Constitutional Validity Under Urgent Judicial Review

The HC examined a constitutional challenge to Section 28 of the CGST Amendment Act and related circular regarding tax credit. While declining immediate relief, the court issued notice, fixed urgent hearing for the main matter, and directed completion of pleadings within specified timeframe. The applicant's request for stay on recovery proceedings was not granted, with the court suggesting appeal and stay mechanisms pending final adjudication.

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Issues: Challenge to constitutionality, vires, and legality of Section 28 of the Central Goods and Services Tax (Amendment) Act, 2018 and Circular No.87/06/2019-GST; Stay on recovery proceedings pending the main matter; Show-cause notice for appropriation of credit under CGST Act; Enforcement of amendment to explanation 2 to Section 140 of the CGST Act; Request for stay on penalty and interest pending final decision.

Analysis:
1. The applicant challenged the constitutionality, vires, and legality of Section 28 of the Central Goods and Services Tax (Amendment) Act, 2018, and Circular No.87/06/2019-GST. The challenge was based on the retrospective disallowance of the transaction and carry forward of credit of Education Cess and Secondary and Higher Education Cess into the GST regime. The Court issued notice and fixed the main matter for urgent attention due to a group of related matters (Para 2).

2. A show-cause notice was issued seeking to appropriate the credit of Education Cess and Secondary and Higher Education Cess under Section 140(1) of the CGST Act. The applicant contested the issuance of the notice and subsequent Order-in-Original, arguing that the amendment to explanation 2 to Section 140 of the CGST Act has not been enforced. The applicant relied on a Bombay High Court decision for support (Para 3).

3. The applicant sought relief from the show-cause notice and Order-in-Original, contending that they were issued without jurisdiction. The applicant also requested a stay on recovery proceedings or, alternatively, a stay on the penalty amount if a certain percentage of the tax under dispute was paid (Para 4).

4. The respondent opposed the request for a stay, citing a decision of the Madras High Court favoring the Revenue. The respondent argued that the challenge was premature and need not be entertained at present (Para 5).

5. The Court considered the submissions from both sides and noted the challenge to the constitutional validity of the amended Section 140 of the CGST Act. The Court declined to grant the requested relief at the present stage, emphasizing that the main matter was scheduled for a hearing. The Court suggested the applicant file an appeal and seek a stay of appeal, with further proceedings subject to the main matter's outcome (Para 6-7).

6. The Court disposed of the civil application accordingly, instructing the completion of pleadings within a specified timeframe (Para 8).

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