2023 (9) TMI 44 - HC - GST

Amendment to Rule 89(4) CGST Rules 2017 Applies Prospectively, Refund Denials Quashed for Pre-Amendment Period

M/s. Tata Steel Limited Versus Union of India, Central Board of Indirect Taxes and Customs, Commissioner of Central Goods and Services Tax & Central Excise, Jamshedpur, Deputy Commissioner of Central Goods and Services Tax & Central Excise, Division-I, Jamshedpur Commissionerate, Assistant Commissioner of Central Goods and Services Tax & Central Excise, Joint Commissioner (Appeals), Central Goods and Services Tax & Central Excise, Ranchi,

The HC held that the amendment to Rule 89(4) of the CGST Rules, 2017, introduced by Notification No. 14/2022 dated 05.07.2022, is substantive and applies ... Refund of unutilised balance of Input Tax Credit (ITC) of compensation cess on account of zero-rated supplies of goods - retrospective effect of amendment in Rule 89(4) of CGST Rules, 2017 - HELD THAT:- As far as the explanation inserted by way of amendment in Rule 89(4) of the CGST Rules, 2017, vide Notification No. 14/2022 – Central Tax dated 5.7.2022 is concerned; these rules were not in existence at the time of passing of the Order in Appeal dated 11.10.2021. Rule 1(2) of 2022 Amendment Rules, specifically provides that “save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette”. Except for Rules 7, 9, 10, and 19 for which dates with retrospective operation have been provided, no other rules have been given any retrospective effect. The 2022 Amendment Rules inserts a new stipulation for comparison between two values. Such an exercise was not contemplated prior to the amendment as what was taken into account was the actual transaction value. Therefore, by way of the amendment, a substantive change has been brought about in the law and therefore the amendment ought to operate prospectively. The law is now no more res integra that mere use of the term explanation will not be indicative of the fact that the amendment is clarificatory/declaratory. The amendment in Rule 89 (4) of CGST Rules, 2017 which came into effect vide Notification No. 14/2022-Central Tax dated 05.07.2022 is not clarificatory in nature and thus will have a prospective effect. In all these writ applications since the period involved is prior to the amendment; as such, the respective impugned orders deserve to be quashed and set aside. Application allowed. Issues Involved:1. Validity of Paragraph 47 of Circular No. 125/44/2019-GST dated 18.11.2019.2. Applicability of amended Rule 89(4) of CGST Rules, 2017, introduced by Notification No. 14/2022-Central Tax dated 05.07.2022.Summary:Issue 1: Validity of Paragraph 47 of Circular No. 125/44/2019-GSTThe petitioner challenged Paragraph 47 of Circular No. 125/44/2019-GST dated 18.11.2019, which stipulates that while processing refund claims in case of exports, the lower of the values indicated in the tax invoice and the shipping bill should be taken into account. The petitioner argued that this stipulation is beyond the purview of and ultra vires the provisions of the CGST Act, 2017, and the CGST Rules, 2017, and is arbitrary, unreasonable, and violative of Articles 14 and 19(1)(g) of the Constitution of India.The court refrained from deliberating upon the validity of Paragraph 47 due to the subsequent amendment in Rule 89(4) of the CGST Rules, 2017, which introduced an explanation similar to Paragraph 47.Issue 2: Applicability of Amended Rule 89(4) of CGST Rules, 2017The petitioner contended that the amendment to Rule 89(4) of the CGST Rules, 2017, introduced by Notification No. 14/2022-Central Tax dated 05.07.2022, should not have retrospective effect. The court examined whether the amendment, which introduced a new stipulation for comparison between two values, is substantive or clarificatory. It was determined that the amendment brought about a substantive change and should operate prospectively. The court noted that the amendment was not in existence at the time of passing the Order in Appeal dated 11.10.2021, and the notification did not indicate any retrospective effect for Rule 89(4).Conclusion:The court held that the amendment to Rule 89(4) of the CGST Rules, 2017, which came into effect on 05.07.2022, is not clarificatory and thus will have a prospective effect. Consequently, the respective impugned orders in the writ applications were quashed and set aside, and the writ applications were allowed.