2023 (10) TMI 306 - HC - GST

Amended Rule 89(4)(C) of CGST Rules cannot apply retroactively to export refund claims made before amendment

Delhi HC held that amended Rule 89(4)(C) of CGST Rules, 2017 cannot be applied retroactively to compute refund claims for exports made before the ... Refund of accumulated unutilised Input Tax Credit - computation of admissible refund under Rule 89(4) of the CGST Rules - definition of 'turnover of zero-rated supply of goods' in Rule 89(4)(C) - relevant date for refund under Section 54 of the CGST Act - retrospective application of procedural amendment - crystallisation of refund right on date of export - effect of judicial striking down of a statutory amendmentDefinition of 'turnover of zero-rated supply of goods' in Rule 89(4)(C) - computation of admissible refund under Rule 89(4) of the CGST Rules - retrospective application of procedural amendment - Amendment to Rule 89(4)(C) (substituted w.e.f. 23.03.2020) cannot be applied to compute refund of ITC in respect of exports made prior to the amendment date when the refund right crystallised - HELD THAT: - The Court examined the substituted Clause (C) which caps export turnover at 1.5 times the value of like domestic supplies for purposes of computing the maximum refund under the Rule 89(4) formula. The Revenue's contention that the amended clause is merely procedural and therefore may be applied to refund applications filed after 23.03.2020 even if exports occurred earlier was rejected. The Court held that the right to refund of accumulated ITC crystallises on the date of export and limitation for filing a refund claim is reckoned from that 'relevant date' under Section 54(2) Explanation (a). 'Turnover' must be read with reference to the period in which supplies are effected and, absent express indication to the contrary, the refund-related turnover must be ascertained by the rules in force during that period. Consequently, applying the post-amendment definition of export turnover to exports made in the period 01.10.2018 to 30.09.2019 was impermissible and the appellate authority erred in doing so. [Paras 17, 18, 20, 21, 22]Amended Clause (C) of Rule 89(4) could not be applied to compute refunds for exports made before 23.03.2020; export turnover for the relevant period must be determined by the law in force on the date of export.Relevant date for refund under Section 54 of the CGST Act - crystallisation of refund right on date of export - refund of accumulated unutilised Input Tax Credit - Petitioner's refund claims for the period 01.10.2018 to 30.09.2019 are sustainable and impugned rejection orders must be set aside with directions to process the refund with interest - HELD THAT: - Applying the principle that the refund right crystallises on the date of export and that turnover is to be ascertained with reference to the period of supply, the Court found in favour of the petitioner. The appellate authority's conclusion upholding rejection on account of non-compliance with the amended Rule 89(4)(C) was quashed. In light of the finding, the impugned refund rejection orders and the orders-in-appeal were set aside and the assessing officer was directed to process the petitioner's refund claims for the specified period, along with applicable interest, pursuant to the refund applications already filed. [Paras 22, 25, 26]Impugned orders rejecting refund claims for 01.10.2018 to 30.09.2019 set aside; concerned officer directed to process the petitioner's refund claims with applicable interest.Final Conclusion: The petitions succeed: the amended Clause (C) of Rule 89(4) cannot be applied to compute refunds for exports effected in the period 01.10.2018 to 30.09.2019; the impugned rejection orders and appellate orders are set aside and the officer is directed to process the petitioner's refund claims for that period with applicable interest. Issues Involved:1. Refund of accumulated unutilised Input Tax Credit (ITC) on export of goods.2. Constitutional validity of Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017.3. Applicability of Rule 89(4)(C) for exports made prior to its amendment on 23.03.2020.Summary:Issue 1: Refund of accumulated unutilised Input Tax Credit (ITC) on export of goodsThe petitioner sought a refund of accumulated unutilised ITC for the period 01.10.2018 to 30.09.2019, which was rejected by the authorities on two grounds: non-submission of Foreign Inward Remittance Certificates (FIRCs) and non-compliance with Rule 89(4)(C) of the Rules. The appellate authority upheld the rejection based on non-compliance with Rule 89(4)(C), despite the petitioner succeeding on the issue of FIRCs.Issue 2: Constitutional validity of Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017The petitioner challenged Rule 89(4)(C) as ultra vires Section 54 of the CGST Act, Section 2(5) and Section 16 of the IGST Act, and Article 14 of the Constitution of India. The court noted that the amendment to Rule 89(4)(C) was struck down by the Karnataka High Court in M/s Tonbo Imaging India Pvt. Ltd. v. Union of India and Ors., making the amended provisions non-existent. Hence, the court did not find it necessary to examine this challenge further.Issue 3: Applicability of Rule 89(4)(C) for exports made prior to its amendment on 23.03.2020The court found that the amended Rule 89(4)(C) applies prospectively from 23.03.2020 and cannot be applied retrospectively to exports made prior to this date. The right for refund of accumulated ITC crystallizes on the date of export, and the relevant rules at that time should apply. The appellate authority erred in applying the amended rule for computing the export turnover for the refund claim.Conclusion:The court set aside the impugned refund rejection orders and directed the concerned officer to process the petitioner's claim for refund of accumulated ITC along with applicable interest for the period 01.10.2018 to 30.09.2019. The petitions were disposed of accordingly.