2025 (8) TMI 886 - HC - GST

High Court upholds Single Judge decision in Glenmark Pharmaceuticals case on budgetary support eligibility under CGST rules

Zydus Wellness-Sikkim Versus The Assistant Commissioner, Central Goods and Service Tax and Others.

Zydus Wellness-Sikkim Versus The Assistant Commissioner, Central Goods and Service Tax and Others. - TMI 1. ISSUES PRESENTED and CONSIDERED Whether the taxpayer is eligible for budgetary support claims under the relevant Central Goods and Services Tax (CGST) scheme despite the adjudicating authority's finding of a negative eligible budgetary support payable amount. Whether the calculation of budgetary support claims should be done on a monthly basis rather than quarterly, given that GST returns are filed monthly. The applicability and binding effect of judicial orders and clarifications issued by other High Courts and government departments concerning budgetary support claims under GST schemes. The relevance and application of the doctrine of judicial comity in resolving conflicting orders or clarifications issued by different authorities or courts. Whether the impugned order rejecting budgetary support claims should be set aside and remanded for reconsideration in light of relevant judicial precedents and departmental clarifications. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Eligibility for Budgetary Support Claims under CGST Scheme - Legal Framework and Precedents: The budgetary support scheme is governed by notifications issued by the Department of Industrial Policy and Promotion and related GST notifications. The relevant notification dated 05-10-2017 prescribes the terms and conditions for claiming budgetary support, including the filing of claims on a quarterly basis. - Court's Reasoning: The adjudicating authority found the eligible budgetary support payable to be negative and thus rejected the taxpayer's claim. However, this Court, relying on the Division Bench's judgment in a related writ appeal, held that the issue is no longer res integra and that the taxpayer's claim must be reconsidered in light of binding judicial precedents and clarifications. - Application of Law to Facts: The Court set aside the impugned order rejecting the claim and directed reconsideration of claims from July to September 2017 on the same terms as considered by authorities in a similar matter. - Conclusion: The taxpayer is entitled to have the budgetary support claim reconsidered, and the rejection on the basis of a negative payable amount was set aside. Issue 2: Monthly vs. Quarterly Basis for Calculation of Budgetary Support Claims - Legal Framework and Precedents: Clause 5.4 of the Notification dated 05-10-2017 mandates that budgetary support claims be filed quarterly. However, the GST returns are filed monthly (GSTR-3B), and the Central Board of Indirect Taxes and Customs issued a circular dated 10-01-2019 recommending month-wise details to facilitate verification of refund claims. - Court's Interpretation and Reasoning: The Court referred to the judgment of the High Court of Jammu & Kashmir and Ladakh in Coromandel International Ltd., where it was held that though claims are filed quarterly, the calculation of budgetary support should be on a monthly basis to reflect the actual tax paid monthly. The Court agreed with the petitioner's contention that monthly filing of returns supports monthly calculation of claims. - Treatment of Competing Arguments: The respondents argued for adherence to quarterly calculations and gave weight to a later clarification dated 21-09-2023 by the DPIIT, which was rejected by the Court as untenable and preposterous, especially in light of the binding judicial order from Jammu & Kashmir High Court. - Conclusion: The Court held that budgetary support claims should be calculated on a monthly basis, consistent with the filing of monthly GST returns, although claims are filed quarterly. Issue 3: Binding Effect of Judicial Orders and Departmental Clarifications - Legal Framework and Precedents: The Court relied on the doctrine of judicial comity and cited authoritative Supreme Court decisions emphasizing that courts should not pass orders conflicting with other competent courts' lawful orders. - Court's Reasoning: The Court emphasized that the order of the High Court of Jammu & Kashmir and Ladakh, directing reconsideration of claims in light of departmental clarification dated 26-04-2022, is binding and must be respected. The Court rejected the respondents' attempt to give overriding effect to a later DPIIT clarification dated 21-09-2023. - Application of Law to Facts: The Court held that the doctrine of comity requires adherence to the earlier High Court order and that conflicting departmental clarifications cannot override judicial directions. - Conclusion: The Court reaffirmed the binding nature of judicial orders and departmental clarifications relied upon by competent courts, mandating their implementation in the adjudication of budgetary support claims. Issue 4: Application of Doctrine of Judicial Comity - Legal Framework and Precedents: The Court cited the Supreme Court's observations that judicial comity is a healthy doctrine preventing contradictory orders in different jurisdictions, and that courts should avoid passing orders that cause violation of lawful orders passed by other courts. - Court's Reasoning: The Court applied this doctrine to reject the respondents' contention that a later departmental clarification could supersede the judicial order of another High Court, holding that such a proposition is untenable. - Conclusion: The doctrine of judicial comity mandates respect and adherence to judicial orders from other competent courts to avoid conflicting rulings. Issue 5: Setting Aside and Remanding the Impugned Order - Court's Reasoning: In light of the Division Bench's judgment in the related writ appeal and the binding precedents and clarifications, the Court found the impugned order dated 27-06-2022 rejecting budgetary support claims to be unsustainable. - Application of Law to Facts: The Court set aside the impugned order and directed the adjudicating authority to reconsider the claims for the relevant period on the same terms as considered by authorities in the Jammu & Kashmir High Court order. - Conclusion: The impugned order was quashed, and the matter was remanded for fresh consideration consistent with judicial precedents and departmental clarifications.