2025 (9) TMI 732 - AT - GST

Respondent ordered to refund Rs 6,88,770 to Consumer Welfare Funds; 18% interest rule applies only prospectively

DGAP Versus Proctor & Gamble Group.

GSTAT (AT), New Delhi held that the respondent profiteered Rs. 6,88,770 for 27.07.2018-31.10.2018 and is directed to deposit that amount into the Central ... Liability of interest on profiteered amount - whether the insertion of clause “along with interest at the rate of eighteen percent from the date of collection of the higher amount till the date of deposit of such amount” is enabling provision or is clarificatory provision? - HELD THAT:- Dealing with a similar question the Constitution Bench of Supreme Court of India in C.I.T. (C-1) New Delhi Vs. Vatika Township Pvt. Ltd, [2014 (9) TMI 576 - SUPREME COURT (LB)], considered whether the amendment to the provisions of Section 113 of the Income Tax Act, inserted by the Finance Act, 2002 is to operate prospectively or it is a clarificatory and curative in nature, and, therefore, has retrospective operation. While considering this issue the Hon’ble Supreme Court has held that a plain reading of the aforesaid statutory provision, it is clear that though the provision of surcharge under the Finance Act has been in existence since 1995, in so far as levy of surcharge on block assessment is concerned, it is introduced by insertion of the aforesaid provision of Section 113. Sub rule (2) of Rule (1) of CGST Rules specifically provided that they shall come into force on their date of publication, except as otherwise provided in these rules. A careful comparison of rule 17 with rule 5 of the said amending rules reveals that rule 5 aims at inserting a proviso to rule 46 of CGST Rules - And virtue of Notification No. 71/2019- Central Tax dated 13.12.2017, the Government appointed 01.04.2020 as the date from which such rule regarding provision of QR code would be effective. Thus it is clear that the Government of India in framing the delegated legislation was fully aware of the impact of the legislation and day on which it was to take effect. There is no provision for notifying a different date for coming into force of Rule 17, which seeks to amend rule 133 of the Fourth Amending Rules of the CGST Rules regarding Anti-Profiteering. However, it has clearly provided a different date i.e. 01.04.2022 for the implementation of the direction / requirement of providing a QR code. The argument advanced by the Respondent is partially acceptable and partially non-acceptable. That is to say that it is agreed with the argument advanced by the Learned Counsel for the Respondent that the provision for imposition 18 percent interest on the profiteered amount shall come into force only to those cases which fall after the notification on the Amending (Fourth) Rule came into force, that is 28.06.2019 and not on 1st April, 2020, as argued by the Learned Counsel. However, in this case profiteering took place much prior to date of coming into force of such provision for levying interest and in view of the constitution Bench judgment of the Supreme Court in the case Vatika Township Pvt. Ltd. [2014 (9) TMI 576 - SUPREME COURT (LB)], it is opined that this is not the fit case where Respondent should be directed to pay any interest on the profiteered amount. Thus the Report submitted by the DGAP accepted to the extent that respondent has profiteered an amount of Rs. 6,88,770/- only for the period of 27.07.2018 to 31.10.2018 - the Respondent is directed to deposit the profiteered amount as aforesaid in Consumer Welfare fund created by Centre and States equally. Application disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a registered person is liable to pay interest at the rate of 18% on the amount determined as profiteered under Rule 133(3) of the CGST Rules for the period 27.07.2018 to 31.10.2018. 2. Whether the insertion of the words 'along with interest at the rate of eighteen percent. from the date of collection of higher amount till the date of deposit of such amount' in clause (c) of sub-rule (3) of Rule 133 by the Central Goods & Services Tax (Fourth Amendment) Rules, 2019 is clarificatory/curative (retrospective) or an enabling/prospective amendment. 3. The effective date of applicability of the amended provision: whether the amendment is to be read as operative from the date of the amending notification (28.06.2019), the notified appointed date (01.04.2020), or otherwise. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Liability to pay 18% interest on profiteered amount for period 27.07.2018 to 31.10.2018 Legal framework: Rule 133(3) of the CGST Rules empowers the Authority to order, inter alia, return to the recipient of amount not passed on 'along with interest at the rate of eighteen percent' and, in clause (c), deposit of fifty percent of the determined amount 'along with interest at the rate of eighteen percent...' in the Consumer Welfare Fund where the eligible person does not claim return/is not identifiable. The impugned language was inserted by the Fourth Amendment Rules (Notification No. 31/2019 dated 28.06.2019) amending Rule 133. Precedent treatment: The Court applies the constitutional principle against retrospective imposition of onerous liabilities and follows the reasoning in the cited Constitution Bench authority on retrospective versus clarificatory/amending provisions (treating that precedent as guiding on interpretation and presumption against retrospectivity of burdensome provisions). Interpretation and reasoning: Legislated words creating a new monetary liability are to be construed as prospective unless clear legislative intent supports retrospectivity. The Amendment's wording and surrounding amending rules (notably use of 'further' and separate appointed dates for other amendments) indicate an intent to add/advance provisions rather than to clarify pre-existing law to operate retrospectively. The Court finds that for provisions creating a new obligation (interest at 18%), the presumption against retrospective operation applies. Since the profiteering arose in 2018, prior to the amending notification's operative ambit, and the amendment creates a new burden, the imposition of 18% interest for that earlier period is not warranted in the absence of express retrospective words or necessary implication to that effect. Ratio vs. Obiter: Ratio - onerous fiscal amendments imposing new liabilities are prospective absent express retrospective intent; application here that interest inserted by the Fourth Amendment does not attach to earlier profiteering (27.07.2018-31.10.2018). Obiter - ancillary observations on legislative drafting choices (use of 'further') as interpretive aid. Conclusion: The Court determines that the respondent is not liable to pay interest at 18% on the profiteered amount for the period 27.07.2018 to 31.10.2018; only the principal profiteered amount is to be deposited in the Consumer Welfare Fund. Issue 2 - Character of the amendment (clarificatory/curative vs. enabling/prospective) Legal framework: Principles of statutory interpretation - presumption against retrospectivity, distinction between curative/clarificatory amendments and substantive/enabling amendments, and requirement for clear legislative intent to make a provision retrospective. Statutory context: Notification No. 31/2019 (Fourth Amendment Rules) and Rule 17 inserting interest language into Rule 133(3)(c). Precedent treatment: The Court relies on the Constitution Bench analysis that an amendment imposing new liabilities will generally be construed as prospective unless the statute clearly indicates retrospective intent or the amendment supplies an obvious omission/clarifies earlier ambiguity. Interpretation and reasoning: The Court examines the text of the amending notification and notes (i) the use of the word 'further' in the preamble to the amending rules; (ii) the general commencement clause in the amending rules that rules come into force on publication unless otherwise provided; and (iii) that the government specified distinct appointed dates for certain other amendments (example: QR code proviso) indicating awareness and intentionality in fixing effective dates. The Court concludes that the insertion of interest was an enabling/prospective provision rather than a retrospective clarification: it introduced a new monetary obligation rather than merely clarifying an existing one. Ratio vs. Obiter: Ratio - the insertion of the interest clause is not a clarificatory/curative amendment that can be read retrospectively as imposing interest for earlier periods; it is a substantive enabling amendment and should be given prospective effect. Obiter - commentary on semantics of 'further' and consequences of separate appointed dates in the amending Rules. Conclusion: The amendment is prospective/enabling in character; it does not operate retrospectively to impose interest on profiteering occurring before the amendment's effective scope. Issue 3 - Effective date of the amendment and its bearing on liability Legal framework: Rule (1)(2) of the Fourth Amendment Rules provides that, unless otherwise provided, rules come into force on publication in the Official Gazette; Notification appointing 01.04.2020 as effective date for certain provisions (Notification No. 71/2019) shows that the executive can specify differing effective dates for different amendments. Precedent treatment: The Court treats the executive's specific appointed dates for certain amendments as indicia of deliberate legislative timing; reliance on this to reject arguments that the entire amending rule should be treated as having retrospective effect. Interpretation and reasoning: The Court observes that the amending notification was published on 28.06.2019 and that sub-rule (2) contemplates coming into force on publication unless otherwise provided. The Government expressly appointed later dates for particular amendments where intended; absence of such an appointment for Rule 17 suggests the amendment is to operate from publication (28.06.2019) and not earlier. However, even if the operative date is treated as 28.06.2019, the profiteering here occurred in 2018 (27.07.2018-31.10.2018) and therefore predates the amendment; consequently interest cannot be obligatorily imposed for that earlier period. Ratio vs. Obiter: Ratio - effective operation of the inserted interest clause begins with the amendment's operative date (publication or specifically appointed date), and does not reach back to cover profiteering preceding that date. Obiter - affirmation that the executive's separate appointment of dates for other amendments is relevant context in construing operative intent. Conclusion: The interest clause became effective only from the amendment's operative date (at the earliest 28.06.2019, or as otherwise appointed); it does not apply to profiteering that occurred during 27.07.2018-31.10.2018. Ancillary determinations and orders flowing from conclusions The Authority's acceptance of the DGAP's re-investigation finding as to the quantum of profiteering (Rs. 6,88,770/-) is upheld; the respondent is directed to deposit that principal amount in the Consumer Welfare Fund (Centre and States equally), with specified administrative instructions for States/UTs whose State Consumer Welfare Fund accounts are not constituted (temporary deposit in Central Fund). No interest or penalty is imposed on the determined amount. Compliance reporting by the concerned Commissioner within four months is directed.