TaxTMI 
TaxTMI 
2024 (11) TMI 188
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....aju, Aditya Unnikrishnan, R. Devika, Anjali Menon, For the Respondent : By Advs., Sreelal N. Warrier (Sr. SC) (For R3), P.G. Jayashankar (Sr. SC) (For R4), Mohammed Rafiq (Spl. Gp). Rajesh. K. Raju (SC), Vishnu Rajagopal (SC), V. Girishkumar, (SC), Girish Kumar V. (Sr. SC) (For R3), Suvin R. Menon (SC), M/s. Sance Laboratories Private Limited, Coco Latex Exports Pvt. Ltd., Crust N Crumb Food Ingredients P. Ltd., Sadha Exports, Kerala Balers Pvt. Ltd., William Goodacre & Sons India (P) Ltd., M/s. Floor Gardens, Mini Jobson, Proprietrix, M/s. ST. George Foods, M/s. Sree Lekshmi Cashew Company, M/s. Choice Cashew Industries Cashew Exporter, M/s. Associated Cashew Industries, M/s. Bismi Cashew Company, M/s. Southern Cashew Exporters, M/s. Five Star Cashew Exporters & Importers, Souparnika Export Enterprises, Jobrun Geevarghese, Prasanthi Cashew Company Private Limited, South Kerala Cashew Exporters, AF Cashews, Vizag Exports, Diamond Nuts, Prasanthi Cashew Company, Tasty Nuts Industries, Global Foods, M/s. N.C. John & Sons Pvt. Ltd., Jose Joseph. Versus Union Of India, The State Of Kerala, The Directorate General Of GST Intelligence, Kochi, Office Of The Deputy/Assistant Commissi....
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....of the IGST Act, 2017, read with the provisions of Section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) indicate that there is to be no export of taxes and on the goods being exported the exporter is entitled to a refund of the IGST paid on the export of goods or to the refund of taxes paid on input goods and input services used in the manufacture of goods or provision of services that are ultimately exported. Section 16 of the IGST Act (as it stood till amendment by Act 13 of 2021 (Brought into force w.e.f. 01-10-2023 vide Notification No. 27/2023-C.T., dated 31-07-2023)) contemplated two methods to enable the exporter to claim a refund of taxes on input goods and input services used in the manufacture of goods exported or services exported. The two methods were:- (a) Through the supply (export) of goods or services (or both) under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and a resultant claim for refund of unutilised input tax credit arising from the payment of tax on goods or services used in making the export; or (b....
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....ules. 3. I have heard Sri. G. Shivadas, the learned Senior Counsel appearing for the petitioner in W.P (C) No. 17447/2023 on the instructions of Sri. Shaji Thomas, Sri. K. Srikumar, the learned Senior Counsel, appearing for the petitioners in W.P(C) Nos. 26040/2023 and 25969/2023 on the instructions of Smt. Ammu Charles, Sri. Anil D. Nair, the learned Senior Counsel, appearing for the petitioners in W.P (C) Nos. 4389/2024, 6653/2024 and 25134/2024 on the instructions of Smt. Aditya Unnikrishnan, Sri. M. Balagopal, the learned counsel appearing for the petitioner in W.P (C) No. 20672/2024, Sri. K.N. Sreekumaran, the learned counsel appearing for the petitioners in W.P (C) Nos. 20442/2023 and W.P (C) Nos.22051/2023, Sri. Sherry Samuel Oommen, the learned counsel appearing for the petitioners in W.P (C) Nos.39776/2023, 148/2024, 3065/2024, 3124/2024, 3250/2024, 3503/2024, 5412/2024 and 9516/2024, Sri. Sergi Joseph Thomas, the learned counsel appearing for the petitioner in W.P (C) No.41106/2023, Sri. Shameem Ahamed, the learned counsel appearing for the petitioners in W.P (C) Nos.42356/2023, 42395/2023 and 21909/2024, Smt. Krishna K, the learned counsel appearing for the petitioner....
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....adas, the learned Senior Counsel appearing for the petitioner in W.P (C) No. 17447/2023 referred to paragraph 28 of the judgment of the Supreme Court in Ispat Industries Ltd. v. Commissioner of Customs, Mumbai; (2006) 12 SCC 583, to the decision of the Supreme Court in Cellular Operators Association of India and Ors. v. TRAI and Ors., (2016) 7 SCC 703 and to the decision of the Supreme Court in Shayara Bano (supra) to contend that subordinate legislation has to be subservient to plenary legislation and the introduction of restrictions as now contended in Rule 96 (10) of the CGST Rules goes contrary to the express provisions of Section 16 of the IGST Act. He also referred to paragraph Nos. 28 to 31 of the judgment of the Supreme Court in Union of India v. Intercontinental Consultants and Technocrats (P) Ltd.; (2018) 4 SCC 669 in support of his contention. The learned Senior Counsel has also referred to the judgment of the Supreme Court in Union of India v. VKC Footsteps India Pvt. Ltd.; (2022) 2 SCC 603 to contend that a restriction on the right to claim a refund of IGST paid can only be justified if it is explicitly contemplated by the plenary law. Sri. K. Srikumar, the learned Sen....
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.... of the CGST Act also do not authorize the imposition of a restriction as contemplated by the provisions of Rule 96 (10) of the CGST Rules. The learned counsel appearing on behalf of the petitioners in the other Writ Petitions made submissions substantially along the same lines. Therefore, for the sake of brevity and to avoid repetition, those submissions are not recorded. Submissions for the Revenue:- 5. The learned Senior Standing Counsel appearing for the Central Revenue refers to the counter affidavit filed in W.P (C) No. 17447/2023 to explain the genesis of the provisions in Rule 96 (10) of the CGST Rules. He submits that the right of refund under Section 16 of the IGST Act is always subject to the provisions of Section 54 of the CGST Act and sub-section (3) of Section 54 permits the imposition of conditions in claiming refund. The learned counsel has extensively referred to the judgment of the Supreme Court in VKC Footsteps (supra) to contend that the said judgment covers the issue raised (against the petitioners) and the Supreme Court has categorically found that the right to refund is not absolute and the State may, in contemplation of its fiscal objectives, seek to i....
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....of Rule 89 and Rule 96 of the CGST Rules to show that while a person opting to claim refund of IGST in terms of the provisions contained in Rule 96 of the CGST Rules will be entitled to claim the benefit of credit arising out of the purchase of capital goods such right is not available to persons who may opt to file a letter of undertaking/bond and seek a refund of taxes paid on input goods and inputs services by following the procedure contemplated by Rule 89 of the CGST Rules. It is therefore submitted that it is at the option of the exporter to adopt either of the Rules contemplated by the provisions of Section 16 and it is for him to decide which is the method more beneficial to him. 6. Sri. G. Shivadas, the learned Senior Counsel appearing for the petitioner in W.P (C) No. 17447/2023 would submit, in reply, that the judgment of the Gujarat High Court in Zenith Spinners v. Union of India, 2005 SCC OnLine Guj 601 which was affirmed by the Supreme Court in Union of India & Ors v. Zenith Spinners, (2020) 14 SCC 520 is authority for the proposition that the phrase "conditions, safeguards and procedures" mentioned in Section 16 (3) (b) of the IGST Act read with the phrase "condit....
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....f goods or services or both; or (b) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. (3) A registered person making zero-rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or letter of undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed: Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limi....
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....ation No. 1/2023-Integrated Tax dated 31-07-2023, which was replaced by notification No. 5/2023-Integrated Tax dated 26-10-2023, notifying that the class of persons or class of goods or services which are not permitted to be exported on payment of IGST. Though it is not relevant for the purposes of this case, it may be noted that none of the goods or services that are subject matter of these writ petitions find a place in the notifications referred to above. 9. Section 54 of the CGST Act, to which reference is made by Section 16 of the IGST Act, to the extent relevant^1, reads thus: "54. Refund of tax. (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: Provided ....... (2)...... (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than-- (i) zero rat....
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.... so far as they apply to matters set out in Section 20 of the IGST Act shall also apply in relation to Integrated Tax as they apply in relation to Central Tax. 10. The provisions of Rule 96 of the CGST Rules have been amended from time to time and presently provide thus: "96. Refund of Integrated tax paid on goods or services exported out of India - (1) The shipping bill filed by an exporter of goods shall be deemed to be an application for refund of Integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:- (a) the person in charge of the conveyance carrying the export goods duly files a departure manifest or an export manifest or an export report covering the number and the date of shipping bills or bills of export; and (b) the applicant has furnished a valid return in Form GSTR-3B: Provided that if there is any mismatch between the data furnished by the exporter of goods in Shipping Bill and those furnished in statement of outward supplies in Form GSTR-1, such application for refund of integrated tax paid on the goods exported out of India shall be deemed to have been ....
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....ing anything to the contrary contained in any other rule, the said system generated form shall be deemed to be the application for refund in such cases and shall be deemed to have been filed on the date of such transmission. (5-B) Where refund is withheld in accordance with the provisions of clause (b) of sub-rule (4) and the proper officer of the Customs passes an order that the goods have been exported in violation of the provisions of the Customs Act, 1962 (52 of 1962), then, such claim shall be transmitted to the proper officer of Central tax, State tax or Union territory tax, as the case may be electronically through the common portal in a system generated Form GST RFD-01 and the intimation of such transmission shall also be sent to the exporter electronically through the common portal, and notwithstanding anything to the contrary contained in any other rule, the said system generated form shall be deemed to be the application for refund in such cases and shall be deemed to have been filed on the date of such transmission. (5-C) The application for refund in Form GST RFD-01 transmitted electronically through the common portal in terms of sub-rules (5-A) and (....
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....n Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications." Rule 96 of the CGST Rules has undergone various amendments from time to time. Though the pleadings in many of these cases refer to the metamorphosis of Rule 96 of the CGST Rules into its present form, it is conceded at the bar that it may not be necessary for this Court to examine the history of the amendments and the reasons which compelled those amendments to examine whether the provisions as they presently stand are ultra vires the provisions of Section 16 of the IGST Act. 11. A reference to the provisions of Section 16 of the IGST Act both before and after its amendment suggests to me that the Section itself has not imposed any restriction in the matter of availing either refund of taxes paid on input goods and input services or claiming refund of IGST after payment of IGST on the exports. While, on the authority of the judgment of the Supreme Court in VKC Footsteps (supra), it may be possible for the Revenue to contend that the Parliament has a right to impose restrictions on the right to refund, it must be noticed that in VKC Footsteps (supra), the Supreme Court wa....
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....d" in Section 16 (3) (a) & (b) of the IGST Act and the provisions of Section 20 of the IGST Act and Section 54 of the CGST Act do not authorise the imposition of restrictions in such a manner that it would completely take away the right granted under Section 16 of the IGST Act. Useful reference may be made in this regard to the judgment of the Gujarat High Court in Zenith Spinners (supra) where that Court was considering the validity of certain notifications (under the Central Excise Regime) which were impugned on the ground that they were contrary to the scheme of Rules 18 and 19 of the Central Excise Rules, 2002. It was contended that the right to a rebate of excise duty available to an exporter (in relation to duty paid on final products which are excisable goods, or in relation to duty paid on raw material used as inputs in manufacture or processing of such final products) on export of goods was taken away completely by the terms of the impugned notifications. When dealing with a contention on behalf of the Revenue that the right to rebate was subject to approval by the commissioner it was held:- "14. There is one more reason. As can be seen from reading of sub-rule (1....
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....ontemplated by Section 16 (3) (b). The statement is extracted below in tabular form:- SI. No. Particulars Rule 89 Rule 96 1. Parent Provision Section 16 (3) (a) of the IGST Act read with Section 54 of the CGST Act provides for refund of unutilized input tax credit ("ITC") in respect of zero-rated supplies. Section 16 (3) (b) read with Section 54 of the CGST Act provides for refund of the IGST paid on exports of goods or services or both on payment of IGST within the expiry of two years from the relevant date. 2. Relevant Rule Rule 89(4) provides for refund of unutilized input tax credit ("ITC") in respect of inputs and input services in case zero-rated supplies are undertaken without payment of taxes, under a Letter of Undertaking ("LUT") or bond. Rule 96 provides for refund of output IGST paid on export of goods and services. Note: This payment of tax is essentially from the accumulated ITC, which is a basket of ITC availed on inputs, input services and capital goods with no one-to-one correlation between the usage of inputs and usage of credit so long as the inputs satisfy the requirements under Section 16 (1) of the CGST Act. 3. Proce....
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....laim of refund of export of goods shall be processed by a proper officer and an amount equal to the IGST paid shall be electronically credited to the bank account of the applicant. v. Detailed Guide on IGST refunds in ICES issued by Directorate General of Systems, CBEC pursuant to the IGST refund module being made operational since 10.10.2017. vi. Rule 96 (9) provides that refund of IGST paid on export of services shall be dealt with in accordance with Rule 89. 4. Withholding of refund According to Rule 92 (2), claim for refund shall be withheld if the proper officer or the Commissioner is of the opinion that the amount of refund is liable to be withheld under Section 54 (10) or (11) of the CGST Act and an order in Part A of Form GST RFD-07 shall be passed. According to Rule 96 (4), claim for refund shall be withheld in the following circumstances: ● a request has been received from the jurisdictional Commissioner to withhold the payment of refund in accordance with Section 54 (10) or (11) of the CGST Act; or ● the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act....
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....which refund is claimed under sub-rules (4A) or (4B) or both. Note: The above definition refers to ITC availed on inputs and input services availed during the relevant period which is the period for which the claim has been filed. Rule 96 (9) provides that refund of IGST paid on export of services shall be dealt with in accordance with Rule 89. Rule 96 (3) provides that the claim of refund of export of goods shall be processed by a proper officer and an amount equal to the IGST paid shall be electronically credited to the bank account of the applicant. 2. Under Rule 89 (4A) In case the applicant has received supplies from a supplier who has availed the benefit of Notification No. 48/2017-CT dated 18.10.2017 (deemed exports), refund of ITC availed in respect of "other inputs and input services" used in making zero-rated supply of goods or services or both, shall be granted. Rule 96 (10) (i) provides that "persons" claiming refund of IGST on export of goods or services, should not have received supplies under the following notifications: ● Notification No. 48/2017-CT dated 18.10.2017 (nil rate of tax - deemed exports), except so far as it relate....
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....rs (Bombay) (P) Ltd. v. Union of India stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14. The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14." The judgment of the Supreme Court in K.P Varghese (supra) is the authority for the proposition that where even the provisions of a plenary legislation produce a manifestly absurd and unjust result, that could never have been inten....
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....es, as inserted by notification No.53/2018-CT dated 09-10-2018 w.e.f. 23-10-2017 is declared ultra vires the provisions of Section 16 of the IGST Act and unenforceable on account of being manifestly arbitrary; ii. As a consequence of the above declaration, any action that has been initiated by the issuance of a show cause notice or otherwise or has culminated in an order against the petitioners in these writ petitions on the basis of the provisions contained in Rule 96 (10) of the CGST Rules, as inserted by notification No.53/2018-CT dated 09-10-2018 w.e.f. 23-10-2017, will stand quashed; iii. It is directed that no proceedings shall be taken to recover any IGST that has been refunded to the petitioners in these writ petitions by applying the provisions of Rule 96 (10) of the CGST Rules for the period between 23-10-2017 and 08-10-2024; iv. In cases where orders have been issued by the Adjudicating Authority including on issues other than those arising out of the application of Rule 96 (10) of the CGST Rules, the person aggrieved may file appeals against such orders and on such issues other than those arising out of the application of Rule 96 (10) of the C....