TaxTMI 
TaxTMI 
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2025 (6) TMI 1156
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....ATION NO. 5128 of 2024, R/SPECIAL CIVIL APPLICATION NO. 5790 of 2023, R/SPECIAL CIVIL APPLICATION NO. 4938 of 2024, R/SPECIAL CIVIL APPLICATION NO. 6879 of 2021, R/SPECIAL CIVIL APPLICATION NO. 6598 of 2021, R/SPECIAL CIVIL APPLICATION NO. 9844 of 2024, R/SPECIAL CIVIL APPLICATION NO. 5958 of 2024, R/SPECIAL CIVIL APPLICATION NO. 6594 of 2023, R/SPECIAL CIVIL APPLICATION NO. 6948 of 2024, R/SPECIAL CIVIL APPLICATION NO. 7359 of 2021, R/SPECIAL CIVIL APPLICATION NO. 7880 of 2023, R/SPECIAL CIVIL APPLICATION NO. 6158 of 2024, R/SPECIAL CIVIL APPLICATION NO. 7871 of 2023, R/SPECIAL CIVIL APPLICATION NO. 8393 of 2023, R/SPECIAL CIVIL APPLICATION NO. 7922 of 2023, R/SPECIAL CIVIL APPLICATION NO. 6346 of 2024, R/SPECIAL CIVIL APPLICATION NO. 7986 of 2023, R/SPECIAL CIVIL APPLICATION NO. 13588 of 2023, R/SPECIAL CIVIL APPLICATION NO. 7711 of 2021, R/SPECIAL CIVIL APPLICATION NO. 8847 of 2020, R/SPECIAL CIVIL APPLICATION NO. 8535 of 2023, CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2023, R/SPECIAL CIVIL APPLICATION NO. 8535 of 2023, R/SPECIAL CIVIL APPLICATION NO. 8610 of 2023, CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2023, R/SPECIAL CIVIL APPLICATION NO. 8610 of 2023, R/SPECIAL CIVIL APP....
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....PLICATION NO. 16892 of 2021, R/SPECIAL CIVIL APPLICATION NO. 16373 of 2020, R/SPECIAL CIVIL APPLICATION NO. 17514 of 2023, R/SPECIAL CIVIL APPLICATION NO. 17122 of 2023, CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2023 In R/SPECIAL CIVIL APPLICATION NO. 17122 of 2023, R/SPECIAL CIVIL APPLICATION NO. 17572 of 2023, R/SPECIAL CIVIL APPLICATION NO. 18417 of 2021, CIVIL APPLICATION (FOR STAY) NO. 2 of 2023, R/SPECIAL CIVIL APPLICATION NO. 18417 of 2021, R/SPECIAL CIVIL APPLICATION NO. 18408 of 2021, CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2023, R/SPECIAL CIVIL APPLICATION NO. 18408 of 2021, R/SPECIAL CIVIL APPLICATION NO. 18838 of 2023, R/SPECIAL CIVIL APPLICATION NO. 238 of 2023, R/SPECIAL CIVIL APPLICATION NO. 22929 of 2022, R/SPECIAL CIVIL APPLICATION NO. 18893 of 2023, R/SPECIAL CIVIL APPLICATION NO. 19435 of 2023, R/SPECIAL CIVIL APPLICATION NO. 20131 of 2023, R/SPECIAL CIVIL APPLICATION NO. 20398 of 2023, R/SPECIAL CIVIL APPLICATION NO. 22507 of 2019, R/SPECIAL CIVIL APPLICATION NO. 21040 of 2023, R/SPECIAL CIVIL APPLICATION NO. 22514 of 2019, R/SPECIAL CIVIL APPLICATION NO. 21015 of 2023, R/SPECIAL CIVIL APPLICATION NO. 21006 of 2023, R/SPECIAL CIVIL APPLICATION NO. 1210 of 20....
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.... chargeable to service tax under the Finance Act, 1994. The petitioner was eligible for availing the credit of the taxes paid by them on inputs, capital goods and input services under the Cenvat Credit Rules, 2004. 7. Cenvat Credit availed by the petitioner was in turn utilized for payment of the excise duty on the goods cleared by the petitioner in the domestic market as well as for payment of duties applicable at the time of export of goods. 8. The petitioner was entitled to claim rebate i.e. refund of actual amount of excise duty so paid on the goods exported under Rule 18 of the Central Excise Rules, 2002. 9. The petitioner applied for Advance Authorisation (AA) License in the year 2017 under Chapter 4 of the Export-Import policy framed by the Central Government under the provisions of the Foreign Trade (Development and Regulations) Act, 1992 which was allowed by the Director General of Foreign Trade (DGFT). The petitioner thereafter obtained several AA licenses during the period between 04.07.2017 to 10.04.2019 and imported some of the raw materials required in manufacture of finished products utilizing such AA licenses without payment of custom duty while procuring the oth....
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....he GST Act were made applicable and the procedure prescribed in CGST Rules which are applicable for refund claim under section 54 of the GST Act are therefore, prescribed for availing refund/rebate under section 16 of the IGST Act. 15. Explanation 1 to section 54 of the GST Act provides that "refund" includes refund of tax paid on zero-rated supply of goods or services or both or on inputs or input services used in making such zero-rated supply or refund of tax paid on the supply of goods regarded as deemed exports or refund of unutilized input tax credit as provided under section 54 (3) of the GST Act. 16. Section 54 (3) entitles a registered person to claim refund of unutilized input tax credit however, the proviso to the said sub-section provided that no refund of unutilized tax credit shall be allowed in cases other than (i) zero rated supplies made without payment of tax or (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendation of the Council. 17. Rule ....
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....Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme." 19. Rule 96 of the CGST Rules falls under Chapter X of Refunds and deals with the refund of Integrated Tax "paid" on goods or services exported out of India. Sub-rule (1) to Sub-rule (9) prescribes the procedure for filing of the shipping bills, returns and other forms to avail the refund of IGST paid under section 16 (3) (b) of the IGST Act. 20. Sub-rule (10) was inserted for the first time by Notification No. 75/2017 dated 29.12.2017 with effect from 23.10.2017. By Notification No. 3/2018 dated 23.01.2018 Sub-Rule (10) was amended with effect from 23.10.2017. 21. By Notification No.54/2018 Sub-Rule (10) of Rule 96 was substituted with effect from 9.10.2018 as under: "Governme....
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....paid on exports of goods or services should not have - (a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or (b) availed the benefit under notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No.....
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....he petitioners to manufacture the exported goods or services. However, the respondent authorities on inquiry and investigation to the effect that petitioners were exporting finished goods on payment of IGST and availing benefit of refund in terms of Rule 96 (10) of the CGST Rules, in spite of availing the benefit of Notifications mentioned in the said Rule, were not eligible to claim such refund on the entire input tax credit availed by the petitioners on procurement of input, input services or capital goods from the domestic market as the petitioners have taken benefit of notifications for procurement of some of the material either under the Advance Authorisation license or under the merchant export or as per the notification stated in Rule 96 (10). The respondent authorities therefore initiated the proceedings for recovery of the refund already paid to the petitioners for alleged violation of Rule 96 (10) of the CGST Rules on the ground that erroneous refund has been paid to the petitioners where raw materials were imported under Advance Authorisation scheme by the petitioners on some of the products which were procured under the said Scheme. The respondent authorities therefore,....
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....5) of the CGST Rules applicable to refund of unutilised input tax credit, the same do not relate to capital goods whereas input tax credit utilised by the petitioners for payment of IGST on the export of goods and services utilises both the input tax credit on goods, services or capital goods. Distinction was tried to be made with regard to applicability of formula prescribed under Rule 89 (4) of the CGST Rules to avail the refund of unutilised input tax credit because of timing mismatch between the period of taking credit and period of export and the amount of refund under Rule 96 of the CGST Rules for the tax paid on export of goods or services. Distinction was also made in applicability of Rule 89 (4) (B) of the CGST Rules which provides for formula to avail the benefit of refund on basis of unutilised credit where the petitioners have availed the benefit of Advance Authorisation Scheme but did not pay the IGST and exported the goods under bond or LUT. 32. It was therefore, submitted that if the petitioners import inputs without payment of customs duty and manufacture the goods therefrom along with other inputs for export and pay IGST on export of such goods, then the petitione....
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....sh flow advantage to the petitioners, but the same cannot be substantial relief in sense of reduced tax liability or the like. It was submitted that the policy of the Government is always to encourage the export and the entire scheme of giving option to the petitioners to pay IGST by utilising input tax credit and get the refund of the same is to facilitate the cash flow which would not result into any benefit whatsoever to the petitioners except to reduce blockage of working capital. 35. Learned Senior Advocate Mr. Sridharan in support of his submissions placed reliance on the following decisions: 1) In support of his submission that this Court has quashed the notifications for being ultra vires the Articles 14 and 19 (1) (g) of the Constitution of India, reliance was placed on the decision in case of Gujarat Paraffins Pvt. Ltd. v. Union of India reported in 2012(282) ELT 33(Guj.) 2) In the context of the input or output ratios to be considered for determining the quantum of refund of unutilized Input Tax Credit under Rule 89 (4B), reliance was placed on the decision of this Court in case of Filatex India Ltd. v. Union of India reported in 2022 SCC OnLine Guj 2596. 3) In su....
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....d in (2007) 10 SCC 342. 11) In support of his submission that the lancet of the Court may remove the offending word and restore to constitutional health the rest of the provision, reliance was placed on the decision of Hon'ble Supreme Court in case of State of Kerala v. T.M. Peter reported in (1980) 3 SCC 554, decision of Kerala High Court in case of Jayadevan v. State of Kerala reported in 1980 SCC OnLine Ker 197 and decision of Hon'ble Supreme Court in case of Lohara Steel Industries Ltd. v. State of A.P. reported in (1997) 2 SCC 37. 12) In support of his submission that if part of a rule is ultra vires to Article 14 then the provisions need not be struck down if State gives an undertaking to delete the offensive provision later, or accepts construction within constitutional limits, reliance was placed on the decision of Hon'ble Supreme Court in case of P.N. Kaushal v. Union of India reported in (1978) 3 SCC 558. 13) In support of his submission that if exercise of legislative or administrative power is manifestly erroneous or arbitrary, it is liable to be set aside, reliance was placed on the decisions of Hon'ble Supreme Court in case of Shri Sitaram Sugar Company Limited ....
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....024 SCC OnLine SC 114. 21) To highlight the view taken by this Court on validity of Rule 96 (10), reliance was placed on the decision in case of Cosmo Films Ltd. v,. Union of India reported in (2021) 85 GSTR 79. 22) Reliance was also placed on decision of Hon'ble Supreme Court in case of State of Kerala and others v. Unni and others reported in (2007) 2 Supreme Court Cases 365. 36. Learned advocate Mr. Paresh Dave for the petitioner supplemented the submissions made by the learned Senior Advocate Mr. Sridharan by again referring to the entire scheme and the provisions of law in detail and submitted that there is anomaly in applicability of Rule 96 (10) of the CGST Rules resulting into it being ultra vires to the provisions of section 54 (1) of the CGST Act as well as section 16 (3) (b) of the IGST Act. It was submitted that Rule 96 (10) is also contrary to the provisions of section 164 of the GST Act which provides for rule making power. 37. It was also submitted by learned advocate Mr. Paresh Dave that Rule 96 (10) creates "class within class" of the exporters comprising of one class which do not import any goods using advance authorisation scheme and the exporters who are i....
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....ssion, reliance was placed on the following decisions: (i) In case of Union of India V/s. S. Srinivasan reported in 2012 (281) ELT 3 (SC). (ii) In case of General Officer Commanding-In-Chief V/s. Dr. Subhashchandra Yadav reported in AIR 1988 Supreme Court 876. 42. Learned advocate Mr. Dave submitted that the right to claim refund of integrated tax paid on exported goods under Section 16 (3) (b) is to be exercised in accordance with the provisions of Section 54 of the CGST Act or the Rules made thereunder. Sub-section (1) of Section 54 of the CGST Act confers upon any person the right to claim refund of any tax; and it is this right under the provisions of Section 54 (1) of the CGST Act, which is referred to in Sub-section (3) of Section 16 of the IGST Act. Section 54 of the CGST Act is an enabling provision for claiming refund, and a plain reading of this provision shows that the right to pay integrated tax and claim its refund on exported goods conferred on a registered person under Section 16 (3) (b) of the IGST Act is in no way affected or restricted under this provision of Section 54 of the CGST Act. Therefore, Rule 96 (10) is ultra vires Section 54 of the CGST Act also. ....
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....g in the electronics credit ledger of the registered person, and such amount of taxes paid on input transactions would add to the cost of the final products exported. 47. It was submitted that the provision is unreasonable because a genuine exporter like the petitioner is knocked off, and his right of refund is defeated, even if only one input was procured under exemption whereas a large quantum of other inputs and all input services were procured on payment of appropriate tax. 48. It was further submitted that the provision was based on incorrect basis inasmuch as the Government has made the impugned provision on the basis that the registered persons were en cashing ITC of other inputs, not used for export transactions. It was pointed out that at para 7.1 of Circular No. 45/19/2018-GST dated 30th May, 2018, at para 20 of Minutes of the 30th meeting of the GST Council and also in the Reply Affidavit filed by the Respondents, it is stated that some exporters started misusing the provision and started claiming refund of ITC in respect of inputs which were not used for exports, and that sub rule (10) of Rule 96 was made to ensure that the exporter did not utilise ITC availed on othe....
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....s that refund would be allowed under the scheme of Section 16 (3) (a) of the IGST Act, and unutilised ITC shall be in any case refunded to the exporters. But this proposition is based on incorrect and wrong facts because this option is not at all viable, and the genuine exporters may not get any refund if the procedure of Rule 89 (4) and (4B) of the CGST Rules is followed for refund under Section 16 (3) (a) of the Act. 53. It was submitted that the formula under Rule 89 (4) for determining refund amount is based on "Net ITC", which is the ITC availed during the relevant period; the "relevant period" being the period for which the claim has been filed. In most of the cases, the manufacturer-exporter may not have availed ITC during the relevant period when the export is made, and therefore he may not get any refund under this scheme and therefore, Sub Rule (10) of Rule 96 is unreasonable in this view also. 54. It was submitted that prior to 01.07.2017 also, assessees like the petitioners were functioning under the Advance Authorization Scheme; and while importing one or a few inputs duty free under the Authorization, they were procuring all other inputs, input services and capital ....
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.... services except a few products, which may be exported on payment of integrated tax with claim of refund of tax so paid. This Notification is effective from 1st October, 2023 i.e. the day on which the amended provision of Section 16 has been brought into force. This shows that the objective of the Government and also that of the Council has always been to allow export of all goods on payment of integrated tax and allow refund of tax so paid irrespective of the class of the goods or class of the persons. 58. It was further submitted that the above change/amendment in the scheme of Section 16 made during the pendency of all these petitions shows that the restriction under Sub Rule (10) of Rule 96 of the CGST Rules had been without any legal backing, without any nexus with the objective sought to be achieved by the refund mechanism under Section 16 of the IGST Act, and unreasonable and based on incorrect facts. 59. Learned advocate Mr. Uchit Sheth for the petitioner in addition to adopting the arguments submitted by learned advocates for other petitioners submitted that the amendment to Rule 96 (10) of the Central Goods and Services Tax Rules, 2017 by Notification No. 54/2018-Centra....
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....nt to override the provisions of section 15(b) of the CST Act and curtail the extent of reimbursement that has to be granted thereunder. When section 15(b) of the CST Act permits the State law to provide for the manner in which such reimbursement is to be granted, which may be subject to restrictions or conditions, it means that it is permissible for the State to decide the mode and manner in which such reimbursement is to be made. For example under the Sales Tax Act, reimbursement was granted by way of refund; whereas, under the GVAT Act it is granted by way of input tax credit. It may further be permissible for the State law to provide for restrictions or conditions, but, in the considered opinion of this court, the State law cannot provide for curtailing the extent of reimbursement which is provided in section 15(b) of the CST Act, namely the tax levied under the State law at the time of purchase of such goods. In the opinion of this court, section 15(b) of the CST Act does not permit the State law to reduce the amount of tax which is required to be reimbursed, but only permits the State law to provide for the manner in which such reimbursement is to be granted which may be subj....
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.... under Section 74 of the GST Acts in light of the dispute involved is wholly without jurisdiction and illegal. 64. Learned advocate Mr. Uchit Sheth thereafter made his submissions with regard to Special Civil Application No. 13957 of 2023. It was submitted that what was sought to be curbed by the impugned Rule 96 (10) of the CGST Rules was a situation wherein the purchases were made without payment of tax while exports were made on payment of tax by utilizing other input tax credit which resulted in its encashment. It was submitted that insofar as imports against advance authorizations are concerned, the benefit of exemption is taken by the importer himself. However Rule 96 (10) of the CGST Rules, when incorporated, erroneously mentioned that exports on payment of tax would not be permitted when suppliers of the exporters had imported against advance authorizations. This anomaly was sought to be removed by Notification No. 39/2018-Central Tax dated 4.9.2018 with retrospective effect. Since this would result in reopening of refunds already granted to importers who had imported against advance authorizations and exported on payment of IGST, the retrospectivity was removed by simulta....
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....the legislature has consciously used the expression "conditions, safeguards and procedure" which is contradistinction from the expression "restrictions". By citing the example that Sec. 16 (1) of the CGST Act, 2017 permits the rule-making authority to prescribe "conditions and restrictions", it was submitted that the expression "conditions, safeguards and procedure" used u/s 16 (3) (b) does not permit the rule-making authority to prescribe restrictions. 70. It was further submitted that the expression "conditions, safeguards and procedure" implies that the rule-making authority can prescribe the circumstances and factors which can affect the matter in which the registered person can claim the refunds by paying IGST on exports. In support of his submission, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Sankar Ram and Co vs Kasi Naicker reported in (2003) 11 SCC 699 wherein it has been held as under : "It is a cardinal rule of construction that normally no word or provision should be considered redundant or superfluous in interpreting the provisions of a statute. In the field of interpretation of statutes, the courts always presume that the le....
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....der Rule 96 (10). It was therefore, submitted that Rule 96 (10) is ultra vires to Section 16 (3) (b) of the IGST Act, 2017. 73. Learned advocate Mr. Desai further submitted that Rule 96 (10) is ultra vires Article 14 and 19 (1) (g) of the Constitution of India. It was submitted that even if the expression "conditions, safeguards and procedure" under section 16 (3) (b) of the IGST Act, 2017 can be said to include the power to prescribe "restrictions", the prescribed restrictions cannot tantamount to prohibition. In support of such submission, reliance was placed on the decision of the nine-judge Bench of the Hon'ble Supreme Court in K S Puttaswamy v. Union of India reported in (2019) 1 SCC 1 which introduced the proportionality standard in determining violations of fundamental rights wherein the following test was laid down: "319.... This discussion brings out that following four sub-components of proportionality need to be satisfied: 319.1. A measure restricting a right must have a legitimate goal (legitimate goal stage). 319.2. It must be a suitable means of furthering this goal (suitability or rational connection stage). 319.3. There must not be any less restrictive ....
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.... as per section 2 (12) of the CGST Act the words and expression used and defined under the CGST Act were defined in the CGST Act shall have the same meaning as assigned to them in this Act. It was therefore, submitted that considering the provisions of section 54 read with section 164 of the CGST Act and section 22 of the IGST Act framing of Rule 96 (10) form and manner in which it is framed is nothing but a colourable legislation or excessive legislation contrary to the basic structure of the Constitution. 76. Reference was also made to Notification No. 27/2023 (CT) dated 31.07.2023 and Notification No. 1/2023 (IT) dated 31.07.2023. Referring to and relying upon the various decisions for invoking Doctrine of Colourable Legislation and Doctrine of Excessive Legislation, learned advocate Mr. Mishra submitted that Sub-Rule (10) of Rule 96 of the Rules is a classic piece of Excessive Legislation by not allowing the refund of integrated tax paid on export of goods or services utilising the supply even though no benefit of any of the notification referred thereto is availed by the assessee but only one component used for manufacture of the goods exported and supply of the same is recei....
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.... transgression may be patent, manifest or direct, but it may also be disguised, covert and indirect and it is to this latter class of cases that the expression "colourable legislation" has been applied in certain judicial pronouncements. The Idea conveyed by the expression is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretense or disguise. As was said by Duff J. In Attorney-General for Ontario v. Reciprocal Insurers and Others [1924] A.C. 328.), "Where the law making authority is of a limited or qualified character it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the legislature is really doing." 10. In other words, it is the substance of the Act that is material and not merely the form or outward appearance, and If the subject-matter In substance is something which is beyond the powers of that legislature to legislate upon, the form in which the law is clothed would not save it from condem....
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....Conceptually, 'colorability' is bound up with incompetency. 'Colour', according to Black's Legal Dictionary, is 'an appearance, semblance or simulation, as distinguished from that which is real... a deceptive appearance ... a lack of reality'. A thing is colourable which is, in appearance only and not in reality, what it purports to be. In Indian terms, it is may. In the jurisprudence of power, colourable exercise of or fraud on legislative power or, more frightfully, fraud on the Constitution, are expressions which merely mean that the legislature is incompetent to enact a particular law, although the label of competency is stuck on it, and then it is colourable legislation. It is very important to notice that if the legislature is competent to pass the particular law, the motives which impel it to pass the law are really irrelevant. To put it more relevantly to the case on hand, if a legislation, apparently enacted under one Entry in the List, falls in plain truth and fact, within the content, not of that Entry but of one assigned to another legislature, it can be struck down as colourable even if the motive were most commendable. In other words, the l....
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.... are used in connection with any enactment, it only means that the particular legislature had no legislative competence although it purports to have exercised that power. Reference in this connection may be made to the cases of K.C. Gajapati Narayan Deo v. State of Orissa (AIR 1953 SC 375), Bhairabendra Narayan Bhup v. State of Assam (AIR 1956 SC 503), Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corpn. (AIR 1959 SC 308) and R.S. Joshi etc v. Ajit Mills Ltd. (AIR 1977 SC 2279). In the case of K.C.Gajapati Narayan Deo (AIR 1953 SC 375), it was observed (at p. 379): "It may be made clear at the outset that the doctrine of colourable legislation does not involve any question of 'bona fides' or 'mala fides' on the part of the legislature. The whole doctrine resolves itself into the question of competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all..... if the Constitution of a State distributes the legislative powers amongst different bodies....
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....he provisions of repeal and enact a new one. It was submitted that Rule 96 (10) is required to be declared as ultra vires. The assessee cannot be deprived of legitimate refund on the supply for which no benefit is availed n notification of duty concession referred to in Rule 96 (10) of the CGST Rules. 79. Reliance was also placed on decision of Kerala High Court in case of Kerala State Electricity Board and others v. Thomas Joseph and others reported in AIR 2023 SC 126, to highlight that Hon'ble Apex Court has explained in detail about the rule making powers of the delegated authority and held that if the rule goes beyond the rule making power conferred by the statute the same has to be declared invalid and if the rule supplants any provision for which power has not been conferred it becomes invalid. It was pointed out that that Hon'ble Apex Court has held that basic test is to determine and consider the source of power which is relatable to the rule and similarly rule must be in accord with the parent statute as it cannot travel beyond it. Reliance was placed on the following observations of the Apex Court in support of his submission: "65. Delegated legislation has come to sta....
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....vanshi and Another reported in (1975) 1 SCC 421, the Constitution Bench has held that: "18. .... These statutory bodies cannot use the power to make rules and regulations to enlarge the powers beyond the scope intended by the Legislature. Rules and regulations made by reason of the specific power conferred by the statute to make rules and regulations establish the pattern of conduct to be followed. ..." 69. In State of Karnataka and Another v. H. Ganesh Kamath and Others reported in (1983) 2 SCC 402, it has been stated that: "7. .....It is a well-settled principle of interpretation of statutes that the conferment of rule-making power by an Act does not enable the rule-making authority to make a rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto." 70. In Kunj Behari Lal Butail and Others v. State of H.P. and Others reported in (2000) 3 SCC 40, it has been ruled thus:- "13. It is very common for the legislature to provide for a general rule-making power to carry out the purpose of the Act. When such a power is given, it may be permissible to find out the object of the enactment and then see if the rules framed sat....
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.... the assessee upon supply for which no benefit is availed from the notification referred to in Rule 96 (10) of the CGST Rules. It was submitted that Rule 96 (10) is therefore invalid as same could not have supplant the provisions of the enabling Act but it could be made only supplant it and what is permitted is delegation of ancillary or subordinate legislative functions or what is fictionally called as power to fill up details and is given for carrying out purpose of the Act. Such delegation cannot be held to be laid down in guidelines and the regulation making power could not have been exercised so as to bring into existence substantive rights or obligations or disabilities which are not contemplated in terms of the provisions of the Act. 81. Learned advocate Mr. Abhay Rastogi has also adopted the submissions made learned Senior Advocate Mr. Sridharan and learned advocate Mr. Paresh Dave and has made further submission with regard to Doctrine of Impressibility for framing rule 96 (10) of the CGST Rules and reference was placed on decision of Apex Court in case of Association for Democratic Reforms & anr. v. Union of India and others (judgment dated 15.02.2024 in Writ Petition No....
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....er, the single proportionality standard which is used to test whether the fundamental right in question can be restricted for the State interest (that is, the legitimate purpose) and if it can, whether the measure used to restrict the right is proportional to the objective is insufficient for balancing the conflict between two fundamental rights. The proportionality standard is an effective standard to test whether the infringement of the fundamental right is justified. It would prove to be ineffective when the State interest in question is also a reflection of a fundamental right. 153. The proportionality standard is by nature curated to give prominence to the fundamental right and minimize the restriction on it. If this Court were to employ the single proportionality standard to the considerations in this case, at the suitability prong, this Court would determine if non-disclosure is a suitable means for furthering the right to privacy. At the necessity stage, the Court would determine if non-disclosure is the least restrictive means to give effect to the right to privacy. At the balancing stage, the Court would determine if non-disclosure has a disproportionate effect on the r....
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.... the test is applied or the method of using the last two prongs in these jurisdictions. 30. The first two prongs of proportionality resemble a means-ends review of the traditional reasonableness analysis, and they are applied relatively consistently across jurisdictions. Courts first determine if the ends of the restriction serve a legitimate purpose, and then assess whether the proposed restriction is a suitable means for furthering the same ends, meaning it has a rational connection with the purpose. 31. In the third prong, courts examine whether the restriction is necessary to achieve the desired end. When assessing the necessity of the measure, the courts consider whether a less intrusive alternative is available to achieve the same ends, aiming for minimal impairment. As elaborated above, this Court Anuradha Bhasin (supra), relying on suggestions given by some jurists, emphasised the need to employ a moderate interpretation of the necessity prong. To conclude its findings on the necessity prong, this Court is inter alia required to undertake an overall comparison between the measure and its feasible alternatives. 32. We will now delve into the fourth prong, the balancing....
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....al, that is, to realise the values of the German Constitution. Canadian courts, some believe, in practice give wider discretion to the legislature when a restriction is backed by sufficient data and evidence. The constitutional court in South Africa, as per some jurists, collectively applies the four prongs of proportionality instead of a structured application. While proportionality is the predominant doctrine in Australia, an alternate calibrated scrutiny test is applied by a few judges. It is based on the premise that a contextual, instead of broad standard of review, is required to be adopted for constitutional adjudication. 35. Findings of empirical legal studies provide a more solid foundation for normative reasoning and enhance understanding of the relationship between means and ends. In our view, proportionality analyses would be more accurate when empirical inquiries on causal relations between a legislative measure under review and the ends of such a measure are considered. It also leads to better and more democratic governance. While one cannot jump from "is" to "ought", to reach an "ought" conclusion, one has to rely on accurate knowledge of "is", for "is" and "ought"....
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....uch a law impermissibly delegates basic policy matters to policemen and also judges for resolution on an ad hoc and subjective basis, with the attendant dangers of arbitrary and discriminatory application. More so uncertain and undefined words deployed inevitably lead citizens to "steer far wider of the unlawful zone ... than if the boundaries of the forbidden areas were clearly marked. 131. Let us examine clause (i) of Section 2 (1) (a). This section is shown to be blissfully and impermissibly vague and imprecise. As rightly pointed out by the learned counsel, even an innocent person who ingenuously and undefiledly communicates or associates without any knowledge or having no reason to believe or suspect that the person or class of persons with whom he has communicated or associated is engaged in assisting in any manner terrorists or disruptionists, can be arrested and prosecuted by abusing or misusing or misapplying this definition. In ultimate consummation of the proceedings, perhaps that guiltless and innoxious innocent person may also be convicted." iii) In case of Deputy Commissioner of Income Tax and another v. Pepsi Foods Ltd. (now Pepsico India Holdings Pvt Ltd) report....
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....ain of "exports" tax free, i.e., to fully 'zero-rate' the exports by exempting them from both input tax and output tax; accordingly, Section 16 (3) of the IGST Act allows refund of input taxes paid in the course of making a zero-rated supply, i.e., supplies which covers exports as well as supplies to SEZs. The rule in whittling down such refund is ultra vires in view of the well settled principle of law that Rules cannot override the parent legislation." 87. Learned advocate Mr. Poddar with a view to point out the arbitrariness in rule 96 (10) submitted seven different situations as under: Situation No. Particulars 1 Where 100% Goods are imported under Advance Authorization 2 Where 100% Goods are Exported 3 Where import and export are on higher side than the domestic inward and outward supplies 4 Where import is higher and export is less than domestic outward supplies 5 Where import is lower and export is higher than domestic outward supplies 6 Where import and export-both are lower than domestic inward/outward supplies 7 Where local outward supplies are exempted 88. Referring to above situations, it was submitted that prime argument of the respondents in ....
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....was extended in cases where the exporter has received supplies on which the supplier has availed benefit of Notification No. 78/2017-Customs dated 13.10.2017 and Notification No. 79/2017-Customs dated 13.10.2017 which provided for duty free imports of inputs/Capital goods by AA, EOU and EPCG license holders. The said notification was issued with the approval of GST Council obtained in 25th meeting held on 18.01.2018. c. Rule 96 (10) was further amended by Notification No. 39/2018-CT dated 04.09.2018 w.e.f. 23.10.2017 wherein the said restriction was made applicable to the cases where the exporter himself has availed benefit of duty-free procurement under Notification No. 78/2017-Customs dated 13.10.2017 and Notification No. 79/2017-Customs dated 13.10.2017 after obtaining approval of the GST Implementation Committee (GIC) and was ratified by the GST Council in the 30th meeting held on 28.09.2018. d. However, during the 30th GST Council meeting, it was decided to restore the position of Rule 96 (10) prior to amendment vide Notification No. 39/2018-CT dated 04.09.2018 by issuing Notification No. 53/2018-CT dated 09.10.2018 substituting Rule 96 (10) w.e.f. 23.10.2017. Further, Not....
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....xplanation has been inserted in rule 96 (10) which provides that where IGST and Compensation Cess has been paid on procurement of inputs under Notification No. 78/2017-Customs, dated the 13th October, 2017 or Notification No. 79/2017-Customs, dated the 13th October, 2017 and exemption has been availed in respect of Basic Customs Duty (BCD) only, such procurement would not be considered to have been procured by availing the benefit of the said notifications. The said Notification was approved by GST Council in its 39th meeting held on 14.03.2020." 92. Learned Additional Solicitor General Mr. Devang Vyas thereafter negated the contention raised by the petitioner that Rule 96 (10) of the CGST Rules is violative of provisions of section 16 of the IGST Act, 2017 read with section 54 of CGST Act, 2017 and hence liable to be declared as ultra vires by submitting that Rule 96 (10) was inserted in order to prevent exporters from availing double benefit of duty free/concessional procurement of inputs by availing benefit under the relevant notification and of refund of integrated tax paid on export as it was leading to monetisation of ITC which was attributable towards the non-export supplie....
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....supplies. In the cases where the taxpayer procures certain inputs in respect of which the benefit of Notifications as provided under clauses (a) and (b) of Rule 96 (10) of the CGST Rules has been availed and procures certain inputs and input services against payment of appropriate tax, refund of unutilised ITC in such circumstances is available under the provisions of Rules 89 (4A) and 89 (4B) of the CGST Rules. It was therefore, submitted that Rule 96 (10) does not take away substantive right conferred under section 16 (3) (b) of IGST Act, 2017 and the same is available under the provisions of Rules 89 (4A) and 89 (4B) of the CGST Rules and is also consistent with the genesis of providing benefit of advance authorisation. 96. Learned Additional Solicitor General Mr. Vyas further submitted that Section 54 of the GST Act provides for refund of tax paid and Input Tax Credit which have been accumulated in certain situations. It also lays down the conditions subject to which this refund can be claimed. Section 16 of the IGST Act gives the supplier making Zero-rated supplies two options under which refund on account of zero-rated supplies can be claimed. It was submitted that these opt....
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....payer to claim for such refund also provides for imposition of checks and balances. Reference was made to Section 16 (3) (b) of the IGST Act, 2017 which reads as under- "a registered person may supply goods or services or both, subject to such conditions, safeguards and procedures as may be prescribed on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied" 102. It was therefore, submitted that while the said Section extended authority for refund of tax paid on the goods and services, the same section also ensured that such claims are not absolute and they would be subject to such conditions, safeguards and procedures as may be prescribed. Section 16 of the IGST Act, does not offer carte blanche for claim of refund. It provides for allowing such claims of legitimate refunds which are not contrary to or out of the ambit of the larger limitations of law created by imposition of restrictions. 103. Learned Additional Solicitor General Mr. Vyas further submitted that Rule 96 (10) of CGST Rules is a result of the rule making power exercised by the Government under Section 164 of the GST Act, 2017 on the recommendation of the GST Council an....
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....ed benefit of exemption notifications and amount of IGST, so refunded, becomes recoverable for being availed in violation of the provision of Rule 96 (10) of the CGST Rules. 106. It was therefore submitted that the said provision of Rule 96 (10) of the CGST Rules, clearly establishes nexus between the refund claimed on exports in terms of the provisions of Section 16 of the IGST Act, 2017 read with the provisions of Section 54 of the GST Act and the exemption availed under the exemption notifications. Therefore, such provisions are complementary rather than mutually exclusive. 107. Relying on the judgment of this Court in case of M/s Cosmo Films Ltd Vs. UOI, [Judgment dated 20.10.2020 rendered in Special Civil Application No. 15833 of 2018], it was submitted that this Court has delivered the judgment in favour of the department and has upheld the vires of the said Rule 96 (10) of the CGST Rules wherein the Hon'ble High Court has held as under: "8.15 Recently, vide Notification No. 16/2020-CT dated 23.03.2020 an amendment has been made by inserting following explanation to Rule 96 (10) of CGST Rules, 2017 as amended (with retrospective effect from 23.10.2017) "Explanation.....
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....78 SC 597 it has been highlighted that Article 14 strikes at arbitrariness in State action and ensures fairness and equality in treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non-discriminatory: it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. It was submitted that as such, the restrictions on refund of IGST under Rule 96 (10) of the CGST Rules, 2017 cannot be termed as violative of Article 14 of the Constitution of India as the same is applicable to all the assessee equally who are covered within its ambit. Further, freedom of trade, commerce and intercourse throughout the territory of India is also not restricted by the said provisions. 110. It was further submitted that in respect of violation of Article 19 (1) (g) of the Constitution of India, question involved is whether the freedom of trade, commerce and intercourse is an absolute freedom. It was submitted that since an absolute freedom of trade, commerce and intercourse may lead to economic confusion and misuse of the same, therefore, the wide amplitude of the freedom granted by Ar....
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....T Act or section 16 of the IGST Act or violative of Articles 14 and 19 (1) (g) of the Constitution of India. 114. It was submitted that the respondents are justified in inserting Rule 96 (10) with retrospective effect and thereby taking away vested right of petitioner to seek refund. In this regard, reference is invited to Section 164 of the CGST Act, 2017 which provides that: "164. Power of Government to make rules.- (1) The Government may, on the recommendations of the Council, by notification, make rules for carrying out the provisions of this Act. (2) Without prejudice to the generality of the provisions of sub-section (1), the Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be or may be made by rules. (3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on which the provisions of this Act come into force. (4) Any rules made under sub-section (1) or sub-section (2) may provide that a contravention thereof shall be liable to a penalty not exceed....
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....wers except that such rules should be for the purpose of giving effect to the provisions of the CGST Act. A fortiori, upon amendment of Section 140 by introducing the words "within such time", the power to frame rules fixing time limits to avail Transitional ITC is settled conclusively. In SKH Sheet Metals, the Delhi High Court concluded, in paragraph 26, that the statute had not fixed a time limit for transitioning credit by also referring to the repeated extensions of time. Given the fact that the power to prescribe a time limit is expressly incorporated in Section 140, which deals with Transitional ITC, and Rule 117 fixes such a time limit, we are unable to subscribe to this view. The fact that such time limit may be extended under circumstances specified in Rule 117, including Rule 117A, does not lead to the sequitur that there is no time limit for transitioning credit." 117. Learned Additional Solicitor General Mr. Devang Vyas submitted that while dealing with the challenge of constitutional validity of fiscal law vires, this court must be guided by principles of statutory interpretation of a fiscal legislation and judicial self restraint. 118. Learned Additional Solicitor G....
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....he following judgments: (i) In the case of State of M.P. v. Rakesh Kohli, (2012) 6 SCC 312, wherein the Hon'ble Apex Court has observed as under:- "32. While dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the court must have regard to the following principles: (i) there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature, (ii) no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found, (iii) the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence, (iv) hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law, and (v) in the field of taxation, the legislature enjoys greater latitude for classification." (ii) In the case of Union of India v. VKC Footsteps (India) (P) Ltd., (2022) 2 SCC 603, wherei....
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....e impermissible for the Court to redraw the boundaries or to expand the provision for refund beyond what the legislature has provided. If the legislature has intended that the equivalence between goods and services should be progressively realised and that for the purpose of determining whether refund should be provided, a restriction of the kind which has been imposed in clause (ii) of the proviso should be enacted, it lies within the realm of policy." (iii) It was submitted that the Hon'ble Apex Court in the case of Shri Ram Krishna Dalmia vs Shri Justice S. Tendulkar reported in 1958 AIR 538, 1959 SCR 279, held that there is always presumption in favour of the constitutionality of the constitutionality of enactment and the burden is upon him who attacks it. (iv) It was submitted that in case of Kedar Nath Bajoria And Anr. vs The State Of West Bengal reported in AIR 1954 SC 660, the Hon'ble Apex Court held that Article 14 does not insist the legislative classification should be scientifically perfect or logically complete. (v) In the case of Union of India v. Cosmo Films Ltd. reported in (2023) 9 SCC 244 the Hon'ble Apex Court summed up as under :- "75. Therefore, the....
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....range of individuals than are included in the class of those attended with mischief at which the law aims. Herod ordering the death of all male children born on a particular day because one of them would some day bring about his downfall employed such a classification. 56. The first question, therefore, is, whether the exclusion of establishments carrying on business or trade and employing less than 50 persons makes the classification under-inclusive, when it is seen that all factories employing 10 or 20 persons, as the case may be, have been included and that the purpose of the law is to get in unpaid accumulations for the welfare of the labour. Since the classification does not include all who are similarly situated with respect to the purpose of the law, the classification might appear, at first blush, to be unreasonable. But the Court has recognised the very real difficulties under which legislatures operate difficulties arising out of both the nature of the legislative process and of the society which legislation attempts perennially to reshape and it has refused to strike down indiscriminately all legislation embodying classificatory inequality here under consideration. Mr ....
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....ot prevent legislature from introducing a reform i.e. by applying the legislation to some institutions or objects or areas only according to the exigency of the situation and further classification of selection can be sustained on historical reasons or reasons of administrative exigency or piecemeal method of introducing reforms. The law need not apply to all the persons in the sense of having a universal application to all persons. A law can be sustained if it deals equally with the people of well-defined class-employees of insurance companies as such and such a law is not open to the charge of denial of equal protection on the ground that it had no application to other persons." 74. Likewise, Javed v. State of Haryana (Javed v. State of Haryana, (2003) 8 SCC 369: 2004 SCC (L&S) 561 observed that there is no constitutional compulsion that a law or policy should be implemented all at once (SCC p. 383, para 16) "16. A uniform policy may be devised by the Centre or by a State. However, there is no constitutional requirement that any such policy must be implemented at one go. Policies are capable of being implemented in a phased manner. More so, when the policies have far-reaching....
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.... Court in series of decisions has held otherwise holding that right to ITC is neither a vested right, in fact it is in nature of benefit/concession. It was further submitted that the right to refund of ITC stems from the main right to ITC, hence is an ancillary right. It was submitted that in case of ALD Automotive Pvt. Ltd. v. CTO reported in [2018] 58 GSTR 468 (SC), Apex Court has observed as under :- "32. The input credit is in nature of benefit/concession extended to dealer under the statutory scheme. The concession can be received by the beneficiary only as per the scheme of the Statute. Reference is made to judgment of this Court in Godrej and Boyce Mfg. Co. Pvt. Ltd. and Others v. Commissioner of Sales Tax and Others, (1992) 3 SCC 624. Rules 41 and 42 of Bombay Sales Tax Rules, 1959 provided for the set off of the purchase tax. This Court held that Rule making authority can provide curtailment while extending the concession. In paragraph 9 of the judgment, following has been laid down: - "9... In law (apart from Rules 41 and 41-A) the appellant has no legal right to claim set-off of the purchase tax paid by him on his purchases within the State from out of the sales tax ....
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....llow the procedure and Rule 6 (b). (ii) and produce the relevant materials required under the said Rule. Without producing the specified documents as prescribed thereunder a dealer cannot claim the benefits provided under Section 8 of the Act. Therefore, we are of the opinion that the requirements contained in Rule 6(b) (ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory..... 34. This court had occasion to consider the Karnataka Value Added Tax Act, 2013 in State of Karnataka v. M.K. Agro Tech.(P) Ltd., (2017) 16 SCC 210 = 2017 (6) G.S.T.L. 125 (S.C.). This Court held that it is a settled proposition of law that taxing statute are to be interpreted literally and further it is in the domain of the legislature as to how much tax credit is to be given under what circumstances. Following was stated in paragraph 32: - "32. Fourthly, the entire scheme of the KVAT Act is to be kept in mind and Section 17 is to be applied in that context. Sunflower oil cake is subject to input tax. The legislature, however, has incorporated the provision, in the form of Section 10, to give tax credit in respect of such goods which are used as inputs/raw material for manufacturing othe....
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....ssion granted by virtue of Section 19. As a fortiori, conditions specified in Section 10 must be fulfilled. In that hue, we find that Section 10 makes original tax invoice relevant for the purpose of claiming tax. Therefore, under the scheme of the VAT Act, it is not permissible for the dealers to argue that the price as indicated in the tax invoice should not have been taken into consideration but the net purchase price after discount is to be the basis. If we were dealing with any other aspect dehors the issue of ITC as per Section 19 of the VAT Act, possibly the arguments of Mr. Bagaria would have assumed some relevance. But, keeping in view the scope of the issue, such a plea is not admissible having regard to the plain language of sections of the VAT Act, read along with other provisions of the said Act as referred to above." 37. The Constitutional validity of Section 19 (20) was upheld. The above decision is a clear authority with proposition that Input Tax Credit is admissible only as per conditions enumerated under Section 19 of the Tamil Nadu Value Added Tax Act, (2006). The interpretation put up by this Court on Section 3 (2) and 3(3) and Section 19 (2) is fully attract....
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....petitioners are mainly canvassed on a premise that ITC is matter of entitlement and that right to refund of ITC is vested right, therefore curtailment of such right under Rule 96 (10) of CGST Rules is ultra vires. It was submitted that as demonstrated herein above, the entire premise of the argument is faulty because when the foundational plinths of facts are faulty, entire structure is bound to fall. 124. Learned Additional Solicitor General thereafter submitted that contention of the petitioners that a classification has been created between the exporters who are claiming benefits under various schemes like AA, Merchant Exporters etc. and regular exporters under Rule 96(1)is concerned, such classification need not meet the test of scientific precision. It was submitted that the exporters are still able to utilise the ITC and in fact also claim refund of the same through another mode, hence, the benefit is also not as such curtailed. It was therefore submitted that mode, manner and time period as to when such benefit/concession can be conferred is an exclusive domain under the rule making power of the Government on recommendation of GST Council. 125. It was submitted that in the....
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....se on hand. In the present case, the two different classes of exporters are in existence, one that claim benefits of procuring duty free raw material or at concessional rate under specified notifications and other exporters which cannot be said to give the treatment of equals being treated unequally. 128. It was submitted that after VKC Footsteps(supra), the Hon'ble Apex Court in case of Union of India v. Cosmo Films Ltd., reported in (2023) 9 SCC 244 once again had the occasion to consider such issue on pre import exemption, where it was observed as under: 78. The object behind imposing the "pre-import condition" is discernible from Para 4.03 of FTP and Annexure 4-J of the HBP; that only few articles were enumerated when FTP was published, is no ground for the exporters to complain that other articles could not be included for the purpose of "pre-import condition"; as held earlier, that is the import of Para 4.03(i). The numerous schemes in FTP are to maintain an equilibrium between exporters' claims, on the one hand and on the other hand, to preserve the Revenue's interests. Here, what is involved is exemption and postponement of exemption of IGST, a new levy altog....
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....es, 2017 (hereinafter referred to as the said rules), in rule 36, in sub-rule (3), after the words "suppression of facts", the words and figures "under section 74" shall be inserted. 3. In the said rules, in rule 46, with effect from 1st day of November, 2024,- (a) after clause (s), the second proviso shall be omitted; (b) in the third proviso, for the words "Provided also that in the case of", the words "Provided further that in the case of" shall be substituted; 4. In the said rules, after rule 47, the following rule shall be inserted with effect from the 1st day of November, 2024, namely:- "47A. Time limit for issuing tax invoice in cases where recipient is required to issue invoice.- Notwithstanding anything contained in rule 47, where an invoice referred to in rule 46 is required to be issued under clause (f) of sub-section (3) of section 31 by a registered person, who is liable to pay tax under sub-section (3) or sub-section (4) of section 9, he shall issue the said invoice within a period of thirty days from the date of receipt of the said supply of goods or services, or both, as the case may be.". 5. In the said rules,, in rule 66, in sub-rule (1), after the wor....
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....erving the case for judgment, and for passing order/s that may be deemed fit and appropriate in this regard by this Hon'ble Court; (C) That this Hon'ble Court may be pleased to pass any further order and issue any further direction that may be deemed fit and proper in the facts of the present case." 132. After hearing both the sides, following order was passed on 22.11.2024 recalling order dated 19.09.2024 and this group of matters was ordered to be re-notified: "1. Heard learned advocate Mr. Paresh Dave for the applicants-original petitioners, learned advocate Mr. Siddharth Dave and learned advocate Mr. C.B. Gupta for the respective respondents. 2. It was submitted by learned advocate Mr. Dave for the applicants that after the order passed by this Court on 19th September, 2024 reserving the matter for judgment, GST Council in its 54th Meeting recommended to prospectively omit Rule 96 (10), Rule 89 (4A) and Rule 89 (4B) from the CGST Rules, 2017. It was further submitted and pointed out that by Notification No. 20/2024-Central Tax dated 08th October, 2024, Central Board of Indirect Taxes & Customs framed Central Goods & Service Tax (Second Amendment) Rules, 2024 and ....
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....een made applicable. In the case before us, sec. 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132A of the D. I. Rs. for the two obvious reasons that sec. 6 only applies to repeals and not to omission, and applies when the repeal is of a Central Act or Regulation and not by a Rule. If sec. 6 of the General Clauses Act had been applied, no doubt, this complaint against the two accused for the offence punishable under R. 132A of the D. I. Rs. could have been instituted even after the repeal of that rule. 18. The last case relied upon is J. K. Gas Plant Manufacturing Co. (Rampur) Ltd. V/s. King Emperor, 1947 FCR 141. In that case, the Federal Court had to deal with the effect of sub-sec. (4) of sec. 1 of the Defence of India Act, 1939 and the Ordinance No. XII of 1946 which were also considered by the Allahabad High Court in the case of Seth Jugmender Das (supra). After quoting the amended sub-sec. (4) of sec. 1 of the Defence of India Act, the Court held:- "The express insertion of these saving clauses was no doubt due to a belated realisation that the provisions of sec. 6 of the General Clauses Act (X of 1897) apply only to repealed statutes and not....
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....hat an offence previously committed under Rule 132A of the D. I. Rs., would continue to remain punishable as an offence of contravention of sec. 4 (1) of the Act, nor was any provision made permitting operation of Rule 132A itself so as to permit institution of prosecutions in respect of such offences. The consequence is that the present complaint is incompetent even in respect of the offence under Rule 132A (4). This is the reason why we hold that this was an appropriate case where the High Court should have allowed the applications u/s. 561-A of the Code of Criminal Procedure and should have quashed the proceedings on this complaint." 136. It was therefore, submitted that omission of Rule 96 (10) by Notification No. 20/2024 would be applicable to all pending cases as the same may not be applicable retrospectively to the cases which have already achieved finality. 137. Learned Senior Advocate Mr. Sridharan further submitted that effect of repealing the Rules without a saving clause would be applicable to all the pending cases. In support of his submission, reliance was placed on the decision of Hon'ble Apex Court in case of Kolhapur Canesugar Works Ltd. and another v. Union of I....
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....Cases 359, wherein the Hon'ble Apex Court considered the Doctrine of Merger holding that it is merely a common law doctrine based on principles of propriety in the hierarchy of judicial system which postulates merger of the subordinate forum's decision in the decision of the appellate or revisional forum modifying, reversing or affirming such decision and thereafter only the latter decision exists in the eye of law. However, it was further held that doctrine of merger is not of universal or unlimited application but its applicability has to be determined keeping in view the nature of jurisdiction exercised by the superior forum and the content or subject matter of challenge. 141. Reliance was placed on the decision of Hon'ble Apex Court in case of Union of India and others v. West Coast Paper Mills Ltd. and another reported in (2004) 2 Supreme Court Cases 747, wherein Hon'ble Apex Court while dealing with section 46-A of the Railways Act, 1890 and powers of the Supreme Court under Article 136 of the Constitution of India held that the judgment of the Tribunal becomes wide open once Special leave is granted and appeal is admitted by the Supreme Court so as to go into both the quest....
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....e legislature intended for giving effect to the amendment etc. of Rules, Notifications, Orders then such specific provisions are incorporated. Reference was made to section 38A of the Central Excise Act, 1944 and section 159A of the Customs Act, 1962 which specifically provides that unless a different intention appears, amendment, repeal, supersession or rescinding shall not affect the previous operation of any rule. Reference was made to Notification No. 20/2017 dated 30.06.2017 for the Cenvat Credit Rules, 2004 which specifically shows that such rules were framed in supersession of the Cenvat Credit Rules, 2004, except in respect of things done or omitted to be done before such supersession. It was therefore, submitted that in Notification No. 20/2024, there is no exception to the things done or omitted to be done before omission of Rule 96 (10) of the CGST Rules. 145. Learned Senior Advocate Mr. Sridharan submitted that during the pendency of these matters, Rule 96 (10) has been omitted by Notification No. 20/2024 and such omission would be applicable to the pending matters. In support of his submission reliance was placed on the following decisions: 1) Mathew M. Thomas and o....
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....nt is made operative would not conclusively decide the issue and the Court has to examine the scheme of the statute prior to amendment and subsequent to the amendment to determine whether the amendment is clarificatory or substantive. It was therefore, submitted that the circumstances under which the amendment was brought and consequences of the amendment will have to be taken care of while deciding such a question. 150. It was submitted that Rule 96 (10) of the CGST Rules was causing difficulty for the exporters in claiming export benefit of refund as the said rule referred to four exemption notifications which are still in operation and there is no amendment in the said notifications even after omission of Rule 96 (10) and the situation remains the same as regards the procurement of inputs for export transactions and also about exporting the goods on payment of tax under claim of refund or export without tax under bond/LUT and claiming refund of unutilised ITC of input transactions attributable to the exports. It was submitted that the contention raised on behalf of the Revenue justifying the restriction of sub-rule (10) of Rule 96 has been that the exporters were taking double ....
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....d Motors (P) Ltd. v. Commissioner of Income Tax, Delhi reported in (1997) 3 SCC 472. 2) Commissioner of Income Tax v. Alom Extrusions Ltd. reported in (2010) 1 SCC 489. 3) ITO v. Dhan Sai Srivas reported in MANU/CG/0071/2009 of Chhattisgarh High Court. 156. Learned advocate Mr. Dave submitted that amendment made for removal of or remedying unintended or inadvertent error of withdrawing any benefit is held to be clarificatory or curative in nature and such amendment would cover the intervening period also. It was therefore, submitted that omission of Rule 96 (10) is required to be considered for removal of hardship to the assessee being curative in nature. Reliance was placed on the following decisions: 1) Shree Renuka Sugar Ltd. v. Union of India reported in 2018 (360) ELT 483 (Guj.)of this Court. 2) W.P.I.L. Ltd. Commissioner of Central Excise, Meerut, U.P. reported in 2005 (181) ELT 359 (SC). 3) Ralson (India) Ltd. v. Commissioner of Central Excise, Chandigarh reported in 2015 (341) ELT 234 (SC). 157. Learned advocate Mr. Dave further submitted that techniques are not unknown where an amendment or a statute is considered either clarificatory, declaratory or even curat....
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....ation made to have a retrospective operation and therefore, the Notification NO. 20/2024 would have to be presumed to be prospective in absence of express terms or necessary implication for its retrospective applicability by the rule making authority. 163. It was submitted that GST Council, during its 54th meeting has recommended to omit Rule 96 (10) of the CGST Rules prospectively along with other rules and accordingly, the Notification dated 8th October, 2024 was issued omitting Rule 96 (10) in the CGST Rules. 164. It was further submitted that the GST Council is the expert apex body in the field of GST regime and therefore, there is no question of any presumption of legislative intention contrary to the said Notification which has been issued based on the recommendation of the GST Council with prospective effect. 165. It was further submitted that the petitioners have not challenged Notification No. 20/2024 dated 8th October, 2024 by which Rule 96 (10) stands omitted with prospective effect and therefore, in absence of any such challenge or in absence of any such specific pleadings, the petitioners cannot be allowed to contend contrary to the legal presumption of prospective ....
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....or to impair existing obligations and the presumption against retrospective operation is not applicable to curative or declaratory statutes and four factors relevant in inferring necessary implication of retrospectivity of statute are stated i.e. i) general scope and purview of the statute; ii) the remedy sought to be applied; iii)the former state of the law; and iv) what it was the legislature contemplated. It was held that the rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right. 170. With respect to the contention of the petitioners of applicability of Section 6 of the General Clauses Act, it was submitted that such contention is also contrary to the settled principle of law as Section 6 of the General Clauses Act, would have no application in the facts of the present case where Rule 96 (10) has been omitted as Section 6 of General Clauses Act, would apply to repeal and not to omission of a Central Act or Regulations and not of a Rule as has been held in case of Rayala Corpon. (P) Ltd. (supra). 171. It was submitted that in the facts of the case, Revenue has already invoked its jurisdiction based....
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....onstitution of India or not? ii) Whether doctrine of proportionality and reasonableness is applicable while judging the validity of Rule 96 (10) motive or not? iii) Whether rational behind the applicability of Rule 96 (10) is arbitrary and discriminatory or not? iv) Whether the exporters can be prevented to export goods under the rebate claim after paying duty on the ground of having double benefit under the Advance Authorisation License and refund of input tax credit or not? v) Whether Rule 96 (10) creates "class within class" of the exporters comprising of one class which do not import any goods using Advance Authorisation Scheme and the exporters who are importing goods utilising the said scheme? vi) Whether refund of IGST can be denied even if only few items are being imported utilising Advance Authorisation Scheme to manufacture the export goods? vii) Whether Rule 96 (10) is ultra vires to section 164 of the GST Act as the said Rule cannot be said to carry out the provisions of the Act and therefore, beyond the rule making power of the Government? viii) Whether the condition imposed in Rule 96 (10) to deny the refund of IGST paid on export goods for options exerc....
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....3rd October, 2017, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide Number G.S.R. 1320(E), dated the 23rd October, 2017 or Notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (1), vide Number G.S.R. 1321(E), dated the 23rd October, 2017 has been availed; or (b) availed the benefit under Notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (1), vide number G.S.R. 1272(E), dated the 13th October, 2017 or Notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary. Part II, section 3, sub-section (t), vide Number G.S.R. 1299(E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme." 176. On coming into force of the Rule 96 (10), the refund claims of the petitioners for IGST paid on export of goods or services were denied even if the petitioners had utilised only a small portion of the inputs imported w....
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....sed on behalf of the petitioners that Rule 10 of Rules, 2024 whereby Rule 96 (10) of the CGST Rules has been omitted, would be applicable retrospectively as if such rule has never been in existence, it is required to be examined as to whether omission of Rule 96 (10) was curative, and remedial or not and whether the date from which the amendment has been operative would decide the issue of applicability of Rule 96 (10) from the said date or not. 184. The fact remains that Rule 96 (10) of the CGST Rules has been recommended to be omitted by GST Council prospectively to remove the difficulties of the exporters in claiming refund of the IGST paid on export of goods on account of four exemption notifications from payment of duty for importation of the inputs utilised for manufacture of goods to be exported. 185. Sub-rule(2) of Rule 1 of the Rules, 2024 clearly stipulates that the rules save as otherwise provided in the said rules, shall come into effect on the date of the publication in the Official Gazette i.e 8th October, 2024. 186. Reliance placed by the petitioners on decision of Hon'ble Apex Court in case of CIT-I Ahmedabad v. Gold Coin Health Food Pvt. Ltd.(supra) to examine t....
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....plicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law." 188. In his book "Maxwell on the Interpretation of Statutes", Twelfth Edition, with regard to retrospective applicability of the amendment, P.St. J. Langan has stated that; "Upon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication." 189. It is further observed with regard to rights of the parties to pending cases that "But if the necessary intendment of a statute is to affect the rights of parties to pending actions, the Court must give effect to the intention of the leg....
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....d by necessary implication especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole. 14. The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect." 193. Reliance placed on behalf of the petitioners in case of CIT, Kolkatta v. Calcutta Export Company (supra) as to whether omission of Rule 96 (10) by Rules, 2024 is curative in nature and therefore, should be applied retrospectively i.e. from the date of inserti....
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....gation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 6-A. Repeal of Act making textual amendment in Act or Regulation.- Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 24. Continuation of orders, etc., issued under enactments repealed and re-enacted.-Where any Central Act or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any [appointment, notification], order, scheme, rule, form or bye- law, [made or....
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....s to us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to a legislature then the same would, in our opinion, attract the incident of the saving found in Section 6 for the rules of construction embodied in the General Clauses Act are, so to speak, the basic assumptions on which statutes are drafted..." (At page 484) 35. The two later Constitution Bench judgments also did not have the benefit of the aforesaid exposition of the law. It is clear that even an implied repeal of a statute would fall within the expression "repeal" in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Bench in M.A. Tulloch & Co. that only the form of repeal differs but there is no difference in intent or substance. If even an implied repeal is covered by the expression "repeal", it is clear that repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be....
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....tory Interpretation, 12th Edition, the learned author has criticized the aforesaid judgments in the following terms: "Section 6 of the General Clauses Act applies to all types of repeals. The section applies whether the repeal be express or implied, entire or partial or whether it be repeal simpliciter or repeal accompanied by fresh legislation. The section also applies when a temporary statute is repealed before its expiry, but it has no application when such a statute is not repealed but comes to an end by expiry. The section on its own terms is limited to a repeal brought about by a Central Act or Regulation. A rule made under an Act is not a Central Act or regulation and if a rule be repealed by another rule, section 6 of the General Clauses Act will not be attracted. It has been so held in two Constitution Bench decisions. The passing observation in these cases that "section 6 only applies to repeals and not to omissions" needs reconsideration for omission of a provision results in abrogation or obliteration of that provision in the same way as it happens in repeal. The stress in these cases was on the question that a 'rule' not being a Central Act or Regulation, as ....
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....ns, which were commenced, prosecuted and concluded while it was an existing law. Therefore, repeal without any saving clause would destroy any proceeding whether or not yet begun or whether pending at the time of enactment of the repealing Act and not already prosecuted to a final judgment so as to create a vested right. However by incorporation of Section 38 (2) in the English Interpretation Act, 1889 which deals with effect of repeal in future Acts which is equivalent to section 6 of the General Clauses Act has been analysed by the Hon'ble Apex Court in case of Gammon India Ltd v. Special Chief Secretary and others (supra) as under: "50. The next question is whether the application of that principle could or ought to be limited to cases where a particular form of words is used to indicate that the earlier law has been repealed. The entire theory underlying implied repeals is that there is no need for the later enactment to state in express terms that an earlier enactment has been repealed by using any particular set of words or form of drawing but that if the legislative intent to supersede the earlier law is manifested by the enactment of provisions as to effect such supersess....
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....osted before the Division Bench for hearing. xxx 8. It is well settled that the word "Proceedings" shall include the proceedings at the appellate stage. It is sufficient to refer to the Judgement of this Court in Garikapati Veeraya V/s. N. Subiah Choudhry, AIR 1957 SC 540, wherein the Court said at page 553 :- "(i) That the legal pursuit of a remedy, suit appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceedings." Hence we are unable to persuade ourselves to agree with the view expressed by the Full Bench of the High Court in the Judgement under appeal that the circular would apply only to proceedings pending before the Competent Authority." 200. Crawford on "Statutory Construction" dealing with the general effect of the repeal of an Act states the law in America to be as follows: "A repeal will generally, therefore, divest all inchoate rights which have arisen under the repealed statute, and destroy all accrued causes of action based thereon. As a result, such a repeal, without a saving clause, will destroy any proceedings whether not yet begun, or whether pending at the t....
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....judgment of the lower court has been withdrawn by an absolute repeal." 203. In view of above conspectus of law, it appears that the recommendations of the GST Council to omit Rule 96 (10) prospectively would apply to all the pending proceedings and cases. However, the contention on behalf of the Revenue that the petitioners have filed these petitions challenging the validity of Rule 96 (10) cannot be said to be pending proceedings is without any basis because the petitioners have also challenged the show cause notices as well as orders-in- original passed by the respondents by invoking Rule 96 (10) for rejecting the refund claims of the petitioners and therefore, it can be said that these petitions are nothing but pending proceedings before the Court which has not achieved finality when the Notification No. 20/2024 came into force with effect from 8th October, 2024. 204. By Notification No. 20/2024 Rules, 2024 have been notified and as per Rule 10 of the said Rules, Rule 96 (10) of the CGST Rules has been omitted with prospective effect. This would give rise to three situations, firstly, whether the same would be applicable retrospectively, or secondly, prospectively or thirdly, ....