TaxTMI 
TaxTMI 
2025 (6) TMI 1156
X X X X Extracts X X X X
X X X X Extracts X X X X
.... NO. 6610 of 2023, R/SPECIAL CIVIL APPLICATION NO. 4002 of 2024, R/SPECIAL CIVIL APPLICATION NO. 5528 of 2022, R/SPECIAL CIVIL APPLICATION 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....N NO. 12503 of 2024, R/SPECIAL CIVIL APPLICATION NO. 15546 of 2023, R/SPECIAL CIVIL APPLICATION NO. 16421 of 2021, R/SPECIAL CIVIL APPLICATION 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/S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al goods used by the petitioner were chargeable to Central Excise duty under the Central Excise Act, 1944 and the input services used by the petitiones was 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oods or services on payment of Integrated Tax and claim refund of such tax paid. To claim the refund/rebate under section 16 of the IGST Act, provisions of section 54 of the 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 (oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 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 effec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.". 3. In the said rules, in rule 96, for sub-rule (10), the following sub-rule shall be substituted, namely:- "(10) The persons claiming refund of integrated tax 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, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the petitioners have paid IGST on the exports made during the period after 01.07.2017 on bona fide belief that the petitioners are entitled to claim the refund in terms of section 54 of the GST Act read with section 16 of the IGST Act, refund claims were filed on the input tax credit on input of capital goods and input services procured from the domestic market by the 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 reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... input tax credit and there is no matching concept of input tax credit availed by the petitioners which was utilised for payment of IGST as there is no bifurcation in the electronic credit ledger vis-a-vis the input tax credited therein to bifurcate as to whether the same relates to inputs, input services or capital goods. 31. It was submitted that as per Rules 89 (4) and 89 (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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioners were entitled to have the option to pay the excise duty at the relevant time. 34. It was submitted that now in GST regime by utilising the input tax credit for payment of IGST from the Electronic Credit Ledger and thereafter get the refund of the same on the export of the goods which would ultimately accelerate the refund to the extent of GST on value addition is merely a cash 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 decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f State of Maharashtra v. Mrs. Kamal Sukumar Durgule and others reported in (1985) 1 Supreme Court Cases 234 and in case of the State of Kerala v. Haji K Haji K. Kutty Naha and others reported in (1969) 1 SCR 645. 10) In support of his submission that there must be a rational basis of discrimination, reliance was placed on decision of Hon'ble Supreme Court in case of State of U.P.& Ors. v. Deepak Fertilizers & Petrochemical Corporation Ltd reported 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 offensi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....974) 3 SCC 251. 19) With respect to his submission of retrospective operation of rule, reliance was placed on the decision of Hon'ble Supreme Court in case of CIT v. Essar Teleholdings Ltd. reported in (2018) 3 SCC 253. 20) To highlight the legal principles that may be relevant in adjudicating cases where subordinate legislation is challenged on the ground of being ultra vires the parent Act, reliance was placed on the decision of Hon'ble Supreme Court in case of Naresh Chandra Agrawal v. ICAI reported in 2024 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 R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the Act made by the Parliament cannot be taken away by a Rule; and therefore Rule 96 (10) of the CGST Rules is ultra vires Section 16 of the IGST Act. 41. It was further submitted that Rule 96 (10) forces or compels the petitioners to avail only one option, about claiming refund under the scheme of Section 16 (3) (a) of the IGST Act. The option (which is in the nature of a right) given by the Parliament cannot be denied by a rule made by the executive; and therefore, the rule is ultra vires Section 16 of the IGST Act. In support of such submission, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thorisation, actually procures all other inputs, input services and capital goods on payment of appropriate GST. Input Tax Credit (ITC) of taxes so paid on all other inputs, input services and capital goods is allowed under Section 17 of the CGST Act and this right to avail ITC is not taken away or affected in any manner by any provision of the law. It was submitted that if such ITC is not allowed to be utilized for paying integrated tax on exported goods under claim of refund of such integrated tax, then ITC of all other inputs, input services and capital goods would keep on accumulating 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le (10) of Rule 96 does not serve this objective of the Law, but on the contrary defeats the objective for which Section 16 (3) (b) of the IGST Act is enacted and also the objectives for which Section 54 of CGST Act is enacted and thus there is no nexus between Sub Rule (10) of Rule 96 and the objective of the Government in refunding local levies to the exporters for the export transactions. Therefore, the impugned provision is ultra vires Article 14 of the Constitution, because the provision is unreasonable and arbitrary. 52. Learned advocate Mr. Dave submitted that the case of the respondents is 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 "r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t from 1st October, 2023, for the first time, a power is conferred upon the Government to specify a class of persons and a class of goods or services for exporting on payment of integrated tax and claiming refund of the tax so paid. No such power was vested in the Government prior to the amendment with effect from 1st October, 2023 and therefore Sub Rule (10) of Rule 96 excluding exports of goods for which exemption of any of the Notifications specified under this provision was availed had been without any legal backing. 57. It was submitted that the Government has on the recommendations of the Council notified goods or 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/amendme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chases of declared goods, such refund was sought to be curtailed by the State Government by issuing notification. The notification was sought to be defended by the Government by relying upon the language of the statutory provision which empowered the Government to stipulate conditions for grant of refund. Such contention of the State was negatived by observing as under: "32. While sub-section (6) of section 11 of the GVAT Act permits the State Government to specify any goods or class of goods that shall not be entitled to whole or partial tax credit, the said provision cannot be read to mean that it empowers the State Government 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 grante....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter from such IGST refund amount. 62. It was submitted that liability of interest under Section 50 of the GST Act can arise only in case where a person fails to pay tax to the Government within the prescribed period. There is no statutory provision requiring payment of interest if it is held that refund was erroneously granted. Demand of interest without the backing of any statutory provision is wholly without jurisdiction and illegal. 63. It was submitted that there is no element of any fraud, willful misstatement, suppression or evasion. At best an issue of legal interpretation is involved. It was submitted that imposition of penalty 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 insof....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the IGST Act, 2017. 67. It was submitted that Section 16 (3) (b) of the IGST Act, 2017 as in existence prior to 01.10.2023 permits the registered person to supply the goods on payment of IGST and claim refund thereof subject to such conditions, safeguards and procedure. 68. It was further submitted that the expression "conditions, safeguards and procedure" does not permit the rule-making authority to prescribe "restriction" qua the class of persons by defeating their rights to claim the refunds in respect of entire exports including the exports made without availing any benefits on corresponding procurement of inputs. 69. It was submitted that 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 p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ority is not vested with such powers u/s 16 (3) (b) of the IGST Act, 2017 to prescribe such blanket prohibition qua the persons. 72. Learned advocate Mr. Desai further submitted that Section 16 (4) of the IGST Act, 2017 as introduced vide Finance Act, 2021 w.e.f. 01/10/2023 permits the rule-making authority to prescribe a "class of persons" who are permitted to make Zero-rated supply on payment of IGST. It was submitted that the said amendment further supports the submission that prior to 01/10/2023, Section 16 (3) (b) of the IGST Act, 2017 does not permit the rule-making authority to prescribe restrictions for "persons" in the manner in which it has been done under 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 sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T Act, 2017 as well as Articles 14 and 19 (1) (g) of the Constitution of India. 75. Learned advocate Mr. Anandodaya Mishra for the petitioners contended that delegation by one enactment to the other enactment for specific purpose cannot change the framework of that original delegating enactment. It was submitted that as per the provisions of section 2 (12) of the IGST Act "integrated tax" means the integrated goods and services tax levied under the said Act. Reference was made to sections 16, 20 and 22 of the IGST to explain what is zero rated supply read with application of provisions of Central Goods and Services Tax Act to the IGST Act and power to make rules under the said Act. It was submitted that 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 str....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a legislature which is legally important like the British Parliament and the laws promulgated by which could not be challenged on the ground of Incompetency, and a legislature which enjoys only a limited or a qualified jurisdiction. If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has not, In respect to the subject-matter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers. Such 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 transgres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spose of the contention which has appealed to the High Court based on 'colourable device'. Certainly, this a malignant expression and when flung with fatal effect at a representative instrumentality like the Legislature, deserves serious reflection. If, forgetting comity, the Legislative wing charges the Judicative wing with " colourable' judgments, it will be intolerably subversive of the rule of law. Therefore, we too must restrain ourselves from making this charge except in absolutely plain cases and pause to understand the import of the doctrine of colourable exercise of public power, especially legislative power. In this branch of law, 'colourable' is not tainted with bad faith or evil motive'; it is not pejorative or crooked. 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, colourab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lier Act, the same by itself would attract the said doctrine. An act of mala fide on the part of the legislature also is beyond the province of judicial review. In fact no motive can be attributed to the Legislature for enacting a particular statute. The question in regard to the constitutionality of the statute must be considered keeping in view only the provisions of the Constitution. vi) In case of Reliance Industries Ltd and others v. State of Gujarat and others (CAV Judgment dated 16.04.2020 passed in SCA No. 14206 of 2018), this Court has held as under: "114. It is well known that motive or intention for making an Act or issuing an ordinance is not justifiable before a court of law. Whenever the expressions colourable exercise of power or fraud on Constitution 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 Ro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act. 78. Learned advocate Mr. Jatin Arora for the petitioners has adopted the submissions made by learned Senior Advocate Mr. Sridharan and learned advocate Mr. Paresh Dave. He also relied upon the decision of Hon'ble Apex Court in case of Mathuram Agrawal v. State of Madhya Pradesh reported in (1999) 8 Supreme Court Cases 667, wherein in relation to the municipal tax it was held that there is no tax liability in law if there is ambiguity in the provision as to any of the three components of tax law subject of tax, person who is liable to pay tax and rate at which tax is to be paid. It was submitted that in facts of the case applying rule 96 (10) of the CGST Rules clearly shows the ambiguity with regard to subject of tax and in such circumstances only legislature in amending the 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 Electricit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ule can have the effect of a statutory provision, two conditions must be fulfilled, namely, (1) it must conform to the provisions of the statute under which it is framed; and (2) it must also come within the scope and purview of the rule making power of the authority framing the rule. If either of these two conditions is not fulfilled, the rule so framed would be void....." 67. In Additional District Magistrate (Rev.) Delhi Admn. v. Siri Ram reported in (2000) 5 SCC 451, it has been ruled that it is a well recognised principle 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. 68. In Sukhdev Singh and Others v. Bhagatram Sardar Singh Raghuvanshi 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 re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... context, this Court expressed as under:- "25. It is now a well-settled principle of law that the rule-making power "for carrying out the purpose of the Act" is a general delegation. Such a general delegation may not be held to be laying down any guidelines. Thus, by reason of such a provision alone, the regulation-making power cannot be exercised so as to bring into existence substantive rights or obligations or disabilities which are not contemplated in terms of the provisions of the said Act." 80. Referring to above dictum of law it was submitted that Rule 96 (10) of the CGST Rules goes beyond the rule making powers conferred by the statute and as such same is required to be declared as invalid and the respondent authority could not have exercised the power under section 164 of the GST Act to frame such rule to enlarge the power and scope intended by legislature for denial of refund to 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, the alternative is better suited considering the degree of realizing the government objective and the impact on fundamental rights. xxxx 151. Finally, this Court in Justice KS Puttaswamy (5J) (supra) applied the structured proportionality standard to balance two fundamental rights. In this case, a Constitution Bench of this Court while testing the validity of the Aadhar Act 2016 had to resolve the conflict between the right to informational privacy and the right to food. Justice Sikri writing for the majority held that the Aadhar Act fulfills all the four prongs of the proportionality standard. In the final prong of the proportionality stage, that is the balancing stage, this Court held that one of the considerations was to balance the right to privacy and the right to food. On balancing the fundamental rights, this Court held that the provisions furthering the right to food satisfy a larger public interest whereas the invasion of privacy rights was minimal. 152. However, 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts. In the last stage of the analysis, the Court undertakes a balancing exercise to analyse if the cost of the interference with the right is proportional to the extent of fulfilment of the purpose. It is in this step that the Court undertakes an analysis of the comparative importance of the considerations involved in the case, the justifications for the infringement of the rights, and if the effect of infringement of one right is proportional to achieve the goal. Thus, the first two steps laid down by Baroness Hale are subsumed within the balancing prong of the proportionality analysis." 82. Reference was also placed on concurrent judgment rendered by Hon'ble Mr. Justice Sanjiv Khanna in the aforesaid case giving a definite reasoning which are relied upon by learned advocate Mr. Rastogi as under : "29. The test of proportionality is now widely recognised and employed by courts in various jurisdictions like Germany, Canada, South Africa, Australia and the United Kingdom. However, there isn't uniformity in how 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cal deference is given to the legislature owing to their institutional competence and expertise to determine complex factual legislation and policies. However, factors like lack of parliamentary deliberation and a failure to make relevant enquiries weigh in on the court's decision. In the absence of data and figures, there is a lack of standards by which proportionality stricto sensu can be determined. Nevertheless, many of the constitutional courts have employed the balancing stage 'normatively' by examining the weight of the seriousness of the right infringement against the urgency of the factors that justify it. Examination under the first three stages requires the court to first examine scientific evidence, and where such evidence is inconclusive or does not exist and cannot be developed, reason and logic apply. We shall subsequently be referring to the balancing prong during our application of the test of proportionality. 34. In Germany, the courts enjoy a high judicial discretion. The parliament and the judiciary in Germany have the same goal, that is, to realise the values of the German Constitution. Canadian courts, some believe, in practice give wider discretion t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the present petitioners. Taking recourse to the fact that exemption granted is being misused without identifying the individual cases would be an exercise which can be termed to have been made by the respondents only to deny the exemption granted to the petitioners by way of original notification in pursuance to which they have altered their position. This action on the part of respondents can be termed to be arbitrary in nature. ii) In case of Shreya Singhal v. Union of India reported in (2015) 5 Supreme Court Cases 1, wherein reliance was placed on the decision in case of Kartar Singh v. State of Punjab, (1994) 3 SCC 569 at para 130-131, as under: "130. It is the basic principle of legal jurisprudence that an enactment is void for vagueness if its prohibitions are not clearly defined. Vague laws offend several important values. It is insisted or emphasized that laws should give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly. Vague laws may trap the innocent by not providing fair warning. Such a law impermissibly delegates basic policy matters to policemen and also judges for resolutio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing authority. A rule-making authority has no plenary power. It has to act within the limits of the power granted to it." 86. It was further submitted that the intention of the zero rated supply is to make the entire supply chain of exports as tax free i.e. no tax to be imposed both on inputs as well as outputs. Therefore, denying the refund in the present case would lead to imposing tax on the exporters which would be against the scheme of zero-rated supply. In support of such submission reliance was placed on the decision of Karnataka High Court in case of M/s. Tonbo Imaging India Pvt. Ltd. v. Union of India and others reported in 2023 SCC Online Kar 140, wherein it is held as under : "17. In my considered opinion, the impugned amendment to Rule 89 (4) (C) of the CGST Rules is illegal, arbitrary, unreasonable, irrational, unfair, unjust and ultra vires Section 16 of the IGST Act and Section 54 of the CGST Act for the following reasons:- (a) Rule 89 (4)(C) of the CGST Rules is ultra vires Section 54 of the CGST Act read with Section 16 of the IGST Act; the very intention of the zero-rating it to make entire supply chain of "exports" tax free, i.e., to fully &#....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia defended the constitutional validity of fiscal law vires on various grounds. Learned Additional Solicitor General Mr. Vyas at the inception referred to the chronology of amendments made to Rule 96 (10) of the CGST Rules as under: "a. Notification No. 75/2017 Central Tax dated 29.12.2017 inserted rule 96 (9) in the CGST Rules with effect from 23rd October, 2017 which restricted the person from claiming refund of IGST paid on export of goods or services, if he has received supplies on which the supplier has availed benefit of duty-free/concessional procurement under notification No. 48/2017-Central Tax dated 18th October, 2017 or notification No. 40/2017-Central Tax (Rate) dated 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated 23rd October, 2017. Notification No. 75/2017-Central Tax dated 29.12.2017 was issued after obtaining approval of the GST Implementation Committee (GIC) and was ratified by the GST Council in the 25th meeting held on 18.01.2018. b. Rule 96 (9) was subsequently substituted by Rule 96 (9) & Rule 96 (10) by Notification No. 3/2018 CT dated 23.01.2018 w.e.f. 23.10.2017 vide which the restriction on availing refund throu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was even clarified by Circular No. 70/44/2018 GST dated 26.10.2018 and Circular No. 125/44/2019-GST dated 18.11.2019 wherein it was clarified that: "Any exporter who himself/herself imported any inputs/capital goods in terms of notification Nos. 78/2017-Customs and 79/2017-Customs both dated 13.10.2017, before the issuance of the notification No. 54/2018 Central Tax dated 09.10.2018, shall be eligible to claim refund of the Integrated tax paid on exports. Further, exporters who have imported inputs in terms of notification Nos. 78/2017-Customs dated 13.10.2017, after the issuance of notification No. 54/2018-Central Tax dated 09.10.2018, would not be eligible to claim refund of Integrated tax paid on exports. However, exporters who are receiving capital goods under the EPCG scheme, either through import in terms of notification No. 79/2017-Customs dated 13.10.2017 or through domestic procurement in terms of notification No. 48/2017-Central Tax, dated 18.10.2017, shall continue to be eligible to claim refund of Integrated tax paid on exports and would not be hit by the restrictions provided in Sub-rule (10) of rule 96 of the CGST Rules." e. Further, vide N....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....f. 23.10.2017 under Rule 96 (10) vide Notification No. 16/2020-CT dated 23.03.2020 providing that if the exporter has not availed benefit of IGST and Compensation Cess exemption under the said notifications, the exporter can avail the refund of tax paid on the exports. Thus, it can be stated that the intention of the legislature is very clear to provide refund of IGST only in those cases where tax paid inputs have been used in making zero-rated supplies and to restrict the same when the inputs are procured duty free. 95. It was further submitted that the fundamental principle governing the provisions of refund is that in the case of exports, taxes are not exported and accordingly, the tax suffered on the inputs used in the exported goods is refunded to the taxpayer. However, where duty has not been paid on the inputs used in the exported goods, refund of IGST would tantamount to encashment of ITC, which is against the fundamental principle of taxation and also beyond the scope of Section 16 (3) (b) of the IGST Act, 2017. Accordingly, provision of Rule 96 (10) of the CGST Rules was formulated to avoid encashment of ITC. Thus, the legislative intent was to give refund of IGST onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncil, make rules for carrying out the provisions of the Act. Sub-section (3) of Section 164 of the GST Act and sub-section (3) of section 22 of IGST Act explicitly provides for the power to give retrospective effect to the said rules. 99. It was submitted that the Central Government has, on the recommendations of the GST Council, which is a constitutional body constituted under Article 279A of the Constitution of India, with the mandate of making recommendations to both Centre and State Governments on the matters pertaining to GST, notified various rules related to refund with the purpose of implementing the provisions contained in section 54 of the GST Act and section 16 of the IGST Act and to lay down the modalities/conditions for filing/ processing of the refund claims and one of these rules is Rule 96 (10) of the CGST Rules. 100. It was therefore submitted that the primary intent of Rule 96 (10) is to restrict exporters who are availing duty free/concessional inputs, under certain notifications, for export, from encashing their ITC availed on duty paid inputs, meant to be used in domestic supplies, by using it for IGST payments on export. 101. It was submitted that ref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re to declare such rules ultra vires, then the entire Rule framed under any Act would have to be declared ultra vires, the moment they provide any conditions as safeguards, whatsoever, for being a delegated legislation having encroached upon the power of the Parliament. It was submitted that the process of rule making would have no meaning and statute would not provide for the same either. 105. It was further submitted that so far as the provision of Rule 96 (10) of the CGST Rules, as amended by Notification No. 54/2018-Central Tax dated 09-10-2018, is concerned, it specifically provides for precondition of non-availment of benefit of exemption extended by the Notification No. 79/2017-Customs dated 13-10-2017, in case refund is availed of IGST paid on the goods exported. The use of the phrase "should not have availed" in the said Notification No.54/2018-Central Tax dated 09-10-2018, has clearly put a condition of non-availment of benefit of the exemption notification if an exporter wants to avail benefit of IGST refund. Therefore, for claiming refund of IGST, benefit of exemption of IGST on imports under specified notifications stands barred by law, and the exporter would not be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reto from the inception of the Rule 96 (10) of the CGST Act. Therefore, in effect Notification No. 39/2018 dated 4th September, 2018 shall remain in force as amended by the Notification No.54/2018 by substituting sub-rule (10) of Rule 96 of CGST Rules, in consonance with subsection (3) of Section 54 of the CGST Act and Section 16 of the IGST Act. The Notification No. 54/2018 is therefore held to be effective w.e.f. 23rd October 2017. Rule is made absolute to the aforesaid extent, with no order as to costs." 108. Referring to above judgment it was submitted that this Court has not found any of the provisions of Rule 96 (10) being violative of provisions of Section 16 of IGST Act 2017 read with Section 54 of the GST Act. Further, at present no order by any higher court has been passed which is contrary to the said decision of the this Court. 109. Learned Additional Solicitor General Mr. Devang Vyas in order to assail the argument put forth by the petitioners that Rule 96 (10) is violative of Article 14 and Article 19 (1) (g) and the freedom of trade and commerce provided in the Constitution of India, submitted that in the decisions of Hon'ble Apex Court in the cases of E.P.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or service or both supplied." Further, section 164 (1) of the CGST Act provides that the Government may, on the recommendations of the Council, by notification, make rules for carrying out the provisions of this Act, accordingly, the restrictions on refund of IGST under certain conditions under Rule 96 (10) have the authority of section 16 (3) (b) of the IGST Act, 2017. 113. It was further submitted that the rules governing the refund have been formulated after due deliberations by the GST Council, which is a constitutional body constituted under Article 279A of the Constitution of India. Moreover, refund is not an unfettered right and the government is well within its power to impose certain checks and restriction on the recommendation of the GST Council in order to allow only legitimate refund claims within the broader parameters of the law and principles of taxation. In view of the above, it was submitted that Rule 96 (10) of the CGST Rules is not ultra vires the rule making power under section 164 of the GST Act, as the rule is consistent with the provisions of section 16 (3) (b) of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le making powers of the government for giving effect to the provisions of the GST Act wherein it is held as under: "17. Section 140 of the CGST Act read with Rule 117 of the CGST Rules enables a registered person to carry forward the accumulated ITC under erstwhile tax legislations and claim the same under the CGST Act. In effect, it is a transitional provision as is evident both from Section 140 and Rule 117. In light of the judgment of the Supreme Court in Jayam, the contention of the learned counsel for the Petitioner to the effect that ITC is the property of the Petitioner cannot be countenanced and ITC has to be construed as a concession. In addition, it is evident that ITC cannot be availed of without complying with the conditions prescribed in relation thereto. Prior to the amendment to Section 140 of the CGST Act, the power to frame rules fixing a time limit was arguably not traceable to the un-amended Section 140 of the CGST Act, which contained the words "in such manner as may be prescribed", because such words have been construed by the Supreme Court in cases such as Sales Tax Officer Ponkuppam v. Κ.Ι. Abraham [(1967) 3 SCR 518] as not conferring the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud where Frankfurter, J., said in his inimitable style: "In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w of the legislation or make out a ground for invalidating a validly enacted law unless it infringes constitutional parameters. While adopting the constitutional framework of a GST regime, Parliament in the exercise of its constituent power has had to make and draw balances to accommodate the interests of the States. Taxes on alcohol for human consumption and stamp duties provide a significant part of the revenues of the States. Complex balances have had to be drawn so as to accommodate the concerns of the States before bringing them within the umbrella of GST. These aspects must be borne in mind while assessing the jurisprudential vision and the economic rationale for GST legislation. But abstract doctrine cannot be a ground for the Court to undertake the task of redrawing the text or context of a statutory provision. This is clearly an area of law where judicial interpretation cannot be ahead of policy-making. Fiscal policy ought not be dictated through the judgments of the High Courts or this Court. For it is not the function of the Court in the fiscal arena to compel Parliament to go further and to do more by, for instance, expanding the coverage of the legislation (to liquor, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that a section of assessees order their affairs, to be in accord with the new law. Therefore, the exclusion of benefit of imports in anticipation of AAs, and requiring payment of duties, under Sections 3 (7) and (9) of the Customs Tariff Act, 1975, with the "pre-import condition", cannot be characterised as arbitrary or unreasonable. 73. This Court has held, on previous occasions, that when reform by way of new legislation is introduced, the doctrine of classification cannot be applied strictly, and that some allowance for experimentation, to observe the effect of the law, is available to the executive or legislature. This was emphasised in State of Gujarat v. Shri Ambica Mills Ltd. State of Gujarat v. Shri Ambica Mills Ltd., (1974) 4 SCC 656 : 1974 SCC (L&S) 381]: (SCC pp. 675-78, paras 55-56 & 64-66) "55. A classification is under-inclusive when all who are included in the class are tainted with the mischief but there are others also tainted whom the classification does not include. In other words, a classification is bad as under-inclusive when a State benefits or burdens persons in a manner that furthers a legitimate purpose but does not confer the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n in that of economic Regulation and that it is making a vigorous use of the equal protection clause to strike down legislative action in the area of fundamental human rights. / See "Developments Equal Protection", 32 Harv Law Rev 1065, 1127.] *** 65. The question whether, under Article 14, a classification is reasonable or unreasonable must, in the ultimate analysis depend upon the judicial approach to the problem. The great divide in this area lies in the difference between emphasising the actualities or the abstractions of legislation. The more complicated society becomes, the greater the diversity of its problems and the more does legislation direct itself to the diversities. *** 66. That the legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry, that exact wisdom and nice adaption of remedies cannot be required, that judgment is largely a prophecy based on meagre and uninterpreted experience, should stand as reminder tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide." 77. In R.K. Garg (R.K. Garg v. Union of India, (1981) 4 SCC 675] this Court similarly spelt out the circumscribed role that the court has, in considering the validity or constitutionality of fiscal laws, or economic measures, stating that "the court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved". Likewise, in Aashirwad Films v. Union of India (Aashirwad Films v. Union of India, (2007) 6 SCC 624) this Court observed: "66.... The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways. Even so, large latitude is allowed to the State for classification upon a reasonable basis and what is reasonable is a question of practical details and a variety of factors which the court will be reluctant and perhaps ill-equipped to investigate." (Ed.: As observed in Union of India v. Nitdip ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s well, subject, however to deduction of one per cent of the sale price of such goods sent out of the State and sold there. We fail to understand how a valid grievance can be made in respect of such deduction when the very extension of the benefit of set-off is itself a boon or a concession. It was open to the rule-making authority to provide for a small abridgement or curtailment while extending a concession. Viewed from this angle, the argument that providing for such deduction amounts to levy of tax either on purchases of raw material effected outside the State or on sale of manufactured goods effected outside the State of Maharashtra appears to be beside the point and is unacceptable. So is the argument about apportioning the sale-price with reference to the proportion in which raw material was purchased within and outside the State." 33. A Three-Judge Bench in (2005) 2 SCC 129, India Agencies (Regd.), Bangalore v. Additional Commissioner of Commercial Taxes, Bangalore had occasion to consider Rule 6(b)(ii) of Central Sales Tax (Karnataka) Rules, 1957, which requires furnishing original Form-C to claim concessional rate of tax under Section 8(1). This Court held that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....what circumstances, is the domain of the legislature and the courts are not to tinker with the same." 35. The judgment on which Learned Advocate General of Tamil Nadu had placed much reliance i.e. Jayam and Company v. Assistant Commissioner and Another, (2016) 15 SCC 125, is the judgment which is relevant for present case. In the above case, this Court had occasion to interpret provisions of Tamil Nadu Value Added Tax Act, [2006], Section 19 (20), Section 3 (2) and Section 3 (3). Validity of Section 19 (20) was under challenge in the said case. This Court after noticing the scheme under Section 19 noticed following aspects in paragraph 11:- "11. From the aforesaid scheme of Section 19 following significant aspects emerge: (a) ITC is a form of concession provided by the legislature. It is not admissible to all kinds of sales and certain specified sales are specifically excluded. (b) Concession of ITC is available on certain conditions mentioned in this section. (c) One of the most important condition is that in order to enable the dealer to claim ITC it has to produce original tax invoice, completed in all respect, evidencing the amount o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 (SC). (ii) State of Karnataka v. M.K. Agro Tech. (P) Ltd., reported in (2017) 16 SCC 210 (SC). (iii) Jayam & Co. v. Asstt. Commissioner reported in [2016] 96 VST 1 (SC). (iv) Godrej & Boyce Mfg. Co. (P.) Ltd. v. CST, reported in (1992) 3 SCC 624. 122. In support of submission that right to refund of input tax credit is not a constitutional right and it is only a matter of statutory prescription, reliance was placed on the decision in case of Union of India v. VKC Footsteps (India) (P) Ltd., reported in (2022) 2 SCC 603, wherein Hon'ble Apex Court held as under: "99. We must be cognizant of the fact that no constitutional right is being asserted to claim a refund, as there cannot be. Refund is a matter of a statutory prescription. Parliament was within its legislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut services in the first place. The case of the Revenue was that goods and services not only differ on the constitutional level itself but input goods and input services are also defined separately in the GST Act, thereby highlighting the inherent distinction and treating them at par is not conceivable owing to the difference in the tax rates, benefits, exemptions and other relevant policies since refund is a form of exemption, it must receive a literal interpretation and should not have its compass laxly widened. On the other hand, it was contended by the assessees that there must exist a reasonable nexus with the object sought to be achieved, in order to lawfully discriminate between the two, such a differential treatment may be justified for the reason of revenue harvesting, however, that does not find a place as the bone of contention was that where on one hand, goods and services are conferred an equal treatment so far as levy is concerned, their prejudicial treatment for the purpose of refund is rather inequitable. 126. It was submitted that apropos this issue, the Court held that Parliament holds the power to exercise this latitude, which is not constricted to merely reve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll the point of end user. As a result, there is justification for a separate treatment of the two levies. IGST is levied under the IGST Act, 2017 and is collected, for convenience, at the customs point through the machinery under the Customs Act, 1962. The impugned notifications, therefore, cannot be faulted for arbitrariness or under classification." 129. It was therefore submitted by learned Additional Solicitor General Mr. Vyas that Rule 96 (10) of the CGST Rules may not be held as ultra vires to provision of section 54 of the GST Act read with section 16 of the IGST Act. OMISSION OF RULE 96 (10) BY NOTIFICATION NO. 20/2024 DATED 8TH OCTOBER,2024 130. Civil Application (For Orders) No. 1 of 2024 in Special Civil Application No.22519 of 2019 was filed after this group of matters were reserved for judgment vide order dated 19.09.2024 in view of amendment made vide Notification No. 20/2024-Central Tax, dated 8.10.2024 issued by the Ministry of Finance (Department of Revenue) (Central Board of Indirect Taxes and Customs) omitting Rule 96 (10) of the GST Rules, 2017. Relevant extract from the said Notification read as under: "NOTIFICATION No. 20/2024-Central Tax New....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be inserted with effect from the 1st day of November, 2024. 8. In the said rules, in rule 88D, in sub-rule (3), after the words and figures "or section 74", the words, figures and letter "or section 74A" shall be inserted with effect from the 1st day of November, 2024. 9. In the said rules, in rule 89,- (a) in sub-rule (4),- (i) in clause (B), the words, brackets, figures and letters "other than the input tax credit availed for which refund is claimed under Sub-rules (4A) or (4B) or both" shall be omitted; (ii) in clause (C), the words, brackets, figures and letters ", other than the turnover of supplies in respect of which refund is claimed under Sub-rules (4A) or (4B) or both" shall be omitted; (iii) in clause (E), for the long line beginning with the word "excluding" and ending with the words "during the relevant period", the words "excluding the value of exempt supplies other than zero-rated supplies during the relevant period" shall be substituted; (b) sub-rules (4A) and (4B) shall be omitted; (c) in sub-rule (5), in the Explanation, in clause (a), the words, brackets, figures and letters " other than the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red to be taken on record of Special Civil Application No.22519 of 2019 and in view of the subsequent development after 19th September, 2024, the order dated 19th September, 2024 is ordered to be recalled and the matter is ordered to be re-notified for further consideration on 19th December, 2024 before the regular Bench. 4. The application is accordingly disposed of." 133. Pursuant to the above development, the matters were argued by learned advocates for both the sides to submit that Notification No. 20/2024 dated 8th October, 2024 would be applicable to all the pending matters before the Court. The contention of the petitioners was that Rule 96 (10) having been omitted by the said Notification with effect from the date of issuance of Notification i.e. 8th October, 2024, matters which are pending before the Court would be governed by the Notification or in alternative the said notification would apply retrospectively. 134. Learned Senior Advocate Mr. V. Sridharan with learned advocate Mr. Anand Nainawati submitted that the provisions of section 6 of the General Clauses Act, 1897 could not be made applicable to repeal of the Rules. 135. Reliance was placed on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and punished before the Act expires and as soon as the Act expires any proceedings which are being taken against a person will ipso facto terminate." The Court cited with approval the decision in the case of 1947 AC 362 (supra), and held that, in view of sec. 1 (4) of the Defence of India Act, 1939, as amended by Ordinance No. XII of 1946, the prosecution for a conviction for an offence committed when the Defence of India Act was in force, was valid even after the Defence of India Act had ceased to be in force. That case is, however, distinguishable from the case before us in two respects. In that case, the prosecution had been started before the Defence of India Act ceased to be in force and, secondly, the language introduced in the amended sub-sec. (4) of sec. 1 of the Act had the effect of making applicable the principles laid down in sec. 6 of the General Clauses Act, so that a legal proceeding could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. As we have indicated earlier, the notification of the Ministry of Home Affairs omitting Rule 132-A of the D. I. Rs. did not make any such provision ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s pending thereunder would stand discontinued. In the facts of the said case, the Apex Court considered the effect of applicability of Rule 10 and Rule 10A of the Central Excise Rules, 1944 which stood deleted and new Rule 10 was introduced by Notification dated 06.08.1977 and the effect of such deletion and introduction of new provision was that the old rules under which the show cause notice was issued ceased to exist and thereafter further proceedings were without jurisdiction since Notification dated 06.08.1977 did not contain any Savings clause. It was therefore, held that the proceedings for recovery of erroneously granted rebate which had been initiated under Rules 10/10A prior to amendment but was pending on that date stood lapsed. 138. It was therefore, submitted that the proceedings initiated by the respondents under Rule 96 (10) would lapse in view of the pendency of these petitions. 139. It was further submitted that an appeal is continuation of original proceedings as held by Hon'ble Supreme Court in case of The State of Kerala v. K.M. Charia Abdulla and Co. reported in AIR 1965 Supreme Court 1585. The Hon'ble Apex Court in para no.5 of the said judgment held tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned Senior Advocate Mr. Sridharan submitted that clause 10 of the Notification only states that Rule 96 (10) shall be omitted. It was therefore, submitted that an "omission" would amount to a "repeal" as "omission" and "repeal" are synonyms and therefore, not relevant to the present controversy. In support of his submission, reliance was placed on the decision in case of Fibre Boards Private Limited, Bangalore v. Commissioner of Income Tax, Bangalore reported in (2015) 10 Supreme Court Cases 333 to submit that omission of a provision would amount to repeal or implied repeal or not has to be determined by the Court as per the provisions of sections 6-A and 24 of the General Clauses Act. The Hon'ble Apex Court has held that repeal may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression "repeal" and hence even an implied repeal of a statute would fall within the expression "repeal" in section 6-A of the General Clauses Act which would show that a repeal can be by way of an express omission and therefore, the word "repeal" in both sections 6 and 24 of the General Clauses Act would include repeals by express omissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bmitted that pending these petitions being judicial proceedings when Rule 96 (10) is omitted, it would be covered by such omission as proceedings have not reached finality. 147. Learned advocate Mr. Paresh M. Dave appearing for the petitioners submitted that GST Council recommended for omission of Rule 96 (10) prospectively along with Rule 89 (4A) and Rule 89 (4B) of the CGST Rules in its 54th meeting, but it was submitted that date of publication would not be relevant for applicability of the omission of Rule 96 (10) as such omission is curative and remedial in nature and hence it would be applicable with retrospective effect as if it never existed. 148. Learned advocate Mr. Paresh Dave referred to the legislative history of enactment of Rule 96 (10) to submit that CGST Rules have been brought in force on 1st July, 2017 and at that point of time Rule 96 had only 8 sub-rules and sub-rule (10) was not in existence. It was submitted that sub-Rule (10) of Rule 96 came to be inserted on 9th October, 2018 which continued in force till 8th October, 2024 when Notification No. 20/2024 was issued as per the recommendation of the GST Council in its 54th meeting to omit Rule 96 (10) fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inputs. 151. It was therefore, submitted that even if the contention of the Revenue is valid, then the same situation exists even after omission of Rule 96 (10) by Notification No. 20/2024 as four exemption notifications are still in operation without any amendment. It was submitted that GST Council in its 54th meeting, has stated in the minutes that Rule 96 (10) of the CGST Rules created difficulty in respect of refund on exports and therefore, its omission was recommended to remove such hardship and for simplifying and expediting the procedure for refunds. 152. It was therefore, submitted that existence of Rule 96 (10) of the CGST Rules was a case of hardship and omission of such rule was for removing such hardship and hence amendment can not be prospective because its object is to remove the hardship and difficulties faced by the assessee, and hence it is curative and remedial. 153. It was submitted that a curative and remedial amendment should be applied retrospectively i.e. from the date of insertion of main provision and not from the date of amendment or enforcement or omission. In support of such submission, reliance was placed on the following decisions: 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y nature intended to operate upon and affect past transactions. Reliance was placed on the decision of Tripura High Court in case of Biswajit Palit v. State of Tripura reported in MANU/TR/0096/2020. 158. Learned advocate Mr. Dave submitted that Hon'ble Kerala High Court in case of M/s. Sance Laboratories Private Limited and others v. Union of India and others reported in 2024 (11) TMI 188 has held that Rule 96 (10) of the CGST Rules is ultra vires the provisions of section 16 of the IGST Act as it is manifestly arbitrary as it produces absurd results not intended by the legislature. 159. Learned advocate Mr. Dave summarized his submissions that omission of Sub-Rule (10) of Rule 96 of the CGST Rules is curative in nature as it causes difficulty for exporters resulting in hardship for trade. It was submitted that such hardship cannot be allowed to operate for the intervening period from 9th October, 2018 to 7th October, 2024 and therefore, prayed that omission of Rule 96 (10) may be considered to be remedial measure taken up the Central Government for curing anomaly and defect in refund sanctioning mechanism and therefore, such omission would be applicable from 9th October, 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bilities, it is deemed to be prospective only. It was submitted that where an issue arises whether a statute is prospective or retrospective, the Court has to keep in mind presumption of prospectivity articulated in legal maxim 'nova constitutio futuris formam imponere debet non praeteritis' i.e. "a new law ought to regulate what is to follow, not the past". Reliance was placed on the decision of Hon'ble Apex Court in case of Commissioner of Income Tax 5, Mumbai v. Essar Teleholdings Limited through its Manger reported in (2018)3 Supreme Court Cases 253. 167. It was submitted that as per the settled proposition, in absence of any such specific stipulation, the omission would apply prospectively to future transactions or events occurring after the omission and hence such omission of Rule 96 (10) is presumed not to affect existing liabilities accrued before its omission and such omission would not impair or affect any action which has been taken in cognizance of or any rights / liabilities that were vested or accrued before the omission. 168. It was submitted that there is nothing on record to even remotely suggest the omission is in the nature of curative or remedial a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the proceedings where the cognizance have been taken by the Revenue, would not be affected by the subsequent omission, which is specifically in prospective nature. 172. It was submitted that in this group of petitions, the petitioners have challenged the constitutional validity of insertion of the provision of Rule 96 (10) of the CGST Rules which has been omitted by Notification No. 20/2024 dated 8th October, 2024 and therefore, except the arguments on the aspect of constitutional validity of the insertion of Rule 96 (10), in none of the petitions, the Court has considered the merits of any of matter and the arguments are concluded only on the aspect of challenging constitutional validity of the Rule which can never be equated with the continuance of original proceedings as sought to be canvassed by the petitioners. It was therefore, submitted that in absence of any such specific pleadings, the petitioners are not entitled to any further relief as prayed for and the petitioners may be relegated to avail the efficacious alternative remedy, if at all the petitioners are aggrieved by the Show Cause Notice or order-in-original or any other action taken by the Revenue under Rule 96 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... said Act or not? ix) Whether expression "condition, safeguards and procedure" would permit the rule making authority to prescribe "restriction" qua the class of persons to claim the refund in respect of entire export of goods which includes the goods manufactured without availing any benefit on the corresponding procurement of inputs? 175. Before considering the first issue of retrospective applicability of Notification No. 20/2024 by which Rule 96 (10) of CGST Rules is omitted with effect from 8th October,2024, it would be germane to refer to legislative history of Rule 96 (10) of the CGST Rules. i) The CGST Rules have come into existence with effect from 01.07.2017. ii) Rule 96 falls within Chapter X for refund starting from Rule 89 to Rule 97A whereby the procedure is prescribed for claim of refund under the provisions of the GST Act. iii) Rule 96 pertains to refund of integrated tax paid on goods or services exported out of India and provides the procedure for claim of refund of IGST. iv) When Rule 96 was first made part of the Rules, it contained eight sub-rules. v) Sub-rule (9) and sub-rule (10) of Rule 96 were inserte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uty under Advance Authorisation License. Being aggrieved, the petitioners have challenged vires of Rule 96 (10) in this group of petitions. 177. The GST Council in its 54th meeting recommended to omit Rule 96 (10), Rule 89 (4A) and Rule 89 (4B) of the CGST Rules, 2017 prospectively to simplify and expedite the procedure for refund in respect of exports considering the difficulties being faced by the exporters due to the restrictions in respect of refund on exports in cases where benefits of specified concessional/exemption notification is availed on the inputs. 178. Considering the recommendation of the GST Council, CBIC issued Notification No. 20/2024-Central Tax dated 8th October, 2024 called as Central Goods and Services Tax (Second Amendment) Rules, 2024 (here-in-after referred to as "the Rules, 2024") 179. Sub-rule (2) of Rule 1 of the said Notification provides that "save as otherwise provided in these rules, the Rules shall come into force on the date of their publication in the Official Gazette". 180. Rule 10 of the said Notification reads as "In the said rules, in rule 96, Sub-Rule (10) shall be omitted." 181. On perusal of the Central Goods and Services Tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and whether it will have retrospective effect or it was not so. 187. In the book "Principles Of Statutory Interpretation" 14th Edition, 2015, Justice G. P. Singh, the learned author has stated about the position regarding retrospective operation of the statute as under: "The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court: "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'." B....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the intention of the legislature and apply the law as it stands at the time of the judgment even though there is no express reference to pending actions." 190. This principle was applied to the Landlord and Tenant (Rent Control) Act 1949 in Hutchinson v. Jauncey, (1950) 1KB 574, the Court of Appeal taking the view that Sir George Jessel M.R. had gone too far when he said that express terms alone could alter the rights of parties by taking away or conferring any pending right of action. 191. The effect of a change in the law between a decision at first instance and the hearing of an appeal from that decision was discussed by the House of Lords in Att.-Gen. v. Vernazza.98 Lord Denning said (at p. 978) that "it was clear that in the ordinary way the Court of Appeal cannot take into account a statute which has been passed in the interval since the case was decided at first instance, because the rights of the litigants are generally to be determined according to the law in force at the date of the earlier proceedings. But it is different when the statute is retrospective either because it contains clear words to that effect or because it deals with matters of procedur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be applied retrospectively i.e. from the date of insertion of the said rule from 9th October, 2018 is also required to be applied to the facts of the case because the Rules, 2024 clearly stipulates for applicability from the date of publication in Official Gazette in consonance with the recommendation of the GST Council to omit Rule 96 (10) of the CGST Rules, 2017 prospectively. It cannot be said that omission of Rule 96 (10) is curative or remedial because, by omission it affects substantive rights of the assessee to claim refund of IGST paid on export of goods when duty free inputs are utilised. If the omission of Rule 96 (10) is to be applied with retrospective effect, the Rules,2024 would have stipulated but even the GST Council has recommended omission of Rule 96 (10) with prospective effect. Such recommendation is binding upon the Government. Therefore, reliance placed on behalf of the petitioners on various case laws to canvass the proposition that omission of Rule 96 (10) is curative and remedial and therefore, has to be applied retrospectively cannot be accepted. 194. In view of above finding, the next question arises is whether Notification No. 20/2024 whereby Rule ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en, unless it is otherwise expressly provided any [appointment, notification], order, scheme, rule, form or bye- law, [made or] issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been [made or] issued under the provisions so re- enacted, unless and until it is superseded by any [appointment, notification], order, scheme, rule, form or bye-law [made or] issued under the provisions so re- enacted [and when any [Central Act] or Regulation, which, by a notification under section 5 or 5- A of the [Scheduled Districts Act, 1874 (14 of 1874)] or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn from and re-extended to such area or any part thereof, the provisions of such Act or Regulation shall be deemed to have been repealed and re-enacted in such area or part within the meaning of this section." 196. The Hon'ble Apex Court in case of Fibre Boards Private Limited, Bangalore v. Commissioner of Income Tax, Bangalore (supra) while considering the applicability of the aforesaid provisions of the General Clauses Act vis-a-vis the repe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 covered by the expression "repeal" in Section 6 of the General Clauses Act. 36. In fact in Halsbury's Laws of England Fourth Edition, it is stated that: "So far as express repeal is concerned, it is not necessary that any particular form of words should be used. (R v. Longmead, (1795) 2 Leach 694 at 696). All that is required is that an intention to abrogate the enactment or portion in question should be clearly shown. (Thus, whilst the formula "is hereby repealed" is frequently used, it is equally common for it to be provided that an enactment "shall cease to have effect" (or, If not yet in operation, "shall not have effect") or that a particular portion of an enactment "shall be omitted)." 37. At this stage, it is important to note that a temporary statute does not attract the provision of Section 6 of the General Clauses Act only for the reason that the said statute expires by itself after the period for which it has been promulgated ends. In such cases, there is no repeal for the reason that the legi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ogation 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 defined in the General Clauses Act, omission or repeal of a 'rule' by another 'rule' does not attract section 6 of the Act and proceedings initiated under the omitted rule cannot continue unless the new rule contains a saving clause to that effect.."(At pages 697 and 698) 30. In view of what has been stated hereinabove, perhaps the appropriate course in the present case would have been to refer the aforesaid judgment to a larger bench. But we do not find the need to do so in view of what is stated by us hereinbelow. 31. First and foremost, it will be noticed that two reasons were given in Rayala Corporation (P) Ltd. for distinguishing the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Cent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tment 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 supersession, then there is in law a repeal notwithstanding the absence of the word 'repeal' in the later statute. Now, if the legislative intent to supersede the earlier law is the basis upon which the doctrine of implied repeal is founded, could there be any incongruity in attributing to the later legislation the same intent which Sec. 6 presumes where the word 'repeal' is expressly used. So far as statutory construction is concerned, it is one of the cardinal principles of the law that there is no distinction or difference between an express provision and a provision which is necessarily implied, for it is only the form that differs in the two cases and there is no difference in intention or in substance. A repeal may be brought about by repugnant legislation, without even any reference to the Act intended to be repealed, for once legislative competence to effect a repeal is posited, it matters little whether this is done expressly or inferentially or by the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 time of the enactment of the repealing Act, and not already prosecuted to a final judgment so as to create a vested right." 201. In a footnote relating to the cases which the learned author cites in support of the above proposition, he adds:-- "See Cleveland, etc., R. Co. v. Mumford (Ind.)(2) where the repeal of a statute during the trial prevented a judgment from being rendered. Similarly, there can be no legal conviction for an offence, unless the act be contrary to law at the time it is committed; nor can there be a judgment, unless the law is in force at the time of the indictment and judgment. If the law ceases to operate, by its own limitation or by a repeal, at any time before judgment, no judgment can be given. Hence, it is usual in every repealing law to make it operate prospectively only, and to insert a a saving clause, preventing the retroactive operation of the repeal and continuing the repealed law i....