2025 (5) TMI 1272 - HC - GST

Entitlement to budgetary support for the period July 2017 to September 2017 under the applicable scheme and notifications - rejection of claim on the ground that in terms of the computation prescribed in Circular dated 27-11-2017 the appellant s claim for budgetary support after aggregating the tax liabilities and input tax credit and considering that the balance of input tax credit was in the negative the appellant was not entitled to any budgetary support for the said period - HELD THAT - The clarification issued by the Government of Jammu and Kashmir Finance Department bearing No. FD-ST/29/2022-03 dated 26-04-2022 pertains to clarification with respect to determination of amount of reimbursement under (i) SRO 519 dated 21-12-2017 (ii) SRO 521 dated 21-12-2017 and (iii) SRO 63 dated 05-02-2018. All the said SROs pertain to the provision for budgetary support to the existing eligible manufacturing units operating in the then State of Jammu and Kashmir. The SROs detailed the scheme for such budgetary support in the shape of reimbursement of State taxes paid under the Jammu Kashmir Goods and Services Tax Act 2017. The scheme it specified shall be limited to the tax which accrues to the State Government under the Jammu and Kashmir Goods and Services Tax Act 2017 after adjustment of the input tax credit paid by the manufacturing units. Clause 3.2 of the SRO 519 is similar to clause 5.4 of the Notification dated 05-10-2017. As the departmental clarification dated 26-04-2022 also envisages month-wise details it stands to reason that claims could be raised accordingly. The submissions of Deputy Solicitor of India for the respondents No. 1 and 2 not agreed upon who was of the view that even though there was compliance of the order of the High Court of Jammu Kashmir and Ladakh directing the adjudicating authority to take steps in terms of the clarification dated 26-04-2022 yet clarification issued subsequently by the DPIIT Nodal Central Agency dated 21-09-2023 is to be given more weightage over and above the order of the High Court which proposition by itself is preposterous and untenable. Conclusion - Budgetary support under this scheme shall be worked out on quarterly basis for which claims shall be filed on a quarterly basis namely for January to March April to June July to September October to December. The impugned judgment dated 06-05-2024 of the learned single Judge of this Court as also the order dated 01-03-2022 passed by the respondent No. 3 are set aside - appeal disposed off.

The core legal questions considered by the Court in this matter include:

(a) Whether the appellant was entitled to budgetary support for the period July 2017 to September 2017 under the applicable scheme and notifications, despite filing claims on a monthly rather than quarterly basis;

(b) The proper interpretation and application of the Notification dated 05-10-2017 and the Circulars dated 27-11-2017 and 10-01-2019 issued by the Central Board of Excise & Customs and Central Board of Indirect Taxes & Customs, particularly regarding the periodicity and manner of filing claims for budgetary support;

(c) Whether the Circulars, which prescribe procedural requirements, can override or amend the rights conferred by the statutory Notification;

(d) The relevance and binding effect of a clarification issued by the Government of Jammu and Kashmir Finance Department dated 26-04-2022, and the corresponding High Court of Jammu & Kashmir and Ladakh judgment in Coromandel International Ltd. concerning a similar budgetary support scheme;

(e) The applicability of the doctrine of judicial comity in ensuring consistency with the High Court of Jammu & Kashmir and Ladakh's ruling;

(f) Whether the writ petition challenging the rejection of budgetary support claims should be upheld or dismissed.

Issue-wise Detailed Analysis

1. Entitlement to Budgetary Support and Filing Periodicity

The relevant legal framework comprises the Notification dated 05-10-2017 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, which sets out the scheme for budgetary support to eligible manufacturing units. Clause 5.4 of this Notification explicitly mandates that budgetary support claims must be filed on a quarterly basis, specifying the quarters as January-March, April-June, July-September, and October-December.

The Circular dated 27-11-2017 reiterates and operationalizes this scheme, prescribing the method for calculating budgetary support by aggregating tax liabilities and input tax credit. The Circular dated 10-01-2019 further clarifies procedural aspects, permitting month-wise details to be annexed to quarterly refund applications to facilitate verification.

The appellant filed claims on a monthly basis (July and August 2017) rather than quarterly, and did not file any claim for September 2017. The respondent No. 3 rejected the claim for July to September 2017 on the ground that the appellant did not comply with the quarterly filing requirement and that the balance of input tax credit was negative, rendering the appellant ineligible for budgetary support for that quarter.

The learned single Judge upheld this reasoning, emphasizing adherence to the prescribed quarterly filing and computation procedure. The Court noted that the Circulars, while allowing month-wise details for verification, did not dispense with the mandatory quarterly claim filing. The appellant's attempt to have the authorities compute budgetary support on a monthly basis was found inconsistent with the scheme.

The appellant argued that the Circular dated 27-11-2017 should be interpreted in harmony with the Notification dated 05-10-2017 and the Circular dated 10-01-2019, and that the rights conferred by the Notification cannot be overridden by the Circular. Further, the appellant contended that when the claims for two consecutive quarters (July-September and October-December 2017) are combined, the total budgetary support claimed is consistent and revenue neutral, justifying monthly computation.

2. Interpretation of Circulars vs. Statutory Notification

The appellant's contention that the Circulars cannot amend or curtail the statutory rights under the Notification was considered. The Court acknowledged that statutory Notifications confer substantive rights, whereas Circulars generally provide procedural guidance. The rejection of the claim based solely on the formula in the Circulars was challenged as legally erroneous.

However, the Court also recognized that the Circulars were issued in furtherance of the Notification and aimed at ensuring uniform and efficient processing of claims. The requirement of quarterly filing was a procedural mandate intended to streamline verification and prevent piecemeal claims.

The Court concluded that the appellant's failure to comply with the prescribed procedure justified the rejection of the claim for the quarter in question.

3. Relevance of Jammu & Kashmir Clarification and High Court Judgment

A pivotal aspect was the appellant's reliance on the High Court of Jammu & Kashmir and Ladakh's decision in Coromandel International Ltd. concerning a similar budgetary support scheme under the Jammu & Kashmir GST Act. In that case, the High Court directed the adjudicating authority to calculate reimbursement on a monthly basis, although claims were to be filed quarterly, based on a clarification issued by the Jammu & Kashmir Finance Department (dated 26-04-2022).

The clarification stated that since industrial units pay taxes monthly, reimbursement should be calculated monthly but paid quarterly. The appellant argued that the same principle should apply to the present case, given the similarity of the schemes and that GST returns are filed monthly.

The respondents countered that the DPIIT's clarification dated 21-09-2023, issued after the Jammu & Kashmir judgment, reaffirmed the quarterly filing and calculation requirement, and that the High Court's direction in Jammu & Kashmir was not binding on this Court.

The Court examined the scope and nature of the Jammu & Kashmir clarification and judgment. It observed that although the clarification related to a different jurisdiction and scheme, the underlying rationale-monthly tax payments but quarterly claim filings-was analogous. The Court found the reasoning persuasive and applicable by analogy.

Moreover, the Court rejected the respondents' argument that the later DPIIT clarification should override the Jammu & Kashmir High Court order. It held that judicial comity requires respect for orders of coordinate courts and that a subsequent administrative clarification cannot negate a judicial pronouncement.

4. Doctrine of Judicial Comity

The Court invoked the doctrine of judicial comity, citing authoritative Supreme Court pronouncements emphasizing that courts should avoid issuing orders that conflict with those of other competent courts. This principle promotes consistency and prevents contradictory rulings.

Accordingly, the Court declined to give precedence to the DPIIT clarification over the Jammu & Kashmir High Court judgment, underscoring the need to harmonize the approach to similar budgetary support schemes across jurisdictions.

5. Application of Law to Facts and Final Determination

In light of the above analysis, the Court set aside the impugned judgment of the learned single Judge and the order of respondent No. 3. It directed respondent No. 3 to reconsider the appellant's claims for the period July to September 2017 consistent with the approach mandated by the Jammu & Kashmir High Court, i.e., to calculate budgetary support on a monthly basis while maintaining quarterly claim filings.

This approach aligns with the procedural requirements of the Notification and Circulars while accommodating the practical realities of monthly GST returns and tax payments.

Significant Holdings

"Since the eligible industrial units are paying taxes on monthly basis by filing monthly GSTR - 3B returns, as such, the reimbursement amount shall be calculated on monthly basis as per the notified formula based on the amount of cash deposited by the industrial units after adjustment of input tax credit in the same month only. However, the reimbursement to the eligible industrial units shall be made on quarterly basis as defined in clause 3.2 of the notifications." (Government of Jammu and Kashmir Finance Department clarification dated 26-04-2022)

"Budgetary support under this scheme shall be worked out on quarterly basis for which claims shall be filed on a quarterly basis namely for January to March, April to June, July to September & October to December." (Clause 5.4, Notification dated 05-10-2017)

"A court while exercising its judicial function would ordinarily not pass an order which would make one of the parties to the lis violate a lawful order passed by another court." (Supreme Court observation on judicial comity)

The Court established the core principle that while claims for budgetary support must be filed quarterly as per statutory mandate, the calculation of reimbursement can and should be done on a monthly basis to reflect the actual tax payments and input tax credit adjustments, ensuring fairness and accuracy in disbursal.

The Court also affirmed that procedural Circulars cannot override substantive rights conferred by statutory Notifications but must be read harmoniously to effectuate the scheme's objectives.

Finally, the Court underscored the importance of respecting judicial pronouncements from coordinate jurisdictions under the doctrine of judicial comity to avoid conflicting orders and promote legal certainty.

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