TMI Blog2019 (8) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... ee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, the impugned Notification dated 26.07.2018 bearing No.20/2018 and Circular dated 24.08.2018 bearing Circular No.56/30/2018-GST to the extent it provides that the input tax credit lying unutilized in balance, after payment of tax for and upto the month of July, 2018, on the inward supplies received upto the 31st day of July, 2018, shall lapse, are hereby quashed and set aside and are hereby declared as untra vires and beyond the scope of section 54(3)(ii) of the CGST Act, as section 54(3)(ii) of the CGST Act does not empower to issue such notifications and consequently, it is held that the petitioners and members of the petitioners are entitled for the credit and it be granted to them. Power of central government u/s 54(3) of the CGST Act - available/eligible ITC can be withdrawn using rule making power when separate provision exist in this respect - HELD THAT:- The CGST Act itself provides for the lapsing of the ITC at Sections 17(4) and 18(4) respectively of the CGST Act. Thus, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ in the nature of mandamus or any other appropriate writ quashing and setting aside the Notification dated 26.07.2018 being No.20/2018 and Circular dated 24.08.2018 being Circular No.56/30/2018-GST as contrary to Section 54(3) of the Central Goods and Service Tax Act, 2017 as well as notification dated 28.06.2017 being Notification No.5/2017-Central Tax [Rate] and declare the said Notification and Circular as violative of Articles 14 and 19(1)(g) of the Constitution of India. 2.01. By way of Special Civil Application No.20626 of 2018, petitioners federation of Gujarat Weavers Welfare Association and others have prayed for the following main reliefs:- 9(a). YOUR LORDSHIPS may be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioners case and after going into the validity and legality thereof to quash and set aside: ( i). proviso (ii) of the opening paragraph of the Notification No. 05/2017-C.T. (Rate) dated 28.06.2017 inserted vide Notification No. 20/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 4. 2.02. Thus, in both these petitions petitioners have challenged Notification No.20/2018-central Tax (Rate) dated 26.07.2018 issued by the Government of India, Ministry of Finance, Department of Revenue, by which it is resolved that, the accumulated input tax credit lying unutilised in balance in respect of the goods specified at Sr.Nos.1, 2, 3, 4, 5, 6, 6A, 6B, 6C, and 7 of the table below Notification dated 28/6/2017, after payment of tax for and upto the month of July, 2018, on the inward supplies received upto 31st day of July, 2018, shall lapse. In short, by way of the aforesaid Government Resolution, the inverted tax structure refund of excess duty is not granted. 3.00. The petitioner of Special Civil Application No.16213 of 2018, is a company registered under the Companies Act, 1956 and is engaged in manufacturing polyester texturized yarn (HSN Code : 5402) and also manufactures polyester woven fabrics and polyester knitted fabrics from polyester partially oriented yarn / polyester texturized yarn (HSN Code : 5402) while the petitioner No.1 of Special Civil Application No.20626 of 2018 is a duly registered under the Maharashtra Public T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and up to the month of July, 2018 and further states that on the inward supplies received upto 31.7.2018 shall lapse and further states that inward supplies received upto 31st day of July, 2018, shall lapse. It is contended by the learned counsel for the petitioners that the impugned notification is without application of mind inasmuch as the assessees are losing huge amount of money paid towards input tax credit. It is contended that a registered person's right to claim input tax credit arises from section 16 of the CGST Act. It is contended by the learned counsel for the petitioners that there is no statutory provision under the CGST Act empowering the respondents to issue notifications providing for lapsing of input tax credit. It is contended that rule can be made or notification can be issued under the guise of section 164 for lapsing input tax credit. It is also contended that power under section 54(3)(ii) of the CGST Act is limited to notify the supplies not entitled to refund of input tax credit accumulated on account of the inverted rate structure. It is contended that the the impugned notifications have exceeded powers delegated under section 54(3)(ii) of the CGST Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alized only after issuance of the notifications and the extent of it was governed by the terms of the notifications, once the said right got crystallized in terms of money, in our opinion, it was not intended to be taken away or could not be taken away merely by rescinding the notifications. The effect of the rescinded notifications is, in our opinion, that from the date on which the said notifications came to be rescinded, the manufacturers of Vanaspati and soap ceased to earn the benefit of credit of money while manufacturing their final products - Vanaspati or soap - with the help of notified inputs, but they were not deprived of their right to utilise the credit of money which they had already earned validly so long as the same was or intended to be used for payment of excise duty in the manufacture of Vanaspati or soap, as the case may be, merely because the notifications have been rescinded, it cannot be said that Rule 57N has ceased to operate. For these reasons the contention raised on behalf of the respondents will have to be rejected. 3.05. The learned counsel for the petitioners has also And the decision of the Apex Court in the case of Eicher Motors L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finished products. For the purpose at utilisation of the credit all vestitive facts or necessary incidents thereto have taken place prior to 16-3-1995 or utilisation of the finished products prior to 16- 3-1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory on the basis of the existing scheme. Now by application of Rule 57F(4A) credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3-1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate, that the scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect. submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the rules available certain ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that the aforesaid ratio has been followed in the following cases :- [ 1] Samtel India Ltd. V/s. Commissioner of Central Excise, Jaipur [2003 (155) ELT 14 SC] [ 2] Jayam and Co. V/s. Assistant Commissioner (2016) 96 VST 1(SC) [ 3] Collector of Central Excise V/s. Dai Ichi Karkaria Ltd. 1999 (112) ELT 353 (SC) [ 4] Jayaswal Neco Ltd. V/s. Commissioner of Central Excise 2015 (322) ELT 587(SC) [ 5] Commissioner of Central Excise Vs/ New Swadeshi Sugar Mills (2016) 1 SCC 614, [ 6] TATA Engineering Locomotive Co. Ltd. V/s. Union of India [2003 (159) ELT 129 (Bom.)] [ 7] Grasim Industries Ltd. V/s. CBEC [2004 (163) ELT 10] [ 8] Shree Rajastban Texchem Ltd. V/s. Union of India [2005 (182) ELT 311. 3.07. It is further contended by the learned counsel appearing for the petitioners that from the above, it is clear that the impugned notification and circular are required to be struck down as unconstitutional on the ground that it took away the vested right of the assessee without there b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the textile industry were clarified after due consultation with the trade. It is contended that, in fact, on the whole issue, there was extensive discussion and deliberations with trade and industry and other stakeholders including at the level of Union Finance Minister. It is further contended that the inputs from all the State Governments were also taken before issuance of the impugned circular. 4.02. The learned counsel appearing for the respondents - revenue has contended that in the case of Kapil Mohan Vs. Commissioner of Income Tax reported in 1999 (1) SCC 430 , the Apex Court has held that it is now well settled in the field of taxation, hardship or equity has no role to play in determining eligibility to tax and it is for the legislature to determine the same. 5.00. Heard the learned counsel for the respective parties and considered the material on record. 5.01. Having heard the rival submissions and considering the provisions of section 54(3(ii), which empowers the respondents revenue to frame the rules, does not empower the respondents Central Government to frame rule providing for lapsing of the input tax credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act does not empower to issue such notifications and consequently, it is held that the petitioners and members of the petitioners are entitled for the credit and it be granted to them. In view of the disposal of the main Special Civil Application, Civil Application No.1 of 2019 in Special Civil Application No.20626 of 2019 also stands disposed of. No costs. 7.00. I am in complete agreement with the final conclusion arrived at by my esteemed brother Justice Rao. However, I would like to add few words of my own: 8.00. The writ applicant No.1 is a society representing its members who are mostly MMF fabric weavers. The writ applicant No.2 is an Association of Person representing its members who are mostly knitters engaged in the manufacture and sale of MMF knitted fabrics. 9.00. The members of the writ applicants are engaged in the supply of textiles and textile articles of Chapters 52 to 63 of the First Schedule to the Customs Tariff Act, 1975. 10.00. With the introduction of the Goods and Services Tax (hereinafter referred to as GST ) in India w.e.f. 01.07.2017, the Central Goods and Service Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than - ( i) zero rated supplies made without payment of tax; ( ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty: Provided also that no refund of input tax credit shall be allowed. If the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies. 18.00. In terms of Section 20 of the IGST Act, Section 54(3) of the CGST Act shall mutatis mutandis apply to the IGST Act. 19.00. Section 54(3) of the SGST Act reads thus: ( 3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Woven fabrics of manmade textile materials 6 5512 to 5516 Woven fabrics of manmade staple fibres 6A 5608 Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials 6B 5801 Corduroy fabrics 6C 5806 Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of warp without weft assembled by means of an adhesive (bolducs) 7 60 Knitted or crocheted fabrics [All goods]. 21.00. The effect of the Notification No. 05/2017-Centra1 Tax (Rate) dated 28.06.2017, as amended by the Notification No. 29/2017-Central Tax ( Rate) dated 22.09.2017 and Notification No. 44/2017-Centra1 Tax (Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) in respect of said goods, the accumulated input tax credit lying unutilised in balance, after payment of tax for and upto the month of July, 2018, on the inward supplies received up to the 31st day of July 2018, shall lapse. 26.00. In the case on hand, the writ applicants have challenged the proviso (ii) of the opening paragraph of the Notification No.05/2017-C.T. (Rate) dated 28.06.2017 inserted vide Notification No. 20/2018-C.T. (Rate) dated 26.07.2018. 27.00. The challenge is essentially on the following grounds: ( i) The Respondents have no power under Section 54(3) of the CGS T Act to lapse the accumulated ITC lying unutilised in balance on 31.07.2018. ( ii) The only power conferred upon the Respondents under Section 54(3) of the CGST Act is to notify the goods and services not entitled for refund of ITC accumulated on account of inverted rate structure. ( iii) The Central Board of Indirect Taxes and Customs (Respondent No. 4 herein), vide Circular No.56/30/2018- GST dated 24.08.2018 has clarified that the legislative power of providing for lapsing of ITC flows inherently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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