TMI Blog2021 (1) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Rules, 2017 by issuing the Notification No. 26/2018-Central Tax, dated 13-6-2018 - the subject matter has also been under consideration at various judicial and quasi-judicial authorities and the recent progression in the matter is prominent to deliberate cautiously hereunder, which is not only a obiter dicta but also laid the foundation for formulation of the principles of law for the purpose of deciding the present problem before us on this issue. The amendment by the Notification No. 26/2018-Central Tax, dated 13-6-2018 is intra vires to the Section 54(3) of the CGST Act, 2017 provisions. Further, the Rule 89(5) is not contrary to the provisions of Section 54(3) of the CGST Act, 2017 as amended albeit it, as a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). The scope, function and role of amendment as adumbrated in above paras and on applying the ratio decidendi of the Hon ble Madras High Court, I find that the lexes of the amendments are amply justified. Thus, refund of input services/capital goods on account of inverted duty structure is not admissible in terms of Section 54(3) read with Rule 89(5) of the CGST Act/Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned and ₹ 9,94,169/- has been rejected. 2.2 On verification of the refund claim submitted by the appellant, the adjudicating authority had noticed that the appellant has claimed refund on input services/capital goods also which is not admissible as per Rule 89(5) of CGST Rules, 2017 substituted vide Notification No. 21/2018, dated 18-4-2018 in the case of refund on account of inverted duty structure. Accordingly, the show cause notices in Form-08, dated 22-4-2019 proposing rejection of refund claim was issued. 2.3 The appellant in response to show cause notices in Form-08 submitted their reply wherein they submitted that mainly as per Section 54(3) of the CGST Act, 2017 refund can be claimed in respect of unutilized ITC. Further, they also submitted that supply of Service is also covered under the definition of Input Tax Credit as defined under Section 2(63) read with Section 2(62) of CGST Act, 2017 and in absence of specific exclusion regarding refund of input tax credit on services, refund of input tax credit on services/capital goods is also admissible. Further they have also submitted that even if it is assumed that refund of input tax credit on input services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 in Form-GST-RFD-08 for the month of August, 2018/March, 2019 proposing to reject refund claim of ₹ 10,61,774/- on the ground that the appellant have claimed refund of ITC taken on input services amounting to ₹ 10,61,774/- and ₹ 9,94,168/- by including the same in Net ITC which is inadmissible as per CGST Rules, 2017. - that the appellant made detailed submission in response to the show cause notice in Form GST-RFD-09, dated 29-4-2019. - that the respondent did not accept the contention of the appellant and rejected the refund claim vide impugned O-I-O dated 22-5-2019. - that the appellant submit that they have claimed refund of input tax credit under Section 54(3) of Central Goods and Services Tax Act, 2017 for the month of August, 2018. Section 54(3) of Central Goods and Services Tax Act, 2017 is reproduced below for ease of reference. Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period : Provided that no refund of unutilized input tax credit shall be allowed in cases other than - (i) zero rated supplies made without pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding refund of input tax credit on services under Section 54(3) of Central Goods and Services Tax Act, 2017 it is submitted that refund of input tax credit in respect of services is admissible. - that the appellant further submit that the benefit given under section cannot be restricted/withdrawn by Rules. Therefore, section will prevail over rule as Rules are subordinate to the Act. In support of his claim the appellant wish to rely upon following judgments :- (i) Deepak Fertilizers and Petrochem v. Designated Authority [2006 (203) E.L.T. 370 (Del.)], wherein Hon ble High Court Delhi. (ii) Kishorilal Sudesh Kumar Metals (P) Ltd. v. Commr. of C. Ex., Jaipur [1999 (111) E.L.T. 708 (Tribunal)] (iii) Collector of C.E., Chandigarh v. Doaba Co-Operative Sugar Mills [1988 (37) E.L.T. 478 (S.C.)] (iv) Allied Enterprises v. Designated Authority [2011 (272) E.L.T. 127 (Tri. - Del.)] - that the appellant submits that though the above judgments pertain to pre-GST regime, but the underlying principle of law is not affected by change in tax regime. Hence, the underlying principle held in above relied upon judgments is squarely applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilizers and Petrochem v. Designated Authority [2006 (203) E.L.T. 370 (Del.)], wherein Hon ble High Court Delhi. (ii) Kishorilal Sudesh Kumar Metals (P) Ltd. v. Commr. of C. Ex., Jaipur [1999 (111) E.L.T. 708 (Tribunal)] (iii) Collector of C.E., Chandigarh v. Doaba Co-Operative Sugar Mills [1988 (37) E.L.T. 478 (S.C.)] (iv) Allied Enterprises v. Designated Authority [2011 (272) E.L.T. 127 (Tri. - Del.)] (v) During oral submission he has also cited the case law in the matter of M/s. VKC Footsteps India Pvt. Ltd. v. Union of India dated 24-7-2020 [2020 (43) G.S.T.L. 336 (Guj.)]. 9. Before embarking upon the issue, I would like to reproduce the statutory provisions which are relevant in this case. Section 54(3) of the Act provides - CHAPTER XI REFUNDS 54. Refund of tax. - xx xx xx (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period : Provided that no refund of unutilised input tax credit shall be allowed in cases other than - (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstitution, with effect from 1st July, 2017, in Rule 89, for sub-rule (5), that :- (5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula :- Maximum Refund Amount - {(Turnover of inverted rated supply of goods and services) x Net ITC Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services. Explanation . - For the purposes of this sub-rule, the expressions - (a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and (b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4). 11. Now, I shall proximate ahead, step by step, toward the gradient descent of crux in the instant matter. 12. I find that the powers have been conferred by Section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017), to the Central Government to make the rules or to amend the Central Goods and Services Tax Rules, 2017. It is also noteworthy that the Government is also empowered to give retrospective ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and, consequently, the quantum thereof. (5) As a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). Consequently, it is not necessary to interpret Rule 89(5) and. in particular, the definition of Net ITC therein so as to include the words input services. 16. Therefore, I am in opinion and thoroughly satisfied that the dictum of the Hon ble High Court has extensively tested the tenability of legislative powers to the span of contentions made by the appellant in conformity to the tax jurisdiction. It is therefore, established that the amendment by the Notification No. 26/2018-Central Tax, dated 13-6-2018 is intra vires to the Section 54(3) of the CGST Act, 2017 provisions. Further, the Rule 89(5) is not contrary to the provisions of Section 54(3) of the CGST Act, 2017 as amended albeit it, as a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). 17. Now progressing a step ahead, on taking sturdy look of the amendment in the provision of the Rule 89(5) of the CGST Rules, 2017 vide Notification No. 26/2018-Central Tax, dated 13-6-2018, I find that it unambiguously verbalizes that Net ITC s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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