TMI Blog2023 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned; these rules were not in existence at the time of passing of the Order in Appeal dated 11.10.2021. Rule 1(2) of 2022 Amendment Rules, specifically provides that save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette . Except for Rules 7, 9, 10, and 19 for which dates with retrospective operation have been provided, no other rules have been given any retrospective effect. The 2022 Amendment Rules inserts a new stipulation for comparison between two values. Such an exercise was not contemplated prior to the amendment as what was taken into account was the actual transaction value. Therefore, by way of the amendment, a substantive change has been brought about in the law and therefore the amendment ought to operate prospectively. The law is now no more res integra that mere use of the term explanation will not be indicative of the fact that the amendment is clarificatory/declaratory. The amendment in Rule 89 (4) of CGST Rules, 2017 which came into effect vide Notification No. 14/2022-Central Tax dated 05.07.2022 is not clarificatory in nature and thus will have a prospective effect. In all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 9 of GSTR- 1 of the subsequent tax period on the basis of the shipping bills to reflect the actual transaction value of export of goods, and thus such cases will in turn be governed by Paragraph 18 of the said circular which mandates that information contained in Table 9 of FORM GSTR-1 of the relevant tax period as well as that of the subsequent tax periods should be taken into cognizance while processing refund claims. (iii) For the issuance of an appropriate writ/ order/ direction for quashing and setting aside the Order in Original dated 2.2.2021 issued in Form GST RFD-06 (Annexure - 9) and the Order in Appeal dated 11.10.2021 (Annexure - 12) in as much as they seek to curtail the amount of refund of unutilised balance of Input Tax Credit ( ITC ) of compensation cess on account of zero-rated supplies of goods to which the Petitioner is entitled, by solely placing reliance on Paragraph 47 of Circular No. 125/44/2019-GST dated 18.11.2019 (Annexure - 6). (iv) For the issuance of an appropriate writ/order/direction including a writ in the nature of mandamus to direct the Respondent Authorities to refund the amount of Rs. 1,12,49,220/- being the shortfall amount to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. WPT No. 2796/2022 Nov to Dec 2018 62,61,069/- 11.12.2020 7.10.2021 11. WPT No. 2797/2022 July 2018 28,88,065/- 8.9.2020 9.2.2021 12. WPT No. 404/2023 Aug to Oct 2019 1,38,85,741/- 1.9.2021 30.8.2022 13. WPT No. 405/2023 June to July 2019 45,02,427/- 18.6.2021 20.7.2022 14. WPT No. 1986/2023 Nov 2017 to Mar 2018 2,04,30,905/- 16.12.2019 25.1.2021 3. The brief fact of the case as revealed in the writ application [W.P. (T) No. 1719 of 2022] that the Petitioner requires coal for manufacturing iron and steel. This coal is procured inter alia by way of purchase from other vendors on which applicable Goods and Services Tax and Compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account. Petitioner filed its application for refund of unutilized ITC of Compensation Cess in respect of zero-rated supplies made during January and February 2019, claiming refund of Rs. 4,95,64,373/-. Refund was claimed as per the formula prescribed in 89(4). The component Turnover of zero-rated supply of goods is defined as the value of zero-rated supply of goods . Therefore, the Petitioner reflected the actual value of exports (reflected I GSTR-1 of September 2019). The case of the petitioner company is that an amount of Rs. 3,32,08,130/- was provisionally refunded to the Petitioner in terms of Section 54(6) of the CGST Act read with Rule 91(2) of the CGST Rules. Thereafter, a show cause notice was issued to the Petitioner in RFD-08. It was indicated that value of Turnover of zero rated supply of goods indicated in the refund application could not be ascertained with certainty. Petitioner replied to the show cause notice in RFD-09. Thereafter, Impugned Order in Original ( OIO ) was passed in RFD-06 denying refund to the tune of Rs. 1,12,49,220/-. Reliance was placed on paragraph 47 of the Impugned Circular to arrive at a figure of Rs. 583,86,12,617/- as the Turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Act nor the CGST Rules contemplated comparison of the values of the tax invoice and the shipping bill and then take the lower of the two values. The said stipulation has been introduced for the first time in the Impugned Circular without there being any underlying provision. (iii) The above principles of law have also been applied in the context of circulars issued under Section 168 of the CGST Act and it has been held by various Hon ble High Courts that a circular which is repugnant to the parent legislation cannot be applied to oust the legitimate claim of refund of ITC. (iv) Further, the Respondent No. 2 does not have the jurisdiction, by way of issuing the Impugned Circular, to direct that the actual value of goods is to be disregarded. There is absolutely no justification to use a different parameter, i.e., taking a figure other than the actual amount paid against exports, only for the purpose of calculating refund. (v) The fiction introduced by the circular is thus against the scheme of the CGST which stipulates that actual price is to be accepted for it is trite law that subordinate legislation cannot create a deeming fiction. (vi) Moreover, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the formula, the eligible refund of the Petitioner has been reduced. Thus, this action of the Respondent authorities in deliberately taking a higher figure in the denominator side, despite their own finding to the contrary, is clearly arbitrary and illegal. 6. Learned senior counsel further raised an additional ground to the extent that in the counter-affidavit the respondents have come with a statement that since the notification issued by CBEC has now been made a Rule in view of amendment in Rule 89(4) of CGST Rules, 2017, vide Notification No. 14/2022 - Central Tax dated 05.07.2022; he contended that the rule was not in existence at the time of passing of the Order in Appeal in respective cases and thus cannot be relied upon to justify the impugned Order in Appeal. He further submits that even in the said notification the retrospective effect of other rules has been indicated and by bare perusal of those extracts it appears that except Rules 7, 9, 10 and 19; no Rule has been given retrospective effect. Relying upon the aforesaid submission, learned senior counsel contended that even if this court does not interfere with the circular, notification which came into effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of claims for refund vide Circular No. 37/11/2018-GST dated 15-032018 detailed out necessity of verification of invoices produced by claimants while processing refund claim on ITC. Clause 14.1 of this circular state, .. For processing of refund claims of input tax credit, verifying the invoice details is quintessential. In a completely electronic environment, the information of the recipients' invoices would be dependent upon the suppliers' information, thus putting an in-built check-and-balance in the system. However, as the refund claims are being filed by the recipient in a semi-electronic environment and is completely based on the information provided by them, it is necessary that invoices are scrutinized. The petitioner-assessee has revised invoice values in most of the invoices as per Range officer report which has been mentioned in the OIO, but the Range officer also marked certain abnormalities such as claimant has not claimed refund in respect of some invoices and some invoices remain unchanged. However, no rectification was submitted by the assessee-company in respect of such abnormalities. As no fresh evidence produced by the petitioner to authenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Rules and corresponding Shipping bill. Para 47 of Circular No. 125/44/2019-GST dated 18.11.2019 is very specific in such cases where it instructs to take lower value of the two. Thus, all the writ applications are very well covered under para-47 where instruction has been given for processing of refund distinctly for those cases where differences exist between tax invoice issued under rule 46 of the CGST, Rule and corresponding shipping bill values. 10. Learned ASGI further submits that the said clarification was carried out with the approval of GST Council, which is a constitutional body established under Article 279A of the Constitution of India and entrusted with the task to make recommendations to the Union of India and the states on all matters related to GST. Further, refund is not an unfettered right and Government is well within its power to impose certain restrictions, conditions and safeguards for grant of refund. This view has been upheld by the Hon'ble Supreme Court in the case of Mafatlal Industries Limited. v. Union of India reported in (1997) 5 SCC 536 wherein Hon ble Apex court held that the right of refund is not automatic. Further, Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on between two values. Such an exercise was not contemplated prior to the amendment as what was taken into account was the actual transaction value. Therefore, by way of the amendment, a substantive change has been brought about in the law and therefore the amendment ought to operate prospectively. Further, mere use of the term explanation will not be indicative of the fact that the amendment is clarificatory/declaratory. While Paragraph 47 contemplates comparison of the value of export in the tax invoice and in the shipping bill, i.e., the export document (which can either be FOB or CIF value), the explanation requires comparison of the value in tax invoice with only the FOB value. Thus, the explanation cannot be said to be on similar lines as Paragraph 47. A policy can be changed only by way of an amendment under the parent Act and not by a circular and the policy change will be effective from the date of the amendment. 13. At this stage it is relevant to refer the judgment cited by learned ASGI, rendered in the case of M/s Tonbo Karnatak High Court. We observed that in the said case the vires of Rule 89(4) (C) of the CGST rule was under challenge; as such the same is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 1 wherein at para 28 and 44 the law has been laid down as under:- 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585, 598 : AIR 1981 SC 1274, 1282 para 24 ] . If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352, 354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506 ]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are it is declared or for the removal of doubts . 19. When the Explanation seeks to give an artificial meaning to earned in India and brings about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively. 17. The law is now no more res integra that mere use of the term explanation will not be indicative of the fact that the amendment is clarificatory/declaratory. In this regard, reference may be made in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot by a circular and the law is well settled that no taxes shall be levied or collected by way of executive fiat. In this regard reference may be made to a celebrated Constitutional Bench judgment of the Hon ble Apex Court rendered in the case of Kunnathat Thatehunni Moopil Nair etc. -versus State of Kerela and another reported in 1960 SCC Online SC 7 wherein the Hon ble Supreme Court has held as under. Relevant portion of para-7 is extracted herein below: - 7. The most important question that arises for consideration in these cases, in view of the stand taken by the State of Kerala, is whether Article 265 of the Constitution is a complete answer to the attack against the constitutionality of the Act. It is, therefore, necessary to consider the scope and effect of that Article. Article 265 imposes a limitation on the taxing power of the State insofar as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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