Cosmo Films Limited v. Union of India & 3 Other
[Citation -2020-LL-1020-51]

Citation 2020-LL-1020-51
Appellant Name Cosmo Films Limited
Respondent Name Union of India & 3 Other
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act CGST
Date of Order 20/10/2020
Judgment View Judgment
Keyword Tags convertible foreign exchange • retrospective operation • goods and services tax • sale of finished goods • special economic zone • retrospective effect • service of notice • expenses incurred • denial of benefit • input tax credit • deemed export • modvat credit • cenvat credit • refund claim • levy of tax


C/SCA/15833/2018 CAV JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15833 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA 1 Whether Reporters of Local Papers may be allowed to YES see judgment ? 2 To be referred to Reporter or not ? YES 3 Whether their Lordships wish to see fair copy of NO judgment ? 4 Whether this case involves substantial question of law NO as to interpretation of Constitution of India or any order made thereunder ? COSMO FILMS LIMITED Versus UNION OF INDIA & 3 other(s) Appearance: MR. ABHISHEK RASTOGI WITH MR. PRATUSH SAHA WITH MR. MR NACHIKET DAVE(5308) FOR PETITIONER(S) NO. 1 MR NIRZAR S DESAI(2117) for Respondent(s) No. 1,3,4 NOTICE SERVED(4) for Respondent(s) No. 2 CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 20/10 / 2020 CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) Page 1 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 1. Rule returnable forthwith. Learned Standing Counsel Mr. Nirzar Desai waived service of notice of rule on behalf of respondent nos. 1, 3 and 4. 2. Having regard to controversy raised in this petition in narrow compass, with consent of learned advocates for respective parties, same is taken up for final hearing . 3. By this petition, under Article 226 of Constitution of India, petitioner has prayed for following reliefs: a) this Hon'ble Court may be pleased to issue appropriate writ, order or direction quashing and setting aside amendments in sub rule (10) of Rule 96 of CGST Rules and GGST Rules substituted vide Notification Number 54/2018 Central Tax, dated 9 October 2018 and Notification No.54/2018 State Tax, No. (GHN 99) / GSTR 2018(33)TH, dated 9 October 2018, to extent it denies option of rebate claim to Petitioner for importing goods under AA License, as being ultra vires of CGST Act, GGST Act and Rules made thereunder and Constitution; b) this Hon'ble Court may be pleased to issue writ, order or direction staying any demand against Rebate benefits availed by Petitioner due to retrospective Page 2 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT operation of impugned Notifications on Rule 96(10) of CGST and GGST Rules; c) this such further and other reliefs be granted as this Hon'ble Court may deem fit and proper. 4. short facts of case are as under: 4.1. petitioner is public limited company engaged in business of manufacturing and sale of flexible packaging films. petition is filed through its Director and Authorized person Mr. Anil Kumar Jain. 4.2. petitioner is holder of Advance Authorization Licenses (for short AA License ) granted in terms of Foreign Trade Policy, issued and amended from time to time. 4.3. petitioner has obtained AA Licenses and imports goods without payment of import duty in terms of Notification No. 79/2017 Customs, dated 13th October 2017. It is case of petitioner that, with effect from 1st July 2017, Central Goods and Service Tax Act,2017 (for short CGST Act ) and Gujarat Goods and Services Tax Act, 2017 (for short GGST Act ) are enacted for indirect tax on goods and services. provisions with respect to export Page 3 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT of goods or services are contained under Integrated Goods and Services Tax Act, 2017 (for short IGST Act ). Section 16 of IGST Act deals with export of goods and services and provides benefits against export of goods or services which can be claimed through either, (a) supply without payment of IGST and claim refund of unutilized input tax credit at end of period ( Refund ) and (b) Supply on payment of IGST and claim refund of such IGST paid ( Rebate ). 4.4. For purpose of procedure for granting refund of IGST on goods and services exported out of India, Rule 96 of Central Goods and Services Tax Rules, 2017 (for short CGST Rules ) provides mechanism, as per procedure prescribed under Section 54 of CGST Act and GGST Act. Sub rule (10) of Rule 96 of CGST Rules was introduced vide para 3 of Notification No. 54/2018 Central Tax, dated 9th October 2018 issued by respondent no.1 Ministry of Finance w.e.f. 23rd October 2017 and corresponding provisions were also introduced in GGST Rules by respondent no.2 State of Gujarat. 4.5. Sub rule (10) of Rule 96 of CGST Rules was Page 4 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT inserted by Central Goods and Service Tax (3rd Amendment) Rules, 2017 w.e.f. 1st July 2017. Sub rule (10) provides for exemption for AA license holders importing goods from levy of custom duties and IGST. 4.6. petitioner was entitled to import raw materials without payment of IGST under AA Licenses and pay IGST on exports and claim Rebate (Refund) of IGST so paid on exports. petitioner has received benefits of rebate of IGST at relevant point of time. Thereafter, sub rule (10) of Rule 96 of CGST Rules was amended by Notification dated 4th September, 2018 with retrospective effect from 23rd October, 2017, providing that rebate on exports cannot be availed by petitioner, if inputs procured by petitioner have enjoyed AA benefits or Deemed Export Benefits under said notification. Therefore, petitioner was unable to utilize benefit of duty free imports under AA Licenses and take benefit of rebate on exports, because of amendments made in Rule 96(10) of CGST Rules. It appears that, thereafter, by Notification No. 53/2018 Central Tax dated 9th October 2018, sub clause (a) and (b) of sub rule 10 of Rule 96 of CGST Rules were merged. Thereafter, vide Notification No. Page 5 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 54/2018 Central Tax dated 9th October 2018, sub rule 10 of Rule 96 of CGST Rules was again de merged and with effect from 23rd October, 2017 thereby indicating that Notification No. 54/2018 Central Tax do not intend to apply amendment to Rule 96(10) of CGST Rules retrospectively. petitioner has therefore preferred this petition challenging aforesaid notifications and amendments made in sub rule 10 of Rule 96 of CGST Rules, by Notification No. 54/2018 denying option to claim rebate to petitioner for importing goods under AA Licenses being ultra vires provisions of CGST Act and CGST Rules made there under and Article 14 of Constitution of India. 5. It would therefore be necessary to refer to relevant provisions of CGST Act , IGST Act and CGST Rules which have been amended by impugned notifications as under: 5.1. Section 16 of IGST Act, 2017 read as under: SECTION 16 : Zero rated supply (1) "zero rated supply" means any of following supplies of goods or services or Page 6 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT both, namely: (a) export of goods or services or both; or (b) supply of goods or services or both to Special Economic Zone developer or Special Economic Zone unit. (2) Subject to provisions of sub section (5) of section 17 of Central Goods and Services Tax Act, credit of input tax may be availed for making zero rated supplies, notwithstanding that such supply may be exempt supply. (3) registered person making zero rated supply shall be eligible to claim refund under either of following options, namely: (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with provisions of section 54 of Central Goods and Services Tax Act or rules made Page 7 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT thereunder. 5.2. Section 54 of IGST Act, 2017 read as under: CHAPTER XI REFUNDS Section 54 Refund of tax (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make application before expiry of two years from relevant date in such form and manner as may be prescribed: Provided that registered person, claiming refund of any balance in electronic cash ledger in accordance with provisions of sub section (6) of section 49, may claim such refund in return furnished under section 39 in such manner as may be prescribed. (2) specialised agency of United Nations Organisation or any Multilateral Financial Institution and Organisation notified under United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to refund of tax paid by it on inward supplies of goods or services or both, may make application for such refund, in such Page 8 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT form and manner as may be prescribed, before expiry of six months from last day of quarter in which such supply was received. (3) Subject to provisions of sub section (10), registered person may claim refund of any unutilised input tax credit at 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 credit has accumulated on account of rate of tax on inputs being higher than 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 Government on recommendations of Council: Provided further that no refund of unutilised input tax credit shall be allowed in cases where goods exported out of India are subjected to export duty: Provided also that no refund of input tax credit shall be allowed, if supplier of goods or services or both avails of drawback in respect of central tax or claims refund of integrated tax paid on such supplies. (4) application shall be accompanied Page 9 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT by (a) such documentary evidence as may be prescribed to establish that refund is due to applicant; and (b) such documentary or other evidence (including documents referred to in section 33) as applicant may furnish to establish that amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and incidence of such tax and interest had not been passed on to any other person: Provided that where amount claimed as refund is less than two lakh rupees, it shall not be necessary for applicant to furnish any documentary and other evidences but he may file declaration, based on documentary or other evidences available with him, certifying that incidence of such tax and interest had not been passed on to any other person. (5) If, on receipt of any such application, proper officer is satisfied that whole or part of amount claimed as refund is refundable, he may make order accordingly and amount so determined shall be credited to Fund referred to in section 57. (6) Notwithstanding anything contained in sub section (5), proper officer may, in case of any claim for refund Page 10 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT on account of zero rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by Government on recommendations of Council, refund on provisional basis, ninety per cent. of total amount so claimed, excluding amount of input tax credit provisionally accepted, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make order under sub section (5) for final settlement of refund claim after due verification of documents furnished by applicant. (7) proper officer shall issue order under sub section (5) within sixty days from date of receipt of application complete in all respects. (8) Notwithstanding anything contained in sub section (5), refundable amount shall, instead of being credited to Fund, be paid to applicant, if such amount is relatable to (a) refund of tax paid on export exports of goods or services or both or on inputs or input services used in making such zero rated supplies; (b) refund of unutilised input tax credit under sub section (3); (c) refund of tax paid on supply which is not provided, either wholly or partially, and for which invoice has not Page 11 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT been issued, or where refund voucher has been issued; (d) refund of tax in pursuance of section 77; (e) tax and interest, if any, or any other amount paid by applicant, if he had not passed on incidence of such tax and interest to any other person; or (f) tax or interest borne by such other class of applicants as Government may, on recommendations of Council, by notification, specify. (9) Notwithstanding anything to contrary contained in any judgment, decree, order or direction of Appellate Tribunal or any court or in any other provisions of this Act or rules made thereunder or in any other law for time being in force, no refund shall be made except in accordance with provisions of sub section (8). (10) Where any refund is due under sub section (3) to registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by specified date, proper officer may Page 12 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT (a) withhold payment of refund due until said person has furnished return or paid tax, interest or penalty, as case may be; (b) deduct from refund due, any tax, interest, penalty, fee or any other amount which taxable person is liable to pay but which remains unpaid under this Act or under existing law. Explanation. For purposes of this sub section, expression specified date shall mean last date for filing appeal under this Act. (11) Where order giving rise to refund is subject matter of appeal or further proceedings or where any other proceedings under this Act is pending and Commissioner is of opinion that grant of such refund is likely to adversely affect revenue in said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving taxable person opportunity of being heard, withhold refund till such time as he may determine. (12) Where refund is withheld under sub section (11), taxable person shall, notwithstanding anything contained in section 56, be entitled to interest at such rate not exceeding six per cent. as may be notified on recommendations of Council, if as result of appeal or further proceedings he becomes entitled to refund. Page 13 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT (13) Notwithstanding anything to contrary contained in this section, amount of advance tax deposited by casual taxable person or non resident taxable person under sub section (2) of section 27, shall not be refunded unless such person has, in respect of entire period for which certificate of registration granted to him had remained in force, furnished all returns required under section 39. (14) Notwithstanding anything contained in this section, no refund under sub section (5) or sub section (6) shall be paid to applicant, if amount is less than one thousand rupees. Explanation. For purposes of this section, (1) refund includes refund of tax paid on zero rated supplies of goods or services or both or on inputs or input services used in making such zero rated supplies, or refund of tax on supply of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under sub section (3). (2) relevant date means (a) in case of goods exported out of India where refund of tax paid is available in respect of goods themselves or, as case may be, inputs or input services used in such goods, Page 14 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT (i) if goods are exported by sea or air, date on which ship or aircraft in which such goods are loaded, leaves India; or (ii) if goods are exported by land, date on which such goods pass frontier; or (iii) if goods are exported by post, date of despatch of goods by Post Office concerned to place outside India; (b) in case of supply of goods regarded as deemed exports where refund of tax paid is available in respect of goods, date on which return relating to such deemed exports is furnished; (c) in case of services exported out of India where refund of tax paid is available in respect of services themselves or, as case may be, inputs or input services used in such services, date of (i) receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by Reserve Bank of India, where supply of services had been completed prior to receipt of such payment; or (ii) issue of invoice, where payment for services had been received in advance prior to date of issue of Page 15 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT invoice; (d) in case where tax becomes refundable as consequence of judgment, decree, order or direction of Appellate Authority, Appellate Tribunal or any court, date of communication of such judgment, decree, order or direction; (e) in case of refund of unutilised input tax credit under clause (ii) of first proviso to sub section (3), due date for furnishing of return under section 39 for period in which such claim for refund arises; (f) in case where tax is paid provisionally under this Act or rules made thereunder, date of adjustment of tax after final assessment thereof; (g) in case of person, other than supplier, date of receipt of goods or services or both by such person; and (h) in any other case, date of payment of tax. Refund in certain cases. 5.3. Rule 96 of CGST Rules read as under: Rule 96, Refund of integrated tax paid on goods [or services] exported out of India 96.(1) shipping bill filed by [an exporter of goods] shall be deemed to be Page 16 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT application for refund of integrated tax paid on goods exported out of India and such application shall be deemed to have been filed only when: (a) person in charge of conveyance carrying export goods duly files [a departure manifest or] export manifest or export report covering number and date of shipping bills or bills of export; and (b) applicant has furnished valid return in FORM GSTR 3 [or FORM GSTR 3B, as case may be]. (2) details of [relevant export invoices in respect of export of goods] contained in FORM GSTR 1 shall be transmitted electronically by common portal to system designated by Customs and said system shall electronically transmit to common portal, confirmation that goods covered by said invoices have been exported out of India: [Provided that where date for furnishing details of outward supplies in FORM GSTR 1 for tax period has been extended in exercise of powers conferred under section 37 of Act, supplier shall furnish information relating to exports as specified in Table 6A of FORM GSTR 1 after return in FORM GSTR 3B has been furnished and same shall be transmitted electronically by common portal to system designated by Customs: Provided further that information in Table 6A furnished under first proviso shall be auto drafted in FORM GSTR 1 for said tax period.] (3) Upon receipt of information regarding furnishing of valid return in FORM GSTR 3 [or FORM GSTR 3B, Page 17 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT as case may be] from common portal, [the system designated by Customs or proper officer of Customs, as case may be, shall process claim of refund in respect of export of goods] and amount equal to integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to bank account of applicant mentioned in his registration particulars and as intimated to Customs authorities. (4) claim for refund shall be withheld where, (a) request has been received from jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold payment of refund due to person claiming refund in accordance with provisions of sub section (10) or sub section (11) of section 54; or (b) proper officer of Customs determines that goods were exported in violation of provisions of Customs Act, 1962. (5) Where refund is withheld in accordance with provisions of clause (a) of sub rule (4), proper officer of integrated tax at Customs station shall intimate applicant and jurisdictional Commissioner of central tax, State tax or Union territory tax, as case may be, and copy of such intimation shall be transmitted to common portal. (6) Upon transmission of intimation under sub rule (5), proper officer of central tax or State tax or Union territory tax, as case may be, shall pass order in Part B of FORM GST RFD 07. (7) Where applicant becomes entitled to refund of amount withheld under Page 18 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT clause (a) of sub rule (4), concerned jurisdictional officer of central tax, State tax or Union territory tax, as case may be, shall proceed to refund amount after passing order in FORM GST RFD 06. (8) Central Government may pay refund of integrated tax to Government of Bhutan on exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to Government of Bhutan, exporter shall not be paid any refund of integrated tax. [ (9) application for refund of integrated tax paid on services exported out of India shall be filed in FORM GST RFD 01 and shall be dealt with in accordance with provisions of rule 89. [(10) persons claiming refund of integrated tax paid on exports of goods or services should not have (a) received supplies on which benefit of Government of India, Ministry of Finance notification No.48/2017 Central Tax, dated 18th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1305(E), dated 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 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1320(E), dated 23rd October, 2017 or notification No.41/2017 Integrated Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section Page 19 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 3, Sub section (i), vide number G.S.R 1321 (E), dated 23rd October, 2017 has been availed; or (b) availed benefit under notification No. 78/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1272(E), dated 13th October, 2017 or notification No.79/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1299 (E), dated 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.] 5.4. Notification No. 40 of 2017 C.T. (Rate) dated 23 Oct 2017 read as under: Reduced CGST Rates prescribed for supply of taxable goods by registered supplier to registered recipient for export subject to specified conditions. In exercise of powers conferred by sub section (1) of section 11 of Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as said Act ), Central Government, on being satisfied that it is necessary in public interest so to do, on recommendations of Council, hereby exempts intra State supply of taxable goods (hereafter in this notification referred to as said goods ) by registered supplier to Page 20 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT registered recipient for export, from so much of central tax leviable thereon under section 9 of said Act, as is in excess of amount calculated at rate of 0.05 per cent., subject to fulfillment of following conditions, namely : (i) registered supplier shall supply goods to registered recipient on tax invoice; (ii) registered recipient shall export said goods within period of ninety days from date of issue of tax invoice by registered supplier; (iii) registered recipient shall indicate Goods and Services Tax Identification Number of registered supplier and tax invoice number issued by registered supplier in respect of said goods in shipping bill or bill of export, as case may be; (iv) registered recipient shall be registered with Export Promotion Council or Commodity Board recognized by Department of Commerce; (v) registered recipient shall place order on registered supplier for procuring goods at concessional rate and copy of same shall also be provided to jurisdictional tax officer of registered supplier; (vi) registered recipient shall move said goods from place of registered supplier (a) directly to Port, Inland Container Deport, Airport or Land Page 21 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Customs Station from where said goods are to be exported; or (b) directly to registered warehouse from where said goods shall be move to Port, Inland Container Depot, Airport or Land Customs Station from where said goods are to be exported; (vii) if registered recipient intends to aggregate supplies from multiple registered suppliers and then export, goods from each registered supplier shall move to registered warehouse and after aggregation, registered recipient shall move goods to Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported; (viii) in case of situation referred to in condition (vii), registered recipient shall endorse receipt of goods on tax invoice and also obtain acknowledgement of receipt of goods in registered warehouse from warehouse operator and endorsed tax invoice and acknowledgment of warehouse operator shall be provided to registered supplier as well as to jurisdictional tax officer of such supplier; and (ix) when goods have been exported, registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of registered supplier along with proof of export general manifest or export report having been filed to registered supplier as well as jurisdictional tax officer of such supplier. Page 22 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 2. registered supplier shall not be eligible for above mentioned exemption if registered recipient fails to export said goods within period of ninety days from date of issue of tax invoice. 5.5. Notification No. 41/2017 INTEGRATED TAX (RATE) reads as under: INTEGRATED TAX (RATE) SECTION 6 OF INTEGRATED GOODS AND SERVICES TAX ACT, 2017 POWER TO GRANT EXEMPTION EXEMPTION TO INTER STATE SUPPLY OF TAXABLE GOODS BY REGISTERED SUPPLIER TO REGISTERED RECEIPT FOR EXPORT, FROM SO MUCH OF INTEGRATED TAX LEVIABLE THEREON UNDER SECTION 5, AS IS IN EXCESS OF AMOUNT CALCULATED AT RATE OF 0.1 PER CENT NOTIFICATION NO.41/2017 INTEGRATED TAX (RATE), DATED 23 10 2017 In exercise of powers conferred by sub section (1) of section 6 of Integrated Goods and Services Tax Act, 2017 (13 of 2017), (hereafter in this notification referred to as said Act ), Central Government, on being satisfied that it is necessary in public interest so to do, on recommendations of Council, hereby exempts inter State supply of taxable goods (hereafter in this notification referred to as said goods ) by registered supplier to registered recipient for export, from so much of integrated tax leviable thereon under Page 23 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT section 5 of Integrated Goods and Services Tax Act, 2017 (13 of 2017), as is in excess of amount calculated at rate of 0.1 per cent, subject to fulfilment of following conditions, namely: (i) registered supplier shall supply goods to registered recipient on tax invoice; (ii) registered recipient shall export said goods within period of ninety days from date of issue of tax invoice by registered supplier; (iii) registered recipient shall indicate Goods and Services Tax Identification Number of registered supplier and tax invoice number issued by registered supplier in respect of said goods in shipping bill or bill of export, as case may be; (iv) registered recipient shall be registered with Export Promotion Council or Commodity Board recognised by Department of Commerce; (v) registered recipient shall place order on registered supplier for procuring goods at concessional rate and copy of same shall also be provided to jurisdictional tax officer of registered supplier; (vi) registered recipient shall move said goods from place of registered supplier (a) directly to Port, Inland Container Deport, Airport or Land Customs Station from where said goods are to be exported; or (b) directly to registered warehouse from where said goods shall be move to Port, Inland Container Page 24 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Deport, Airport or Land Customs Station from where said goods are to be exported; (vii) if registered recipient intends to aggregate supplies from multiple registered suppliers and then export, goods from each registered supplier shall move to registered warehouse and after aggregation, registered recipient shall move goods to Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported; (viii) in case of situation referred to in condition (vii), registered recipient shall endorse receipt of goods on tax invoice and also obtain acknowledgement of receipt of goods in registered warehouse from warehouse operator and endorsed tax invoice and acknowledgement of warehouse operator shall be provided to registered supplier as well as to jurisdictional tax officer of such supplier; and (ix) when goods have been exported, registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of registered supplier along with proof of export general manifest or export report having been filed to registered supplier as well as jurisdictional tax officer of such supplier. 2. registered supplier shall not be eligible for above mentioned exemption if registered recipient fails to export said goods within period of ninety days from date of Page 25 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT issue of tax invoice. 5.6. Notification No. 48/2017 C.T. dated 18 Oct 2017 reads as under: Deemed Exports Supply of goods against advance authorization, EPCG or supply to EOU or by Banks/PSUs against advance authorization notified as deemed exports. In exercise of powers conferred by section 147 of Central Goods and Services Tax Act, 2017 (12 of 2017), Central Government, on recommendations of Council, hereby notifies supplies of goods listed in column (2) of Table below as deemed exports, namely : TABLE Sr. Description of supply No. (1) (2) 1 Supply of goods by registered person against Advance Authorisation 2 Supply of capital goods by registered person against Export Promotion Capital Goods Authorisation 3 Supply of goods by registered person to Export Oriented Unit 4 Supply of gold by bank or Public Sector Undertaking specified in notification No. 50/2017 Customs, dated 30thJune, 2017 (as amended) against Advance Authorisation. Page 26 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Explanation For purposes of this notification, 1. Advance Authorisation means authorisation issued by Director General of Foreign Trade under Chapter 4 of Foreign Trade Policy 2015 20 for import or domestic procurement of inputs on pre import basis for physical exports. 2.Export Promotion Capital Goods Authorisation means authorisation issued by Director General of Foreign Trade under Chapter 5 of Foreign Trade Policy 2015 20 for import of capital goods for physical exports. 3. Export Oriented Unit means Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio Technology Park Unit approved in accordance with provisions of Chapter 6 of Foreign Trade Policy, 2015 20. 5.7. Notification No. 3/2018 C.T. dated 23 Jan 2018 read as under: . (x) with effect from 23rd October, 2017, in rule 96, (a) in sub rule (1), for words exporter , words exporter of goods shall be substituted; (b) in sub rule (2), for words relevant export invoices , words relevant export invoices in respect of Page 27 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT export of goods shall be substituted; (c) in sub rule (3), for words system designated by Customs shall process claim for refund , words system designated by Customs or proper officer of Customs, as case may be, shall process claim of refund in respect of export of goods shall be substituted; (d) for sub rule (9), following sub rules shall be substituted, namely : (9) application for refund of integrated tax paid on services exported out of India shall be filed in FORM GST RFD 01 and shall be dealt with in accordance with provisions of rule 89 . (10) persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which supplier has availed benefit of Government of India, Ministry of Finance, notification No.48/2017 Central Tax, dated 18th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1305(E), dated 18th October, 2017 or notification No.40/2017 Central Tax (Rate), 23rd October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1320(E), dated 23rd October, 2017 or notification No.41/2017 Integrated Tax (Rate), dated 23rd October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. Page 28 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 1321(E), dated 23rd October, 2017 or notification No.78/2017 Customs, dated 13th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1272(E), dated 13th October, 2017 or notification No.79/2017 Customs Tax, dated 13th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1299(E), dated 13th October, 2017. 5.8. Notification No. 39/2018 C.T. dated 04 Sep 2018 reads as under: . 6. In said rules, with effect from 23rd October, 2017, in rule 96, for sub rule (10), following sub rule shall be substituted, namely : (10) persons claiming refund of integrated tax paid on exports of goods or services should not have (a) received supplies on which benefit of Government of India, Ministry of Finance notification No.48/2017 Central Tax, dated 18th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1305(E), dated 18th October, 2017 or notification No. 40/2017 Central Tax (Rate), dated 23rd October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1320(E), dated 23rd October, 2017 or notification No.41/2017 Integrated Tax Page 29 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT (Rate), dated 23rd October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1321(E), dated 23rd October, 2017 has been availed; or (b) availed benefit under notification No.78/2017 Customs, dated 13th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1272(E), dated 13th October, 2017 or notification No.79/2017 Customs, dated 13th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1299(E), dated 13th October, 2017. 5.9. Notification No.53/2018 C.T. dated 09 Oct 2018 reads as under: Central Goods and Services Tax Rules, 2018 Eleventh Amendment of 2018 In exercise of powers conferred by section 164 of Central Goods and Services Tax Act, 2017 (12 of 2017), Central Government hereby makes following rules further to amend Central Goods and Services Tax Rules, 2017, namely : 1. (1) These rules may be called Central Goods and Services Tax (Eleventh Amendment) Rules, 2018. (2) They shall be deemed to have come into force with effect from 23rd October, 2017. Page 30 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 2. In Central Goods and Services Tax Rules, 2017, in rule 96, for sub rule (10), following sub rule shall be substituted and shall be deemed to have been substituted with effect from 23rd October, 2017, namely : (10) persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which supplier has availed benefit of Government of India, Ministry of Finance, notification No. 48/2017 Central Tax, dated 18th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1305(E), dated 18th October, 2017 or notification No.40/2017 Central Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1320(E), dated 23rd October, 2017 or notification No.41/2017 Integrated Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1321(E), dated 23rd October, 2017 or notification No. 78/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1272(E), dated 13th October, 2017 or notification No.79/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. Page 31 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 1299(E), dated 13th October, 2017. 5.10. Notification No.54/2018 C.T. dated 09 Oct 2018 reads as under: Central Goods and Service Tax Rules, 2017 Twelfth Amendment of 2018. In exercise of powers conferred by Section 164 of Central Goods and Services Tax Act, 2017 (12 of 2017), Central Government thereby makes following rules further to amend Central Goods and Services Tax Rules, 2017, namely: 1. (1) These rules may be called Central Goods and Services Tax (Twelfth Amendment) Rules, 2018. (2) They shall come into force on date of their publication in Official Gazette. 2. In Central Goods and Services Tax Rules, 2017 (hereinafter referred to as said rules), in rule 89, for sub rule (4B), following sub rule shall be substituted, namely: (4B) Where person claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax has (a) received supplies on which supplier has availed benefit of Government of India, Ministry of Finance, notification No. 40/2017 Central Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1320 (E), dated 23rd October, 2017 or Page 32 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT notification No. 41/2017 Integrated Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1321(E), dated 23rd October, 2017; or (b) availed benefit of notification No. 78/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1272(E), dated 13th October, 2017 or notification No. 79/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1299(E),dated 13th October, 2017, refund of input tax credit, availed in respect of inputs received under said notifications for export of goods and input tax credit availed in respect of other inputs or input services to extent used in making such export of goods, shall be granted. . 3. In said rules, in rule 96, for sub rule (10), following sub rule shall be substituted, namely: (10) persons claiming refund of integrated tax paid on exports of goods or services should not have (a) received supplies on which benefit of Government of India, Ministry of Finance notification No. 48/2017 Central Tax, dated 18th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1305 (E), dated 18th October, 2017 except so far it Page 33 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or notification No. 40/2017 Central Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1320 (E), dated 23rd October, 2017 or notification No. 41/2017 Integrated Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1321 (E), dated 23rd October, 2017 has been availed; or (b) availed benefit under notification No. 78/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1272(E), dated 13th October, 2017 or notification No. 79/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1299 (E), dated 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme. 6.1. learned advocate Mr. Abhishek Rastogi appearing with learned advocate Mr. Nachiket Dave for petitioner submitted that Page 34 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT as per amended Rule 96 (10) of CGST Rules, petitioner is not entitled to get rebate benefits under Section 16(3)(b) of IGST Act in view of amendment w.e.f. 23rd October 2017 where petitioner has availed benefit of upfront IGST exemption on imports against AA Licenses, as conferred upon petitioner through Notification No. 79/2017 Customs dated 13th October, 2017. 6.2. It was submitted that Domestic Tariff Area (for short DTA ) suppliers of petitioner may avail Deemed Export Benefits and claim refund of input taxes, if they supply goods to petitioner who holds AA License under Notification No. 48 of 2017 dated 18th October, 2017, but petitioner is denied benefits under rebate mode under Rule 96 (10) as amended by impugned Notification No. 54 of 2018 w.e.f. 23rd October 2017, if suppliers of petitioner avails Deemed Export benefits while supplying materials to petitioner from DTA. 6.3. Mr. Rastogi further submitted that, till 23rd October 2017, petitioner was eligible to opt for rebate of IGST paid on exports without any restriction, however, w.e.f. 23rd October 2017, on account of amendment in Rule Page 35 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 96(10) , petitioner is not able to avail export benefits under rebate, if petitioner imported goods under AA Licenses issued prior to 23rd October 2017. 6.4. learned advocate Mr. Rastogi therefore submitted that action of respondents suffers from vices of excessive delegation by impugned notifications denying benefit of Zero rated exports conferred upon petitioner through Section 16(3)(b) of CGST Act by imposing arbitrary restrictions upon petitioner, so that they are unable to claim rebate benefits from Government. 6.5. It was submitted that petitioner is entitled to rebate of IGST on exports under Section 16 of IGST Act r/w. Section 54 of CGST Act, as benefits against export of goods can be claimed after payment of IGST on exports and claim refund of such IGST paid under rebate mode, as provided under Section 54 of CGST Act and CGST Rules. It was submitted that neither Section 16 of IGST Act nor Section 54 of CGST Act prescribes any power to issue impugned notifications, so as to deny impact of zero rating exports for granting benefits of rebate under Section 16 of IGST Page 36 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Act, so as to nullify benefits under Advance Authorization Scheme availed by exporters, like petitioner. 6.6. It was submitted that in view of impugned notifications, petitioner is put at disadvantageous position against regular exporters who are exporting goods without payment of IGST on output side and at same time, claiming refund of input taxes on input side thereby effectively incurring no tax cost either on input side i.e. on procurements or on output side i.e. on exports in terms of Section 16 of IGST Act, whereas, only because petitioner has availed benefit under Advance Authorization Scheme, in view of amended Rule 96(10) of CGST Rules, petitioner is denied benefit of IGST refund /rebate on output side i.e. export. 6.7. Mr. Rastogi submitted that petitioner is discriminated qua others who have not availed benefits of Advance Authorization Scheme, which would result in violation of Article 14 of Constitution of India, as regular exporters are able to avail option of rebate and recover rebate for accumulated input tax credit balance. It was Page 37 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT submitted that, AA License holders or regular exporters earn foreign exchange for country and boost economy of nation and therefore, there should not be any reasonable classification by subjecting petitioner to different tax treatments. 6.8. It was submitted that, there is no case of reasonable classification for exporters who have availed benefit of AA License because there is no nexus which is sought to be achieved, as rational behind introduction of sub rule (10) of Rule 96 is that benefit should not be claimed by both suppliers of AA License holders and AA License holders themselves. 6.9. It was submitted that in case of suppliers of AA License holders, refund is claimed against deemed exports under Rule 89 of CGST Rules, wherein, it is specifically provided that AA License holder should not claim input tax credit. reliance was placed to third proviso of Rule 89(1) which reads as under: Third proviso to Rule 89(1) Provided also that in respect of supplies Page 38 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT regarded as deemed exports, application may be filed by, (a) recipient of deemed export supplies; or (b)the supplier of deemed export supplies in cases where recipient does not avail of input tax credit on such supplies and furnishes undertaking to effect that supplier may claim refund. Thereafter, reliance was placed on definition of Net ITC. Rule 89(4A) of CGST Rules, which reads as under: Definition of Net ITC and Rule 89(4A) Net ITC means input tax credit availed on inputs and input services during relevant period other than input tax credit availed for which refund is claimed under sub rules (4A) or (4B) or both; (4A) In case of supplies received on which supplier has availed benefit of Government of India, Ministry of Finance, notification No.48/2017 Central Tax dated 18th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1305 (E) dated 18th October, 2017, refund of input tax credit, availed in respect of other inputs or input services used in making zero rated supply of goods or services or both, shall be granted. 6.10. Relying upon above provisions that AA License holders cannot claim input tax Page 39 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT credit in case vendor / supplier is availing Deemed Export Benefits and AA License holder is also required to furnish undertaking stating that no input tax credit is claimed. reliance was also placed on Circular No. 14/14 2017 GST, dated 6th November 2017, wherein, procedural safeguards in case of Deemed Export Benefits are provided stipulating requirements of furnishing intimation with jurisdictional GST authorities, maintaining records, submitting copies of invoices, etc. It was submitted that, there are sufficient safeguards to ensure that both suppliers of AA License holders and AA License holders themselves do not claim benefits under GST regime simultaneously. 6.11. It was pointed out by Mr. Rastogi that, in case of AA License holders benefits are availed only to input tax credit to extent of tax paid on inward supply and such benefit under rebate mode cannot exceed, input tax credit balance available with AA License holder, i.e. amount of input tax credit actually availed in past and therefore, there is no question of additional benefit being availed in absence of sub rule (10) of Rule 96 of CGST Rules. Page 40 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 6.12. Reliance was placed on Circular No. 45/19/2018 GST dated 30th May 2018 and more particularly para 7.1 thereof, emphasizes objective of introduction of sub rule (10) of Rule 96 which reads as under: Sub rule (10) of rule 96 of CGST Rules seeks to prevent exporter, who is receiving goods from suppliers availing benefit of certain specified notifications under which they supply goods without payment of tax or at reduced rate of tax, from exporting goods under payment of integrated tax. This is to ensure that exporter does not utilise input tax credit availed on other domestic supplies received for making payment of integrated tax on export of goods. 6.13. It was submitted that, rationale given in aforesaid notification is illogical, arbitrary and unreasonable, as benefit under rebate claim cannot exceed amount of input tax credit taken which is allowed to be taken by AA license holders is restricted in case of Deemed Export benefits or Merchant Export Benefits. 6.14. It was submitted by learned Advocate Mr. Rastogi that respondents have issued impugned notifications, while exercising powers under Section 164 of CGST Act, but provision of Section 164 of CGST Page 41 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Act can be invoked only where provision is specifically required to be prescribed by respondents. It was submitted that, sub section (2) of Section 164 specifically states that power to make rules is only to extent required by CGST Act and accordingly, such powers can be exercised only subject to and subservient to respective provisions of GST law. It was therefore submitted that rebate mode or refund mode prescribed under Rules should be in accordance with Section 16 of IGST Act or Section 54 of CGST Act. 6.15. Mr. Rastogi therefore submitted that amended sub rule 10 of Rule 96 restricts rebate claims in case of AA License holders without any reasonable basis to justify imposition of absolute restriction for not claiming and not form and manner for claiming refund. 6.16. Mr. Rastogi without admitting that respondents have power to prescribe safeguards and conditions for refund of tax, submitted that sufficient safeguards already exist to prevent undue benefits being claimed, as Rule 89 of CGST Rules prohibits availment of input tax credit in case of Deemed Export Benefits are claimed and in case of Merchant Page 42 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Export Benefits and AA benefits, quantum of rebate can in no case exceed input tax credit balance i.e. input tax credit earlier availed. It was therefore submitted that, amendment of sub rule (10) of Rule 96 are unreasonable and liable to be stuck down. 6.17. With regard to retrospective amendment made in sub rule (10) of Rule 96 of CGST Rules w.e.f. 23rd October 2017, it was submitted by Mr. Rastogi that, though notification has been issued on 4th September 2018, such retrospective operation cannot be arbitrary and burdensome. Reliance was placed on decision of Apex Court in case of Tata Motors Ltd. v. State of Maharashtra & Ors. reported in AIR 2004 SC 3618, in support of such submission. 6.18. It was submitted that, retrospective introduction in sub rule (10) of Rule 96 of CGST Rules, petitioner is unfairly penalized as consequence of claiming benefits during interim period from 23rd October 2017 till 4th September 2018. 6.19. It was further submitted that AA License scheme has been introduced by Page 43 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT respondent no.1 with objective of boosting exports, enhancing foreign exchange earnings and attracting more investment in country, and therefore, AA License holders are granted with additional fiscal benefits and incentives vis vis regular exporters. It was therefore submitted that to deny benefits which are available to regular exports that are not holding AA Licensee to AA License holders, it goes against policy of granting of AA License and denial of such benefits defeats whole purpose of AA License scheme. 6.20. Mr. Rastogi thereafter submitted that it is settled legal position that taxes cannot be exported, as per norms prescribed by World Trade Organization (for short WTO ) which specifically permits remission of duties and taxes on exported products. reliance was placed on Article XVI of General Agreement on Tariffs and Trade, 1994 (Note to Article XVI) and provisions of Annexures I to III of Agreement on Subsidies and Countervailing Measures, exemption or remission of duties and taxes on exported products, so as not to bring such measures to be subsidy and hence, is permitted. It is settled international practice to export only goods and services and not Page 44 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT taxes suffered thereon. It was further submitted that, petitioner is unable to get back transitional credit either through refund mode or rebate mode, petitioner would be constrained to write off this amount and pass on burden of such amount to its foreign customers, which would lead to situation of export of taxes, which is against policy of respondent no.1. 6.21. Lastly, reliance was placed on statement of objects and reasons to Constitution Amendment Bill introducing GST regime in India, wherein, it is specified that removal of cascading effect of taxes is one of objectives of GST and hence, smooth pass through of credits is stated objective of GST regime and denial of benefit on transitional credit to petitioner leading to blockage of credits is against spirit and objective of GST regime. SUBMISSIONS ON BEHALF OF RESPONDENTS: 7.1. Learned Standing Counsel Mr. Nirzar Desai appearing for respondent nos. 1, 3 and 4 submitted that, sub rule (10) of Rule 96 of CGST Rules only provides that registered persons, Page 45 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT including importers, who are directly purchasing / importing supplies on which benefit of reduced tax incidence or no tax incidence under certain specified notifications has been availed, would not be eligible for refund of integrated tax paid on export of goods or services. It was submitted that, intention of sub rule (10) of Rule 96 is to ensure that exporter is not able to utilize input tax credit availed on inward supplies which are used in making domestic output supplies for payment of IGST on exports and thereby encash same. It was submitted that, such exports are free to export under LUT/ Bond and claim refund of any unutilized input tax credit. 7.2. Mr. Desai thereafter relied upon following averments made in affidavit in reply filed on behalf of respondent nos. 1, 3 and 4: 9. I say that petitioner challenges that sub rule (10) of Rule 96 is beyond competence of respondents and is consequently invalid. said contention of petitioner is not correct. In terms of Section 164 of CGST Act, Government, may on recommendation of Council, by notification make rules for carrying out provisions of Act. approval Page 46 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT of GST Council, which is Constitutional body constituted under Article 279A of Constitution of India and mandated with making all GST related decisions, has been obtained for all above measures. above notifications were issued on recommendation of GST Council on basis of decision taken in its 25th Meeting, held on 15.01.2018. subject matter was presented at Serial No.9 of Agenda item no. 7(i) before GST Council. decision taken, as recorded in minutes of meeting, was as under: 17. For Agenda item 7, Council approved proposed changes in CGST Rules and Forms, as contained in Agenda item 7, except for Serial No.5 of Agenda item 7(i)(v) relating to purchase value of goods repossessed from defaulting borrower . Accordingly, insertion of sub rule (10) has been made in terms of law. 10. I say that retrospectivity of amendments made to sub rule (10) of rule 96 of CGST rules was nullified vide issuance of notification No.53/2018 Central Tax dated 09.10.2018, which restored position of rule 96(10), with retrospective effect (i.e. w.e.f. 23.10.2017) as it existed before issuance of Notification No.39/2018 Central Tax dated 04.09.2018. Further, vide notification No. 54/2018 Central Tax dated 09.10.2018, exception was carved from restriction imposed by sub rule (10) of rule 96 for those exporters who are importing capital goods under EPCG scheme. 11. I say that petitioner further Page 47 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT challenges that Rule 96(10) of CGST/GGST Rules, 2017 inserted vide Para 6 of Notification No.39/2018 Central Tax/State Tax, dated 04.09.2018 violates Article 14 of Constitution of India. In this regard, I say that it is well established that Article 14 forbids class legislation but does not forbid classification. Permissible classification must be founded on intelligible differentia which distinguishes persons or things that are grouped together from others left out of group, and differentia must have rational relation to object sought to be achieved by statute in question. I further say that what is disallowed to petitioner and allowed to others of same class should be demonstrated by petitioner. That is test for arbitrariness. petitioners had no occasion to demonstrate their case in test of arbitrariness. Needless to mention, GST laws are self contained legislations. laws were promulgated after necessary constitutional amendments. It cannot, therefore, be said that equals have been treated unequally or unequals have been treated equally while providing benefit of Notification No. 39/2018 Central Tax/State Tax, dated 04.09.2018. Only such provisions of taxing statute can be struck down on ground of discrimination which operate differently on members of same class and in similar situation. If members of same class are affected equally and uniformly, provision cannot be said to suffer from vice of discrimination and, therefore, cannot be struck down as violation of Article 14 Page 48 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT of Constitution. In this connection reliance is place on judgment of hon'ble Supreme Court in case of Amalgamated Tea Estate Co. Vs. State of Kerala, (1974) CTR (S.C.) 192, wherein it was said that as revenue is first necessity of State and as taxes are raised for various purposes and by adjustment of diverse elements, court grants to State greater choice of classification in field of taxation than in other spheres. and that On challenge to statute on ground of Article 14, court would generally raise presumption in favour of its constitutionality. Consequently, one who challenges statute bears burden of establishing that statute is clearly violative of Article 14. In N. V. Somaraju Vs. Govt. of India 1973 Tax LR 1084 (Andh.Pra.), it was held that While considering provisions of Article 14 of Constitution, no precise or mathematical accuracy is contemplated and what is to be seen is overall equality given to same class. and in matter of taxation legislature has greater freedom not only to classify different persons or subjects in regard to whom or which tax is to be levied but different modes of taxation can also be adopted. In view of above, I say that Rule 96(10) of CGST/GGST Rules, 2017 inserted Page 49 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT vide Para 6 of Notification No.39/2018 Central Tax/State Tax, dated 04.09.2018 does not violate Article 14 of Constitution of India. 12. I say that petitioner further challenges that Rule 96(10) of CGST/GGST Rules, 2017 inserted vide Para 6 of Notification No.39/2018 Central Tax/State Tax, dated 04.09.2018 violates Article 19(1)(g) of Constitution of India. In this regard, I say that Article 19(1)(g) of Constitution guarantees citizens of India right to carry on any occupation, trade or business. petitioners had no carry on any occupation, trade or business. petitioners had no occasion to demonstrate their case in test of arbitrariness. petitioner is still entitled to full enjoyment of this freedom even after implementation of notification, ibid, and legislature has not infringed his right to trade under Article 19(1)(g) of Constitution. 13. In view of whatever is stated hereinabove it is stated that Petitioners have no case on merits or otherwise and hence, present Petition deserves to be dismissed. 7.3. Relying on aforesaid averments made in affidavit in reply, it was submitted that, no interference is required to be made in retrospective amendment of sub Rule (10) of Rule 96 of CGST Rules. Mr. Desai further relied upon decision of Hon ble Apex Court in Page 50 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT case of State of Gujarat v. Reliance Industries Limited reported in (2017) 16 SCC 28, wherein, Apex Court has held in context of Gujarat Value Added Tax Act, 2003, as under: 18. aforesaid discussion leads us to conclusion that it is mega tax credit scheme which is provided under VAT Act meant for all kinds of manufactured goods. material in question, namely, furnace oil, natural gas and light diesel oil are admittedly subject to VAT under VAT Act. Legislature, however, has incorporated provision, in form of Section 11, to give tax credit in respect of such goods which are used as inputs/ raw material for manufacturing other goods. Rationale behind same is simple. When finished product, after manufacture, is sold, VAT would be again payable thereon. This VAT is payable on price at which such goods are sold, costing whereof is done keeping in view expenses involved in manufacture of such goods plus profits which manufacturer intends to earn. Insofar as costing is concerned, element of expenses incurred on raw material would be included. In this manner, when final product is sold and VAT paid, component of raw material would be included again. Keeping in view this objective, Legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstances, is domain of Legislature and courts are not to tinker with same. 19 This proposition is authoritatively Page 51 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT determined by this Court in series of judgments. We may refer to judgment in Godrej & Boyce Mfg. Co. Pvt. Ltd. & Ors. v. Commissioner of Sales Tax and Others, 1992 3 SCC 624 and relevant extract which is relevant for our purposes is as follows: "9. Sri Bobde appearing for appellants reiterated contentions urged before High Court. He submitted that deduction of one per cent, in effect, amounts to taxing raw material purchased outside State or to taxing sale of finished goods effected outside State of Maharashtra. We cannot agree. Indeed, whole issue can be put in simpler terms. appellant (manufacturing dealer) purchases his raw material both within State of Maharashtra and outside State. Insofar as purchases made outside State of Maharashtra are concerned, tax thereon is paid to other States. State of Maharashtra gets tax only in respect of purchases made by appellant within State. So far as sales tax leviable on sale of goods manufactured by appellant is concerned, State of Maharashtra can levy and collect such tax only in respect of sales effected within State of Maharashtra. It cannot levy or collect tax in respect of goods which are despatched by appellant to his branches and agents outside State of Maharashtra and sold there. In law (apart from Rules 41 and 41 A) appellant has no legal right to claim set off of purchase tax paid by him on his purchases within State from out of sales tax payable by him on sale of goods manufactured by him. It is only by virtue of said Rules which, as stated above, are conceived mainly in interest of public that he is Page 52 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT entitled to such set off. It is really concession and indulgence. More particularly, where manufactured goods are not sold within State of Maharashtra but are despatched to out State branches and agents and sold there, no sales tax can be or is levied by State of Maharashtra. State of Maharashtra gets nothing in respect of such sales effected outside State. In respect of such sales, rule making authority could well have denied benefit of set off. But it chose to be generous and has extended said benefit to such out State sales as well, subject, however to deduction of one per cent of sale price of such goods sent out of State and sold there. We fail to understand how valid grievance can be made in respect of such deduction when very extension of benefit of set off is itself boon or concession. It was open to rule making authority to provide for small abridgement or curtailment while extending concession. Viewed from this angle, argument that providing for such deduction amounts to levy of tax either on purchases of raw material effected outside State or on sale of manufactured goods effected outside State of Maharashtra appears to be beside point and is unacceptable. So is argument about apportioning sale price with reference to proportion in which raw material was purchased within and outside State. (emphasis added)" To same effect are judgments in case of Hotel Balaji & Ors. v. State of Andhra Pradesh & Ors., 1993 Supp 4 SCC 536 and Jayam and Company v. Assistant Commissioner and Another, 2015 15 SCC 125. Page 53 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 20 upshot of aforesaid discussion would be to hold that reduction of 4% would be applied whenever case gets covered by sub clause (ii) and again when sub clause (iii) is attracted. This, however, would be subject to one limitation. In those cases where VAT paid on such raw material is 4%, as in case of furnace oil, reduction cannot be more than that. After all, Section 11 deals with giving credit in respect of tax that is paid. Therefore, if some reduction is to be made from said credit, it cannot be more than credit given. Thus, so far as furnace oil is concerned, tax credit shall be reduced by 4%. On other hand, tax credit given in case of natural gas and light diesel oil (other fuels), it shall be reduced by 4% under sub clause (ii) and 4% under sub clause (iii) of clause (b) of sub section (3) of Section 11. 7.4. Mr. Desai also relied upon decision of Division Bench of this Court in case of Willowood Chemicals Pvt. Ltd. v. Union of India rendered on 12th / 19th September, 2018 in Special Civil Application No. 4252 of 2018, wherein, constitutionality of second proviso to Section 140 (1) of CGST Act was upheld. reliance was placed on following observations of said judgment which reads as under: 17 Effectively and essentially, this is what present provisos of sub section Page 54 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT [1] of Section 140 of GGST Act do. As per main provision, credit would be available on amount of Value Added Tax and Entry Tax carried forward in return. As per further proviso or second proviso, such credit to that extent would not be transferred when necessary declarations are not furnished by dealer. proviso thereafter however ensures that as and when declarations are filed, amount equivalent to credit specified in second schedule would be refunded to dealer. We do not find any major change in effect of late production of forms by dealer in present statutory provisions; as compared to earlier position, nor statutory provisions deny benefit of such credit, even where necessary declarations are furnished. Thus, no existing or vested right can be said to have been taken away. We do not think Section 140 [c] is charging provision or that for want of mechanism for computing such charge, provision itself would fail. provision is in nature of enabling dealers to take credit of existing taxes paid by them but not utilized for discharging their tax liabilities. It contains conditions subject to which benefit can be enjoyed. 18 This brings us to petitioners challenge to rule 117 of CGST Rules and GGST Rules. statutory provisions being pari materia in both Act and Rules, in so far as this challenge is concerned, we may refer to provisions contained in CGST Act. Page 55 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 19 As noted, under sub section [1] of Section 140 of CGST Act, registered person, other than one who had opted for composition of tax would be entitled to take credit of amount of CENVAT credit carried forward in return relating to period ending with day immediately preceding appointed day, furnished by him under existing law in such manner as may be prescribed. Under sub section [3] of Section 140, registered person, who was not liable to be registered under existing law and other category of persons mentioned therein, would be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock on appointed day; subject to conditions contained in clauses [i] to [v] therein. Sub section [10] of Section 140 provides that amount of credit under sub sections [3], [4] and [6] shall be calculated in such manner as may be prescribed. Counsel for petitioners had compared language used by legislature in sub sections [1] and [3] of Section 140 to argue that expression "in such manner as may be prescribed" used in sub section [1] was missing in subsection [3]. 20 In his contention, therefore, rules that subordinate legislature framed could not have prescribed time limit for making necessary declarations; as referred to under sub section [3] of Section 140. Rule 117 of CGST Rules pertains to taxes or duty credit carried forward under any existing law or on goods held in stock on appointed day. Sub rule (1) of Rule 117 provides that every registered person Page 56 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT entitled to take credit of input tax under Section 140, shall within ninety days of appointed day, submit declaration electronically in prescribed format, duly signed, on common portal specifying separately amount of input tax credit to which he is entitled under provisions of said section. Proviso to sub rule [1] envisages extension of period for making said declaration on recommendations of Council. We have noted that such time limit was extended from time to time and finally upto 27th December 2017. limited extension has thereafter been granted by Government by inserting sub rule [1A] in Rule 117, authorizing Commissioner to extend date for submitting declaration electronically by further period not beyond 31st March 2019, in respect of registered persons who could not submit said declaration by due date on account of technical difficulties on common portal and in respect of whom, Council has made recommendation for such extension. Effectively thus, last date for filing declaration under sub rule [1] of Rule 117 in general class of persons remained 27th December 2017. For cases falling under sub rule [1A] of Rule 117, same could be extended maximum upto 31st March 2019. As per petitioners, this prescription of time limit per se is ultra vires provisions of Act and Constitution of India. 21 In essence, sub rule [1] of Rule 117 lays down time limit for making declaration only upon making of which, person could take benefit of tax credit in terms of Section 140 of CGST Act. We are conscious that sub sections [1] and [3] Page 57 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT of Section 140 of CGST Act use somewhat different phraseology. Under sub section [1] legislature has provided that benefit of credit in electronic credit ledger would be available to registered person in such manner; as may be prescribed. In contrast, sub section [3] of Section 140 grants facility of credit in electronic ledger of specified duties to specified class of persons; subject to conditions laid down under clauses (i) to (v) of said subsection. It is only in proviso below clause (v) of sub section [3] that legislature has provided that where registered person, other than manufacturer or supplier of services, is not in possession of invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall; subject to such conditions, limitations and safeguards as may be prescribed, including that said taxable person shall pass on benefit of such credit by way of reduced prices to recipient, be allowed to take credit at such rate and in such manner as may be prescribed. For apparent reasons, this proviso does not apply to all cases and its effect is local, to cover cases where person is not in possession of invoice or any other documents evidencing payment of duty in respect of inputs. 22 We can however not be oblivious to Section 164 of CGST Act, which is rule making power and reads as under : "164. Power of Government to make rules : [1] Government may, on Page 58 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT recommendations of Council, by notification, make rules for carrying out provisions of this Act. [2] Without prejudice to generality of provisions of sub section (1), Government may make rules for all or any of matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be or may be made by rules. [3] power to make rules conferred by this section shall include power to give retrospective effect to rules or any of them from date not earlier than date on which provisions of this Act comes into force. [4] Any rules made under sub section (1) of subsection (2) may provide that contravention thereof shall be liable to penalty not exceeding ten thousand rupees." 23 Under sub section [1] of Section 164 of CGST Act, thus, Government on recommendations of Council, by notification, could make rules "for carrying out provisions of Act". This rule making power is thus couched in widest possible manner empowering Government to make rules for carrying out provisions of Act." Sub section [2] to Section 164 is equally widely worded, when it provides that, "without prejudice to generality of provisions of sub section (1), Government may make rules for all or any of matters which by this Act are required to be, or may be, prescribed or in respect Page 59 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT of which provisions are to be, or may be made by rules." Sub section [3] of Section 164, to which we are not directly concerned, nevertheless provides that power to make rules conferred in said section would include power to give retrospective effect to such rules. 24 It is in exercise of this rule making power, Government has framed CGST Rules, 2017 in which; as noted, sub rule (1) of Rule 117 has prescribed, besides other things, time limit for making declaration in prescribed form for every dealer entitled to take credit of input tax under Section 140. Sub rule [1] of Rule 117 thus applies to all cases of credits which may be claimed by registered person under section 140 of Act and is not confined to sub section [3]. This plenary prescription of time limit within which necessary declarations must be made is, in our opinion, neither without authority nor unreasonable. 25 Section 140 of Act envisages certain benefits to be carried forward during regime change. As is well settled, reduced rate of duty or concession in payment of duty are in nature of exemption and is always open for legislature to grant as well as to withdraw such exemption. As noted in case of Jayam & Company [Supra], Supreme Court had observed that input tax credit is form of concession provided by legislature and can be made available subject to conditions. Likewise, in case of Reliance Industries Limited [Supra], it was held and observed that how much tax credit has to be given and under what Page 60 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT circumstances is domain of legislature. In case of Godrej & Boyce Mfg. Co. Pvt. Limited [Supra], Supreme Court had upheld rule which restricts availment of MODVAT credit to six months from date of issuance of documents specified in proviso. contention that such amendment would take away existing right was rejected. 26 While entire tax structure within country was thus being replaced by new frame work, it was necessary for legislature to make transitional provisions. Section 140 of CGST Act, which is transitional provision, essentially preserves all taxes paid or suffered by dealer. Credit thereof is to be given in electronic credit register under new statute, only subject to making necessary declarations in prescribed format within prescribed time. As noted, sub section [1] of Section 164 of CGST Act authorizes Government to make rules for carrying out provisions of Act on recommendations of Council. Sub section [2] of Section 164 further provides that without prejudice to generality of provisions of sub section [1], Government could also make rules for all, or any of matters, which by this Act are required to be or may be prescribed or in respect of which, provisions are to be or may be made by rules. Combined effect of powers conferred to subordinate legislature under sub sections [1] and [2] of Section 164 of CGST Act would convince us that prescription of time limit under sub rule [1] of Rule 117 of CGST Rules is not ultra vires Act. Likewise, such prescription of time limit cannot be stated Page 61 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT to be either unreasonable or arbitrary. When entire tax structure of country is being shifted from earlier framework to new one, there has to be degree of finality on claims, credits, transfers of such credits and all issues related thereto. petitioners cannot argue that without any reference to time limit, such credits should be allowed to be transferred during process of migration. Any such view would hamper effective implementation of new tax structure and would also lead to endless disputes and litigations. As noted in case of USA Agencies [Supra], Supreme Court had upheld vires of statutory provision contained in Tamil Nadu Value Added Tax Act which provided that dealer would have to make claim for input tax credit before end of financial year or before ninety days of purchase; whichever is later. vires was upheld observing that legislature consciously wanted to set up time frame for availment of input tax credit. Such conditions therefore must be strictly complied with. Thus, merely because rule in question prescribes time frame for making declaration, such provision cannot necessarily be held to be directory in nature and must depend on context of statutory scheme. 7.5. Learned advocate Mr. Nirjar Desai to point out that similar writ petition being Special Civil Application No. 10998 of 2018 was filed by petitioner before Delhi High Court which was disposed of by order dated 16th Page 62 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT January 2019 permitting petitioner to withdraw said writ petition and petition may be treated as representation to respondent, who should examine grievance of petitioner. It was therefore submitted that, there is suppression of fact by petitioner by not disclosing writ petition filed before Delhi High Court for same subject matter. It was further submitted that there is no demand notice issued against petitioner and therefore, there is no cause of action to file this petition. ANALYSIS: 8.1. Having considered submissions made by learned advocates for both sides and having gone through materials on record, short question which arises for consideration is whether amendment made by Notification No. 54/2018 dated 9th October 2018 amending sub rule (10) of Rule 96 of CGST Rules is valid or not. 8.2. In order to consider issue of validity of Notification No. 54/2018 substituting sub rule (10) of Rule 96 of CGST Rules, it would be necessary to refer to Page 63 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT scheme of Advance Authorized Licenses. Government of India, Ministry of Finance vide Notification No. 18/2015 Customs, dated 1st April 2015 issued in exercise of powers conferred by Section 25 (1) of Customs Act, 1962 (for short Customs Act ) exempted materials imported into India, against valid Advance Authorization issued by Regional Authority in terms of paragraph 4.03 of Foreign Trade Policy, from whole of duty of customs leviable thereon, which is specified in First Schedule to Customs Tariff Act, 1975 and from whole of additional duty leviable thereon under sub sections (1), (3) and (5) of Section 3 thereon, and Integrated Tax leviable thereon under sub section (7) of section 3 of goods and service tax compensation Cess leviable thereon under sub section (9) of Section 3, safeguard duty leviable thereon under Section 8B, countervailing duty leviable thereon under Section 9 and anti dumping duty leviable thereon under Section 9A of Customs Tariff Act, subject to conditions stated in said notification. 8.3. After coming into force of GST regime w.e.f. 01.04.2017, Notification No. 79/2017 Customs, dated 13th October 2017 was issued amending Page 64 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT Notification No. 18/2015 by inserting condition (viii) as under: Sr. Notification Amendments No. Number and date 2. 18/2015 Customs, In said st dated 1 notification, in April, 2015 [vide opening paragraph. number G.S.R. (a) for words, 254(E), dated brackets, figures and 1st April, 2015] letters from whole of additional duty leviable thereon under sub sections (1), (3) and (5) of section 3, safeguard duty leviable thereon under section 8B and anti dumping duty leviable thereon under section 9A , words, brackets, figures and letters from whole of additional duty leviable thereon under sub sections (1), (3) and (5) of section 3, integrated tax leviable thereon under sub section (7) of section 3, goods and services tax compensation cess leviable thereon under sub section (9) of section 3, safeguard duty leviable thereon Page 65 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT under section 8B, countervailing duty leviable thereon under section 9 and anti dumping duty leviable thereon under section 9A shall be substituted; (b) in condition (viii), after proviso, following proviso shall be inserted, namely : Provided further that notwithstanding anything contained hereinabove for said authorisations where exemption from integrated tax and goods and services tax compensation cess leviable thereon under sub section (7) and sub section (9) of section 3 of said Customs Tariff Act, has been availed, export obligation shall be fulfilled by physical exports only; ; (c) after condition (xi), following conditions shall be inserted, namely : (xii) that exemption from Page 66 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT integrated tax and goods and services tax compensation cess leviable thereon under sub section (7) and sub section (9) of section 3 of said Customs Tariff Act shall be subject to pre import condition; (xiii) that exemption from integrated tax and goods and services tax compensation cess leviable thereon under sub section (7) and sub section (9) of section 3 of said Customs Tariff Act shall be available up to 31st March, 2018. 8.4. Thus condition no. (xii) and (xiii) were inserted, whereby it was provided that exemption from Integrated Tax and Goods and Services Tax compensation Cess leviable thereon under sub section (7) and sub section (9) of Section 3 of Customs Tariff Act shall be subject to pre import condition and available upto 31st March 2018. 8.5. Rule 96 of CGST Rules provides for Page 67 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT procedure of refund of Integrated Tax paid on goods or services exported out of India, as per Section 54 of CGST Act. Rule 96 (10) as it originally existed, when Rules came into force provided that persons claiming refund of Integrated Tax paid on export of goods or services should not have received supplies on which supplier has availed benefit from Government of India, Ministry of Finance, under Notification No. 48/2017 dated 18th October 2017 or Notification No. 40 of 2017 dated 23rd October 2017 or Notification No. 41 of 2017 Integrated Tax (Rate), dated 23rd October 2017 or Notification No. 78 of 2017 Customs dated 30th October 2017 or Notification No. 79 of 2017 customs dated 13th October 2017. 8.6. Thereafter, sub rule (10) of Rule 96 of CGST Rules was amended by Notification No. 39/2018 dated 4th September 2018 w.e.f. 23rd October 2017 and substitute Rule 10 as under: 6. In said rules, with effect from 23rd October, 2017, in rule 96, for sub rule (10), following sub rule shall be substituted, namely : (10) persons claiming refund of integrated tax paid on exports of goods or Page 68 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT services should not have (a)received supplies on which benefit of Government of India, Ministry of Finance notification No. 48/2017 Central Tax, dated 18th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1305(E), dated 18th October, 2017 or notification No.40/2017 Central Tax (Rate), dated 23rd October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1320(E), dated 23rd October, 2017 or notification No.41/2017 Integrated Tax (Rate), dated 23rd October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1321(E), dated 23rd October, 2017 has been availed; or (b)availed benefit under notification No.78/2017 Customs, dated 13th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1272(E), dated 13th October, 2017 or notification No.79/2017 Customs, dated 13th October, 2017 published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R 1299(E), dated 13th October, 2017. 8.7. Thus, sub rule (10) of Rule 96 was subdivided in two parts for person claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which benefit of Notification No. 48/2017 Page 69 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT and availed benefit under Notification No. 78/2017 or 79/2017 dated 13th October 2017. 8.8. It appears that, thereafter, again both clauses which were substituted by Notification No. 39/2018 were merged by Notification No. 53/2018 dated 9th October 2018 which reads as under: Notification: 53/2018 C.T. dated 09 Oct 2018 Central Goods and Services Tax Rules, 2018 Eleventh Amendment of 2018 In exercise of powers conferred by section 164 of Central Goods and Services Tax Act, 2017 (12 of 2017), Central Government hereby makes following rules further to amend Central Goods and Services Tax Rules, 2017, namely: 1. (1) These rules may be called Central Goods and Services Tax (Eleventh Amendment) Rules, 2018. (2) They shall be deemed to have come into force with effect from 23rd October, 2017. 2. In Central Goods and Services Tax Rules, 2017, in rule 96, for sub rule (10), following sub rule shall be substituted and shall be deemed to have been substituted with effect from Page 70 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 23rd October, 2017, namely : (10) persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which supplier has availed benefit of Government of India, Ministry of Finance, notification No. 48/2017 Central Tax, dated 18th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1305(E), dated 18th October, 2017 or notification No. 40/2017 Central Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1320(E), dated 23rd October, 2017, or notification No.41/2017 Integrated Tax (Rate), dated 23rd October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1321(E), dated 23rd October, 2017 or notification No.78/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1272(E), dated 13th October, 2017 or notification No.79/2017 Customs, dated 13th October, 2017, published in Gazette of India, Extraordinary, Part II, Section 3, Sub section (i), vide number G.S.R. 1299(E), dated 13th October, 2017. [Notification No.53/2018 C.T., dated 9 10 2018] Page 71 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 8.9. Thereafter, by Notification No. 54/2018 dated 9th October 2018 again sub rule (10) of Rule 96 was amended by substituting same, wherein, it is provided that persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies (a) on which benefits of Notification No. 48/2017 dated 18th October 2017, Notification No. 40/2017 dated 23rd October 2017 or Notification No. 41/2017 dated 23rd October has been availed or (b) availed benefit under Notification No. 78/2017 or Notification No. 79/2017. 8.10. It is pertinent to note that Notification No. 54/2018 is made applicable retrospectively from date when Rule 96 (10) of CGST Rules came into force and not with effect from 23rd October 2017, as was amended in previous Notifications. 8.11. Section 16 of IGST Act provides for Zero Rated Supply and sub clause (b) of sub section (3) of Section 16 provides that, registered person making zero rated supply shall be eligible to claim refund, if he has supplied goods or services or both, subject to such conditions, safeguards and procedure as may be Page 72 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied. 8.12. Thus on conjoint readings of provision of Section 16 of IGST Act, Section 54 of CGST Act and Rule 96 (10) of CGST Rules, which is substituted by Notification No. 54/2018 dated 9th October 2018, it is apparent that person who has availed benefits of Notification No. 48/2017 dated 18th October 2017 and other Notifications as stated in sub rule 10 shall not have benefit of claiming refund of integrated tax paid on exports of goods or services. petitioner has availed benefits under Advance Authorization License scheme as per Notification No. 18/2015 which was amended by Notification No. 79/2017 dated 13th October 2017 and paid integrated tax on goods procured by petitioners for export purpose. 8.13. Notification No. 48/2017 C.T. dated 18th October 2017 has declared following goods and explanation thereto states that, Advance Authorization means authorization issued by Director General of Foreign Trade under Chapter 4 of Foreign Trade Policy 2015 20 for import or domestic procurement of inputs on pre Page 73 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT import basis for physical exports. Therefore, as petitioner has availed benefits of AA License as per Notification No. 40/2017 CT (Rate) dated 23rd October 2017 and has enjoyed exemption of GST on supply of goods from registered supplier for purpose of export on fulfilling conditions prescribed therein. It appears that, thereafter, by Notification No. 39/2018 CT dated 4th September 2018 has substituted sub rule (10) of Rule 96 w.e.f. 23rd October 2017, however, by Notification No. 54/2018, application of substituted sub rule (10) of Rule 96 is not made effective from 23rd October, 2017, but it was made applicable from inception. Therefore, petitioner who has availed benefit of Notification No. 39/2018 from 23rd October, 2017 to 4th September, 2018 would not be able to get refund of IGST paid or input tax credit balance in accounts of petitioner, in view of Notification No. 54/2018. 8.14. Considering effect of Notification No. 54/2018, contentions raised on behalf of respondents that there is no discrimination qua petitioner is tenable in law, as by amendment made by Notification No. 54/2018 it clearly denied benefit which is Page 74 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT granted to petitioner by Notification No. 39/2018 was withdrawn as same was not made applicable from 23rd October, 2017. 8.15 Recently, vide Notification No. 16/2020 CT dated 23.03.2020 amendment has been made by inserting following explanation to Rule 96(10) of CGST Rules, 2017 as amended (with retrospective effect from 23.10.2017) Explanation. For purpose of this sub rule, benefit of notifications mentioned therein shall not be considered to have been availed only where registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under said notifications. By virtue of above amendment, option of claiming refund under option as per clause (b) is not restricted to Exporters who only avails BCD exemption and pays IGST on raw materials thereby exporters who wants to claim refund under second option can switch over now. amendment is made retrospectively thereby avoiding anomaly during intervention period and exporters who already claimed refund under second option need to payback IGST along with interest and avail ITC. Page 75 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 C/SCA/15833/2018 CAV JUDGMENT 9. In view of above amendment , grievance of petitioner raised in this petition is therefore taken care of . However, it is also made clear that Notification No. 54/2018 is required to be made applicable w.e.f. 23rd October, 2017 and not prior thereto from inception of Rule 96(10) of CGST Act. Therefore, in effect Notification No. 39/2018 dated 4th September, 2018 shall remain in force as amended by Notification No.54/2018 by substituting sub rule (10) of Rule 96 of CGST Rules, in consonance with sub section (3) of Section 54 of CGST Act and Section 16 of IGST Act. Notification No. 54/2018 is therefore held to be effective w.e.f. 23rd October 2017. Rule is made absolute to aforesaid extent, with no order as to costs. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) Pradhyuman Page 76 of 76 Downloaded on : Mon Feb 22 20:35:47 IST 2021 Cosmo Films Limited v. Union of India & 3 Other
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