Jharkhand High Court
M/S. Tata Steel Limited vs Union Of India on 21 August, 2023
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(T)No. 1719 of 2022
With
W.P.(T)No. 2649 of 2022
With
W.P.(T) No. 2650 of 2022
With
W.P.(T) No. 2651 of 2022
With
W.P.(T) No. 2655 of 2022
With
W.P.(T) No. 2704 of 2022
With
W.P.(T) No. 2710 of 2022
With
W.P.(T) No. 2790 of 2022
With
W.P.(T) No. 2796 of 2022
With
W.P.(T) No. 2797 of 2022
With
W.P.(T) No. 403 of 2023
With
W.P.(T) No. 404 of 2023
With
W.P.(T) No. 405 of 2023
With
W.P.(T) No. 1986 of 2023
M/s. Tata Steel Limited .....Petitioners
(In all these cases)
Versus
1. Union of India, through the Secretary, Ministry of Finance,
Department of Revenue, North Block, New Delhi, P.O.-G.P.O.,
P.S.-Sansad Marg, District-New Delhi.
2. Central Board of Indirect Taxes and Customs, through its chairman,
North Block, New Delhi, P.O.-G.P.O., P.S.-Sansad Marg, District-
New Delhi.
3. Commissioner of Central Goods and Services Tax & Central
Excise, Jamshedpur Commissionerate, having its office at Outer
Circle Road, Bistupur P.O. and P.S. Bistupur, Town, Jamshedpur,
District-Singhbhum East, Jharkhand.
4. Deputy Commissioner of Central Goods and Services Tax &
Central Excise, Division-I, Jamshedpur Commissionerate, 5 -E
Road, Bistupur P.O. and P.S. Bistupur, District-Singhbhim (East),
Jamshedpur.
5. Assistant Commissioner of Central Goods and Services Tax &
Central Excise, Division- I, Jamshedpur Commissionerate, 5 -E
Road, Bistupur P.O. and P.S. Bistupur, District-Singhbhim (East),
Jamshedpur.
6. Joint Commissioner (Appeals), Central Goods and Services Tax &
Central Excise, Ranchi, Grand Emerald Building, 2nd & 3rd Floors,
Ashok Nagar, Kadru Argora Main Road, P.O. & P.S. Kadru, District-
2
Ranchi. ..... Respondents (in all these cases)
--------
CORAM: Hon'ble Mr. Justice Rongon Mukhopadhyay
Hon'ble Mr. Justice Deepak Roshan
--------
For the Petitioner : Mr. Tarun Gulati, Sr. Adv
Mr. Sumeet Gadodia, Adv.
Mr. Salona Mittal, Adv. (in all the cases)
For the Resp.- UOI : Mr. Anil Kumar, Addl. SGI
For the Respondents : Mr. P.A.S.Pati, Adv.
Mrs. Ranjana Mukherjee, Adv.
--------
CAV On. 21.07.2023 Pronounced on. 21.08.2023
JUDGMENT
Per Deepak Roshan, J: Heard learned counsel for the parties.
2. Since common issue is involved in all these writ applications and
pertains to the same assessee for different period, as such all are being
heard together and disposed of by this common judgment. For brevity; the
facts of W.P.(T) No. 1719 of 2022 are being referred herein. The
petitioner has prayed for the following reliefs;
(i) For the issuance of an appropriate writ/ order/ direction, quashing and setting
aside the part of Paragraph 47 of Circular No. 125/44/2019-GST dated 18.11.2019
(Annexure 6) ("Impugned Circular") issued by Respondent No. 2 which stipulates that
while processing refund claims in case of exports, the lower of the values indicated in
the tax invoice and the shipping bill should be taken into account, as being beyond the
purview of and ultra vires the provisions of the Central Goods and Services Tax Act,
2017, and the Central Goods and Services Tax Rules, 2017, as well as being manifestly
arbitrary, unreasonable and violative of Articles 14 and 19(1)(g) of the Constitution of
India.
(ii) As an alternative prayer (i), for the issuance of an appropriate writ/order/
direction including a writ in the nature of a declaration, holding and declaring that
stipulation contained in paragraph 47 of the Impugned Circular will not be applicable
in cases where the value of exports has been subsequently amended in Table 9 of GSTR-
1 of the subsequent tax period on the basis of the shipping bills to reflect the actual
transaction value of export of goods, and thus such cases will in turn be governed by
Paragraph 18 of the said circular which mandates that information contained in Table
9 of FORM GSTR-1 of the relevant tax period as well as that of the subsequent tax
periods should be taken into cognizance while processing refund claims.
(iii) For the issuance of an appropriate writ/ order/ direction for quashing and setting
aside the Order in Original dated 2.2.2021 issued in Form GST RFD-06 (Annexure - 9)
and the Order in Appeal dated 11.10.2021 (Annexure - 12) in as much as they seek to
curtail the amount of refund of unutilised balance of Input Tax Credit ("ITC") of
compensation cess on account of zero-rated supplies of goods to which the Petitioner is
entitled, by solely placing reliance on Paragraph 47 of Circular No. 125/44/2019-GST
dated 18.11.2019 (Annexure - 6).
(iv) For the issuance of an appropriate writ/ order / direction including a writ in the
nature of mandamus to direct the Respondent Authorities to refund the amount of Rs.
1,12,49,220/- being the shortfall amount to which the Petitioner is entitled to be
refunded as per the formula prescribed in Rule 89(4) of the CGST Rules and as per the
figures provided by the Petitioner in its application for refund in Form GST RFD-01
dated 22.12.2020 (Annexure - 5) along with the stipulated interest under Section 56 of
the Central Goods and Services Tax Act, 2017.
For convenience a chart is being given below which will indicate
the alleged amount of refund/interest and demand involved in
respective writ applications for concerned period with respective order
in original (OIO) and order in appeal (OIA).
Sl. Writ Petition Period Amount (Rs) Details of Details of
No. OIO OIA
No
1. WPT No. Nov to 85,42,660/- 23.12.2021 30.8.2022
403/2023 Dec'2019
2. WPT No. 1719 Jan to 1,12,49,220/- 2.2.2021 11.10.2021
of 2022 Feb 2019
(Lead Matter)
3. WPT No. March 29,65,413/- 17.3.2021 25.10.2021
2649/2022 2019
4. WPT No. Sept 41,08,693/- 28.10.2020 11.6.2021
2650/2022 to
Oct 2018
5. WPT No. April 2018 27,75,802/- 6.5.2020 25.1.2021
2651/2022
6. WPT No. May' 2018 26,63,544/- 4.6.2020 25.1.2021
2655/2022
7. WPT No Aug 2018 30,31,925/- 8.9.2020 9.2.2021
2704/2022
8. WPT No. April to 15,51,996/- 20.4.2021 11.4.2022
2710/2022 May
9. WPT No. June 22,67,825/- 8.9.2020 9.2.2021
2790/2022 2018
10. WPT No. Nov to 62,61,069/- 11.12.2020 7.10.2021
2796/2022 Dec
11. WPT No. July' 2018 28,88,065/- 8.9.2020 9.2.2021
2797/2022
12. WPT Aug to 1,38,85,741/- 1.9.2021 30.8.2022
No.404/2023 Oct'2019
13. WPT No. June to 45,02,427/- 18.6.2021 20.7.2022
405/2023 July'2019
14. WPT No. Nov' 2017 2,04,30,905/- 16.12.2019 25.1.2021
1986/2023 to
Mar'2018
3. The brief fact of the case as revealed in the writ application
[W.P.(T) No.1719 of 2022] that the Petitioner requires coal for
manufacturing iron and steel. This coal is procured inter alia by way of
purchase from other vendors on which applicable Goods and Services Tax
and Compensation Cess is charged under Section 8(2) read with the Schedule
to the Goods and Services Tax (Compensation to States) Act, 2017
("Compensation Cess Act"). The petitioner avails Input Tax Credit ("ITC")
of the said compensation cess charged on supply of coal. Since the Petitioner
undertakes export of goods under Bond/ Letter of Undertaking without
payment of tax, it results in accumulation of balance of ITC of Compensation
Cess.
During the period in dispute (January to February 2019) goods were
cleared for export from the factory against tax invoices. Since the price of the
goods could not be determined with certainty at that point of time, therefore,
as a uniform practice, for such dispatches, the Petitioner reflected the "cost
price" of the goods as the "taxable value" as well as the "invoice value". In
its GSTR-1 for the said months, the Petitioner furnished details of 4932 tax
invoices under Table 6A of a value of Rs. 603,81,13,133/- (2,101 and 2,831
invoices for the months of January and February 2019 respectively). This
amount reflected the 'cost price'.
For the purpose of refund, the Petitioner claimed refund on 4927
invoices. Monthly return filed by the Petitioner in GSTR - 3B, also reflects
the total zero-rated supplies in column (b) of Table 3.1 of the said return. The
details of shipping bills are also required to furnish in Table 6A of GSTR-1.
However, as details of shipping bills and corresponding commercial value
were not available immediately due to various reasons, therefore GSTR-1, as
per instruction No. 8, itself allows details of shipping bills to be updated by
amending Table 9 of subsequent GSTR-1 return, the Petitioner updated
details of 4932 invoices as per the commercial value in Table 9A of GSTR-1
in the month of September 2019 when it became aware of the final price of
goods (reflected in shipping bill) at the time of actual export. Table 9A
contains details of 14516 invoices which includes details of 4932 invoices
having commercial value of Rs. 775,17,57,704/-.
The Petitioner claimed refund of only 4927 invoices having
commercial value of Rs. 774,44,24,401/-. However, the impugned Circular
was issued by Respondent No. 2 in exercise of powers under Section 168 of
the CGST Act. Para 18 of the Impugned Circular provided that while
processing refund claims, information in Table 9 GSTR-1 of subsequent tax
periods should also be taken into account. Petitioner filed its application for
refund of unutilized ITC of Compensation Cess in respect of zero-rated
supplies made during January and February 2019, claiming refund of Rs.
4,95,64,373/-. Refund was claimed as per the formula prescribed in 89(4).
The component "Turnover of zero-rated supply of goods" is defined as the
'value of zero-rated supply of goods ...". Therefore, the Petitioner reflected
the actual value of exports (reflected I GSTR-1 of September 2019).
The case of the petitioner company is that an amount of Rs.
3,32,08,130/- was provisionally refunded to the Petitioner in terms of Section
54(6) of the CGST Act read with Rule 91(2) of the CGST Rules. Thereafter,
a show cause notice was issued to the Petitioner in RFD-08. It was indicated
that value of "Turnover of zero rated supply of goods" indicated in the
refund application could not be ascertained with certainty. Petitioner replied
to the show cause notice in RFD-09. Thereafter, Impugned Order in Original
("OIO") was passed in RFD-06 denying refund to the tune of Rs.
1,12,49,220/-. Reliance was placed on paragraph 47 of the Impugned
Circular to arrive at a figure of Rs. 583,86,12,617/- as the "Turnover of zero-
rated supply of goods". Para 33 of the Writ Petition contains a table which
shows how the figure of Rs. 583,86,12,617/- has been arrived at. The OIO
itself states that export invoice details were amended. Refund has also been
denied on 149 invoices, details of which could not be found on ICEGATE
website. This allegation was absent in the notice and neither were any details
regarding the same were provided.
Subsequently, Petitioner filed an appeal under Section 107 of the
CGST Act. Due to file size restrictions, all the annexures to the memo of
appeal was sent vide email. This also included the Bank Realization
Certificates ("BRC") which were proof of actual amounts received for the
exports. Impugned Order in Appeal ("OIA") was passed dismissing the
appeal filed by the Petitioner. At multiple places in the OIA, it has been
stated that paragraph 47 of the Impugned Circular was in the form of
directions / instruction.
The further case of the petitioner company is that there was no need
to arrive at transaction value, therefore furnishing of BRC would not have
made a difference. There is no discussion / finding regarding 149 invoices in
respect of which there was no details on ICEGATE and which had been
specifically addressed in paragraphs 59 to 63 of the memo of appeal.
Further, Explanation inserted in Rule 89(4) of the CGST Rules, 2017, vide
notification no. 14/2022 - Central Tax, which purportedly is on the same
lines as paragraph 47 of the Impugned Circular.
4. The details which is sufficient to dispose of all the respective writ
applications has already been indicated herein above in the chart for
convenience.
5. Mr. Tarun Gulati, Sr. Advocate assisted by Mr. Salona Mittal,
learned counsels for the petitioner made following submissions;
(i) As per the scheme of the CGST Act, more particularly Section 15
thereof, the value of supply of goods is the transaction value i.e., the price
actually payable for the said supply. This is the only price that can be taken
into account while calculating the refund amount. Paragraph 47 of the
Impugned Circular cannot arbitrarily impose a new condition to determine
the value of zero rated exports to whittle down the benefit of refund granted
in the Act / Rules.
(ii) It is further well settled that a Circular must be within the four
corners of the parent Act. In the present case, neither the CGST Act nor the
CGST Rules contemplated comparison of the values of the tax invoice and
the shipping bill and then take the lower of the two values. The said
stipulation has been introduced for the first time in the Impugned Circular
without there being any underlying provision.
(iii) The above principles of law have also been applied in the context of
circulars issued under Section 168 of the CGST Act and it has been held by
various Hon'ble High Courts that a circular which is repugnant to the parent
legislation cannot be applied to oust the legitimate claim of refund of ITC.
(iv) Further, the Respondent No. 2 does not have the jurisdiction, by way
of issuing the Impugned Circular, to direct that the actual value of goods is to
be disregarded. There is absolutely no justification to use a different
parameter, i.e., taking a figure other than the actual amount paid against
exports, only for the purpose of calculating refund.
(v) The fiction introduced by the circular is thus against the scheme of
the CGST which stipulates that actual price is to be accepted for it is trite law
that subordinate legislation cannot create a deeming fiction.
(vi) Moreover, the findings of the Appellate Authority that he was bound
by the Impugned Circular which contains certain directions and instructs to
take lower of the two values is wholly misplaced since he was acting in a
quasi-judicial capacity and thus his power was not controlled by directions
issued by the Board. This is also borne out from a reading of Section 5(4) of
the CGST Act.
(vii) Sl. No. 8 of the instructions appended to GSTR-1 as well as
paragraph 18 of the Impugned Circular specifically provide that (i) value of
export invoices can be amended, and (ii) the amended value should be taken
into account while processing refunds. If as per paragraph 47, the value in
the shipping bill is to be ignored (when its value is greater than the tax
invoice), then it would render not only paragraph 18 of the Impugned
Circular redundant, but also the instructions appended to GSTR-1.
(viii) Though submissions had been made in paragraphs 59 to 63 of the
memo of appeal in respect of 149 invoices in respect of which there was
allegedly no details uploaded on the ICEGATE Portal, the Order in Appeal
does not contain any discussion / finding on the same. Moreover, the said
finding was beyond the allegations contained in the show cause notice dated
15.1.2021 and was illegal on that ground alone.
(ix) Reliance on paragraph 14.1 of Circular No. 37/11/2018-GST dated
15.3.2018 demonstrates a complete non application of mind. The said
paragraph directs scrutiny of the invoices issued by the suppliers of the
exporter to ensure that the ITC claimed by the exporter on the strength of its
purchases is not fraudulent. The said paragraph does not direct scrutiny of
the tax invoices issued by the exporter itself, i.e., the Petitioner in this case to
determine the value of zero-rated supply turnover.
(x) The finding that BRCs have not been enclosed to the memo of
appeal is also ex-facie incorrect, in view of the fact that all the annexures
were sent vide email dated 22.4.2021 (Annexure - 11).
(xi) In the OIO, though the value of "Turnover of zero-rated supply of
goods" has been calculated as Rs. 583,86,12,617/-; while calculating the
value of "Adjusted Total Turnover", the value of "Turnover of zero-rated
supply of goods" has been taken to be Rs 603,81,13,134/-, a higher amount,
instead of Rs. 583,86,12,617/-. As result of taking the higher amount on the
denominator side of the formula, the eligible refund of the Petitioner has
been reduced. Thus, this action of the Respondent authorities in deliberately
taking a higher figure in the denominator side, despite their own finding to
the contrary, is clearly arbitrary and illegal.
6. Learned senior counsel further raised an additional ground to the
extent that in the counter-affidavit the respondents have come with a
statement that since the notification issued by CBEC has now been made a
Rule in view of amendment in Rule 89(4) of CGST Rules, 2017, vide
Notification No. 14 / 2022 - Central Tax dated 05.07.2022; he contended
that the rule was not in existence at the time of passing of the Order in
Appeal in respective cases and thus cannot be relied upon to justify the
impugned Order in Appeal. He further submits that even in the said
notification the retrospective effect of other rules has been indicated and by
bare perusal of those extracts it appears that except Rules 7, 9, 10 and 19; no
Rule has been given retrospective effect.
Relying upon the aforesaid submission, learned senior counsel
contended that even if this court does not interfere with the circular,
notification which came into effect from 05.07.2022 will have no application
in the above writ applications, as such the respective OIO and OIA deserves
to be quashed and set aside and consequently the refund amount involved in
respective writ applications may be refunded along with statutory interest.
7. Mr. Anil Kumar, learned ASGI assisted by Mr. P. A. S. Pati, learned
counsel for the respondents submit that indisputably the Circular No.
125/44/2019-GST dated 18.11.2019 has been issued by the CBIC under
section 168(1) of the CGST Act, 2017 to lay down the procedure for
electronic submission and processing of refund applications. Article 265 of
the Constitution of India provides that no tax shall be collected except by
authority of law. There being no challenge either to the levy or collection of
taxes, taxes paid into the coffers of the Union Government or the States
become property of the Union/State. The refund of taxes is neither a
fundamental right nor a constitutional right rather; it is policy of the
Government of India to extend benefits for promoting the export. The
conditions & limitations of refund is the policy of the State and it need not be
challenged. There is no constitutional right to refund. Refund is always a
matter of statutory prescription and can be regulated by the statute to
conditions and limitations.
He further submits that Paragraph 18 of Circular No. 125 is related
to scrutiny of refund application. Para 19 below para 18 clearly speaks about
"Clarification on issues related to making zero rated supplies". Para 19 of the
Circular No. 125 states, "Detailed guidelines laid down in subsequent
paragraphs of this Circular covering various types of refund claims may also
be followed while scrutinizing refund claims for completeness and
eligibility". Accordingly, as per para 19 which prescribes detailed guidelines
on "scrutinizing refund claims for completeness and eligibility" the demand
of issuance of writ/order/direction and quashing and setting aside the part of
paragraph 47 of Circular No. 125 is without any legal basis.
8. Learned senior counsel further submits that the refund granting
authority was in right earnest verifying the turnover of zero-rated supply by
going through invoices issued by the Assessee under Rule 46 of the CGST
Rules in such zero-rated supply. Even Central Board of Excise & Customs
while clarifying various issues in relation to processing of claims for refund
vide Circular No. 37/11/2018-GST dated 15-032018 detailed out necessity of
verification of invoices produced by claimants while processing refund claim
on ITC.
Clause 14.1 of this circular state, "..... For processing of refund
claims of input tax credit, verifying the invoice details is quintessential. In a
completely electronic environment, the information of the recipients' invoices
would be dependent upon the suppliers' information, thus putting an in-built
check-and-balance in the system. However, as the refund claims are being
filed by the recipient in a semi-electronic environment and is completely
based on the information provided by them, it is necessary that invoices are
scrutinized."
The petitioner-assessee has revised invoice values in most of the
invoices as per Range officer report which has been mentioned in the OIO,
but the Range officer also marked certain abnormalities such as claimant has
not claimed refund in respect of some invoices and some invoices remain
unchanged. However, no rectification was submitted by the assessee-
company in respect of such abnormalities. As no fresh evidence produced by
the petitioner to authenticate their claimed value. Thus, the OIO and OIA
passed by the competent authority is proper and legitimate and in accordance
with the Section 54(3) of the CGST ACT.
9. Learned ASGI further submits that in case where the enhanced value
remained unclear and issue of discrepancy between values of tax invoice and
shipping bill has emerged while granting refund in zero rated supply, a clear
guideline has been provided by the CBIC vide clause-9 of Circular No.
37/11/2018-GST dated 15-03-2018, which states "It has been brought to the
notice of the Board that in certain cases, where the refund of unutilized input
tax credit on account of export of goods is claimed and the value declared in
the tax invoice is different from the export value declared in the
corresponding shipping bill under the Customs Act, refund claims are not
being processed. The matter has been examined and it is clarified that the
zero-rated supply of goods is affected under the provisions of the GST laws.
An exporter, at the time of supply of goods declares that the goods are for
export and the same is done under an invoice issued under rule 46 of the
CGST Rules. The value recorded in the GST invoice should normally be the
transaction value as determined under Section 15 of the CGST Act read with
the rules made thereunder. The same transaction value should normally be
recorded in the corresponding shipping bill / bill of export. During the
processing of the refund claim, the value of the goods declared in the GST
invoice and the value in the corresponding shipping bill / bill of export
should be examined and the lower of the two values should be sanctioned as
refund."
The same instruction has again been emphasized in Para 47 of the
Circular No. 125/44/2019-GST 18.11.2019 where for granting refund, lower
between the two values has been stressed upon for refund consideration. The
petitioner in their submission reiterated that during course of export they
raised commercial invoice at port on the basis of revised upgraded value.
These enhanced values then been declared in Table 9A of GSTR-1 in the
month of September-2019 to revise and enforce amendment in export value
and with such revision they intend to claim refund on the upgraded value.
But in the aforesaid Circular certain directions have been given in case where
difference exists in values between tax invoice generated under rule 46 of the
CGST Rules and corresponding Shipping bill. Para 47 of Circular No.
125/44/2019-GST dated 18.11.2019 is very specific in such cases where it
instructs to take lower value of the two. Thus, all the writ applications are
very well covered under para-47 where instruction has been given for
processing of refund distinctly for those cases where differences exist
between tax invoice issued under rule 46 of the CGST, Rule and
corresponding shipping bill values.
10. Learned ASGI further submits that the said clarification was carried
out with the approval of GST Council, which is a constitutional body
established under Article 279A of the Constitution of India and entrusted
with the task to make recommendations to the Union of India and the states
on all matters related to GST. Further, refund is not an unfettered right and
Government is well within its power to impose certain restrictions,
conditions and safeguards for grant of refund. This view has been upheld by
the Hon'ble Supreme Court in the case of Mafatlal Industries Limited. v.
Union of India reported in (1997) 5 SCC 536 wherein Hon'ble Apex court
held that the right of refund is not automatic. Further, Hon'ble Supreme
Court in the case of Union of India Vs. VKC Footsteps India Pvt. Ltd.
reported in (2022) 2 SCC 603, has held that the refund is not a constitutional
right but a matter of a statutory prescription.
Learned counsel for the revenue further relied upon the following decisions;
(i) (2022) 4 SCC 328 para 45
(ii) (2022) SCC 603 Para 50
(iii) Writ application No. 13185 of 2020 passed by High Court
of Karnataka at Bengaluru dated 16.02.2023.
11. Having heard learned counsel for the parties and after going through
the averments made in the respective affidavits and also documents available
on record especially the Circular No. 26/26/2017-GST and the notification
w.r.t. amendment in Rule 89(4) of CGST Rules, 2017, vide Notification No.
14 / 2022 - Central Tax dated 05.07.2022, we are of the opinion that since
there is now an amendment in the Rule 89 (4) itself; as such we refrain
ourself from deliberating upon prayer no. 1 and 2 i.e. for setting aside part of
paragraph 47 of Circular No. 125/44/2019-GST dated 18.11.2019 and also
the alternative contention for declaring the stipulation contained in paragraph
47 of the aforesaid circular as not applicable in these cases.
We are confining our interpretation on the question of retrospective
effect of the amendment that came in the year 2022, so far as its applicability
in the aforesaid writ applications for the sole reason that the vires of the said
rule is not under challenge.
12. As far as the explanation inserted by way of amendment in Rule
89(4) of the CGST Rules, 2017, vide Notification No. 14 / 2022 - Central
Tax dated 5.7.2022 is concerned; these rules were not in existence at the time
of passing of the Order in Appeal dated 11.10.2021. Rule 1(2) of 2022
Amendment Rules, specifically provides that "save as otherwise provided in
these rules, they shall come into force on the date of their publication in
the Official Gazette". Except for Rules 7, 9, 10, and 19 for which dates with
retrospective operation have been provided, no other rules have been given
any retrospective effect.
In order to decide the question as to whether the amendment in Rule
89(4) of the CGST Rules, 2017 which has introduced the explanation that
came in the year 2022 has a retrospective effect; we will have to see the other
parameters also. The 2022 Amendment Rules inserts a new stipulation for
comparison between two values. Such an exercise was not contemplated
prior to the amendment as what was taken into account was the actual
transaction value. Therefore, by way of the amendment, a substantive change
has been brought about in the law and therefore the amendment ought to
operate prospectively. Further, mere use of the term "explanation" will not
be indicative of the fact that the amendment is clarificatory / declaratory.
While Paragraph 47 contemplates comparison of the value of export in the
tax invoice and in the shipping bill, i.e., the export document (which can
either be FOB or CIF value), the explanation requires comparison of the
value in tax invoice with only the FOB value. Thus, the explanation cannot
be said to be on similar lines as Paragraph 47. A policy can be changed only
by way of an amendment under the parent Act and not by a circular and the
policy change will be effective from the date of the amendment.
13. At this stage it is relevant to refer the judgment cited by learned
ASGI, rendered in the case of M/s Tonbo Karnatak High Court. We
observed that in the said case the vires of Rule 89(4) (C) of the CGST rule
was under challenge; as such the same is not applicable in the instant case.
So far as judgment passed in the case of Bharti Airtel Limited Supra and V
CAsh India (Supra), the same will not be applicable, inasmuch as, we are not
deliberating with the merit of the impugned circular and/or the amended
notification.
Learned counsel also referred the judgment passed in the case of Sri.
Sree Sankaracharya University of Sanskrit and Others Versus Dr. Manu
and Another, reported in 2023 SCC Online SC 640. For brevity paragraph
45 of the said judgment is quoted hereinbelow:-
"45. It is trite that any legislation or instrument having the force of
law, which is clarificatory or explanatory in nature and purport and
which seeks to clear doubts or correct an obvious omission in a
statute, would generally be retrospective in operation, vide Ramesh
Prasad Verma. Therefore, in order to determine whether the
Government Order dated 29th March, 2001 may be made applicable
retrospectively, it is necessary to consider whether the said order was
a clarification or a substantive amendment."
14. At the cost of repetition, we may refer to the Notification No. 14/
2022 - Central Tax dated 05.07.2022 itself. Rule 1 (2) of 2022 Amendment
Rule specifically provides that save as otherwise provided in these Rules
they shall come into force on their publication in the officials' gazette. From
the said notification it is also evident that except for Rule 7, 9, 10 and 19 for
which dates with retrospective operation have been provided, no other rules
have been given any retrospective effect. Actually, the legislature expressly
indicated the date of application of respective rules and for Rule 89 (4), no
retrospective date has been indicated in the notification itself; thus, from bare
perusal of the notification itself the amendment made to Rule 89 (4) by Rule
8 of Amendment Rules will have a prospective effect.
15. As indicated hereinabove, the 2022 Amendment Rules inserts a new
stipulation for comparison between the two values. Such an exercise was not
contemplated prior to the amendment as what was taken into account was the
actual transaction value. Therefore, by way of the amendment a substantive
change has been brought about in law and therefore, we are of the view that
amendment will operate prospectively. In this regard. Reference may be
made in the case CIT Versus Vatika Township (P) Ltd., reported in 2015 (1)
SCC 1 wherein at para 28 and 44 the law has been laid down as under:-
"28. Of the various rules guiding how a legislation has to be
interpreted, one established rule is that unless a contrary intention
appears, a legislation is presumed not to be intended to have a
retrospective operation. The idea behind the rule is that a current law
should govern current activities. Law passed today cannot apply to
the events of the past. If we do something today, we do it keeping in
view the law of today and in force and not tomorrow's backward
adjustment of it. Our belief in the nature of the law is founded on the
bedrock that every human being is entitled to arrange his affairs by
relying on the existing law and should not find that his plans have
been retrospectively upset. This principle of law is known as lex
prospicit non respicit: law looks forward not backward. As was
observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective
legislation is contrary to the general principle that legislation by
which the conduct of mankind is to be regulated when introduced for
the first time to deal with future acts ought not to change the
character of past transactions carried on upon the faith of the then
existing law.
44. The Finance Act, 2003, again makes the position clear that
surcharge in respect of block assessment of undisclosed income was
made prospective. Such a stipulation is contained in the second
proviso to sub-section (3) of Section 2 of the Finance Act, 2003. This
proviso reads as under:
"Provided further that the amount of income tax computed in
accordance with the provisions of Section 113 shall be increased by a
surcharge for purposes of the Union as provided in Paras A, B, C, D
or E, as the case may be, of Part III of the First Schedule of the
Finance Act of the year in which the search is initiated under Section
132 or requisition is made under Section 132-A of the Income Tax
Act:"
Addition of this proviso in the Finance Act, 2003 further makes it
clear that such a provision was necessary to provide for surcharge in
the cases of block assessments and thereby making it prospective in
nature. The charge in respect of the surcharge, having been created
for the first time by the insertion of the proviso to Section 113, is
clearly a substantive provision and hence is to be construed
prospective in operation. The amendment neither purports to be
merely clarificatory nor is there any material to suggest that it was
intended by Parliament. Furthermore, an amendment made to a
taxing statute can be said to be intended to remove "hardships" only
of the assessee, not of the Department. On the contrary, imposing a
retrospective levy on the assessee would have caused undue hardship
and for that reason Parliament specifically chose to make the proviso
effective from 1-6-2002."
16. As a matter of fact, way back in the year 2005 itself the Hon'ble
Apex Court in the case of Sedco Forex International Drill. Inc. Versus CIT,
reported in (2005) 12 SCC 717 has laid down the law and held at para 17 and
19 as under:-
"17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC
165 : (2000) 241 ITR 312] a cardinal principle of the tax law is that
the law to be applied is that which is in force in the relevant
assessment year unless otherwise provided expressly or by necessary
implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980)
1 SCC 139 : 1980 SCC (Tax) 67] .) An Explanation to a statutory
provision may fulfil the purpose of clearing up an ambiguity in the
main provision or an Explanation can add to and widen the scope of
the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585,
598 : AIR 1981 SC 1274, 1282 para 24] . If it is in its nature
clarificatory then the Explanation must be read into the main
provision with effect from the time that the main provision came into
force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para
44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352,
354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506] . But if it
changes the law it is not presumed to be retrospective, irrespective of
the fact that the phrases used are "it is declared" or "for the removal
of doubts".
19. When the Explanation seeks to give an artificial meaning to
"earned in India" and brings about a change effectively in the
existing law and in addition is stated to come into force with effect
from a future date, there is no principle of interpretation which would
justify reading the Explanation as operating retrospectively."
17. The law is now no more res integra that mere use of the term
explanation will not be indicative of the fact that the amendment is
clarificatory/declaratory. In this regard, reference may be made in the case of
Union of India v. Martin Lottery Agencies Ltd., reported in (2009) 12 SCC
209 wherein the Hon'ble Apex Court has held at para 34, 37, 43, 50, 51 as
under:-
"34. No doubt, the Explanation begins with the words "for removal of
doubts". Does it mean that it is conclusive in nature? In law, it is not.
It is not a case where by reason of a judgment of a court, the law was
found to be vague or ambiguous. There is also nothing to show that it
was found to be vague or ambiguous by the executive. In fact, the
Board circular shows that invocation of sub-clause (ii) had never been
in contemplation of the taxing authorities.
37. As it is not possible for us to arrive at the said conclusion, we have
no other option but to hold that by inserting the Explanation appended
to clause (19) of Section 65 of the Act, a new concept of imposition of
tax has been brought in. Parliament may be entitled to do so. It would
be entitled to raise a legal fiction, but when a new type of tax is
introduced or a new concept of tax is introduced so as to widen the
net, it, in our opinion, should not be construed to have a retrospective
operation on the premise that it is clarificatory or declaratory in
nature.
43. The question as to whether a subordinate legislation or a
parliamentary statute would be held to be clarificatory or declaratory
or not would indisputably depend upon the nature thereof as also the
object it seeks to achieve. What we intend to say is that if two views
are not possible, resort to clarification and/or declaration may not be
permissible.
50. It is, therefore, evident that by reason of an explanation, a
substantive law may also be introduced. If a substantive law is
introduced, it will have no retrospective effect. The notice issued to
the assessee by the appellant has, thus, rightly been held to be liable
to be set aside.
51. Subject to the constitutionality of the Act, in view of the
Explanation appended to this [sic Section 65(19)(ii) of the Finance
Act, 1994], we are of the opinion that the service tax, if any, would be
payable only with effect from May 2008 and not with retrospective
effect. In a case of this nature, the Court must be satisfied that
Parliament did not intend to introduce a substantive change in the
law."
18. It goes without saying that a policy can be changed only by way of
an amendment under the parent act and not by a circular and the law is well
settled that no taxes shall be levied or collected by way of executive fiat. In
this regard reference may be made to a celebrated Constitutional Bench
judgment of the Hon'ble Apex Court rendered in the case of Kunnathat
Thatehunni Moopil Nair etc. -versus State of Kerela and another reported
in 1960 SCC Online SC 7 wherein the Hon'ble Supreme Court has held as
under. Relevant portion of para-7 is extracted herein below: -
"7. The most important question that arises for consideration in
these cases, in view of the stand taken by the State of Kerala, is
whether Article 265 of the Constitution is a complete answer to the
attack against the constitutionality of the Act. It is, therefore,
necessary to consider the scope and effect of that Article. Article
265 imposes a limitation on the taxing power of the State
insofar as it provides that the State shall not levy or collect a
tax, except by authority of law, that is to say, a tax cannot be
levied or collected by a mere executive fiat. It has to be done by
authority of law, which must mean valid law. In order that the law
may be valid, the tax proposed to be levied must be within the
legislative competence of the legislature.............."
Emphasis supplied
19. Having regard to the aforesaid discussions, we hold that the
amendment in Rule 89 (4) of CGST Rules, 2017 which came into effect vide
Notification No. 14/2022-Central Tax dated 05.07.2022 is not clarificatory in
nature and thus will have a prospective effect. In all these writ applications
since the period involved is prior to the amendment; as such, we hold that the
respective impugned orders deserve to be quashed and set aside.
20. Consequently, the O.I.O 02.02.2021 and O.I.A. No. 11.10.2021 in
W.P.(T) No. 1719 of 2022, O.I.O 17.03.2021 and O.I.A. No. 25.10.2021 in
W.P.(T) No. 2649 of 2022, O.I.O 28.10.2020 and O.I.A. No. 11.06.2021 in
W.P.(T) No. 2650 of 2022, O.I.O 06.05.2020 and O.I.A. No. 25.01.2021 in
W.P.(T) No. 2651 of 2022, O.I.O 04.06.2020 and O.I.A. No. 25.01.2021 in
W.P.(T) No. 2655 of 2022, O.I.O 23.12.2021 and O.I.A. No. 30.08.2022 in
W.P.(T) No. 403 of 2023, O.I.O 08.09.2020 and O.I.A. No. 09.02.2021 in
W.P.(T) No. 2704 of 2022, O.I.O 20.04.2021 and O.I.A. No. 11.04.2022 in
W.P.(T) No. 2710 of 2022, O.I.O 08.09.2020 and O.I.A. No. 09.02.2021 in
W.P.(T) No. 2790 of 2022, O.I.O 11.12.2020 and O.I.A. No. 07.10.2021 in
W.P.(T) No. 2796 of 2022, O.I.O 08.09.2020 and O.I.A. No. 09.02.2021 in
W.P.(T) No. 2797 of 2022, O.I.O 01.09.2021 and O.I.A. No. 30.08.2022 in
W.P.(T) No. 404 of 2023, O.I.O 18.06.2021 and O.I.A. No. 20.07.2022 in
W.P.(T) No. 405 of 2023 and O.I.O 16.12.2019 and O.I.A. No. 25.01.2021 in
W.P.(T) No. 1986 of 2023 involved in the above writ applications are
quashed and set aside.
21. As a result, all these writ applications are allowed. Pending, I.As., if
any, also stands disposed of.
(Rongon Mukhopadhyay, J.)
(Deepak Roshan, J.)
Jharkhand High Court
Dated/21 /08 /2023
Amardeep/AFR
