2017 (9) TMI 388 - HC - GST

Credit of duty paid on import of old dore bar - Validity of Notification dated 17th August 2017 - Rule 44A in the Central Goods and Services Rules, 2017 - Rule 44A is challenged as being ultra vires Section 140 of the CGST Act as well as the rule making powers under Section 164 thereof. It is contended that the impugned Notification is in grossly discriminatory and unreasonable and has imposed the restrictions which are applicable only to imported gold dore bars - Held that - The Court is of the view that the Petitioners have made out a prima facie case for grant of interim relief in their favour. Further, the balance of convenience is in their favour for grant of interim relief - till the next date of hearing, no coercive steps shall be taken by the Respondents to recover the credit already availed by the Petitioners.

Summary

Issues:
Challenge to impugned Notification dated 17th August 2017 inserting Rule 44 A in the Central Goods and Services Rules, 2017 (CGS Rules) requiring reversal of 5/6th of the CENVAT Credit accrued to the Petitioner on account of payment of additional duty of customs levied under Section 3(1) of the Customs Tariff Act, 1975. The challenge is on grounds of ultra vires Section 140 of the CGST Act and rule-making powers under Section 164, discriminatory and unreasonable nature of the Notification, and potential adverse impact on the Petitioners if coercive steps are taken to recover the credit.

Analysis:
The Petitioners challenged the impugned Notification dated 17th August 2017, which introduced Rule 44 A in the CGS Rules mandating the reversal of 5/6th of the CENVAT Credit accrued to them due to payment of additional duty of customs on imported gold dore bars. The Petitioners argued that this rule was ultra vires Section 140 of the CGST Act and the rule-making powers under Section 164. They contended that the Notification was discriminatory and unreasonable as it singled out imported gold dore bars for a higher tax burden compared to other goods. The Petitioners highlighted that they had fulfilled all conditions for accruing the credit and reversing it now would be severely prejudicial to them. The Court acknowledged the prima facie case made by the Petitioners and found the balance of convenience in their favor. Consequently, the Court directed that no coercive steps should be taken by the Respondents to recover the credit until the next date of hearing. The Court scheduled the next hearing for 25th September 2017, allowing time for the filing of replies and rejoinders.