2019 (7) TMI 1382 - HC - GST

Vires of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 as amended vide Notification No. 21/2018-Central Tax dated 18.4.2018 and Notification No.26/2018-Central Tax dated 13.6.2018 - grant of refund of unutilized tax credit in respect of tax paid on input services - HELD THAT - Let notice be issued to the respondents returnable on 31.7.2019.

Summary

Issues: Challenge to the constitutional validity of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 regarding refund of unutilized tax credit on input services.

In this judgment by the Gujarat High Court, the petitioner challenged the constitutional validity of Rule 89(5) of the Central Goods and Services Tax Rules, 2017, as amended by Notification No. 21/2018-Central Tax and Notification No. 26/2018-Central Tax. The petitioner argued that the provision denies the refund of unutilized tax credit on input services, which is in violation of the Constitution of India and the provisions of the Central Goods and Services Tax Act, 2017. The court noted the relevant sections of the Act, such as Sections 53 and 54 related to "Refund," and the definitions of "input," "input services," "input tax," and "input tax credit." The petitioner contended that the amended Rule 89(5) is illegal as it denies the benefit of refund of unutilized input tax credit. The court allowed the draft amendment and issued notice to the respondents returnable on a specified date. Direct service was permitted, and the case was to be heard along with another Special Civil Application.

This judgment highlights the importance of challenging the constitutional validity of tax rules and amendments, specifically focusing on the denial of refund of unutilized tax credit on input services. The court's analysis delves into the relevant sections and definitions under the Central Goods and Services Tax Act, emphasizing the grounds on which the challenge was based. The decision to allow the draft amendment and issue notice to the respondents indicates a procedural advancement in the case, setting the stage for further arguments and considerations. The permission for direct service and the decision to hear the case along with another application suggest a strategic approach to handling related matters efficiently. Overall, this judgment reflects a critical examination of tax rules in light of constitutional provisions and statutory definitions, showcasing the legal complexities involved in such challenges.