2021 (2) TMI 141 - HC - GST

Refund of amount towards IGST - Seeking to extend amending Notification no.16/2015Customs, dated 01.04.2015 - seeking to set aside Trade Notice 11/2018, dated 30.06.2017 - HELD THAT - It is held that the amendment of Notification No.16/2015 Cus. Vide Serial No.1 of Notification No.79/2017 dated 13th October, 2017, would also apply to imports made during the period 1.7.2017 to 13.10.2017. Trade Notice 11/2018 dated 30.6.2017 to the extent it is stated therein that under Chapter 5 importers would need to pay IGST is hereby quashed and set aside. The impugned order-in-original dated 29.9.2018 is hereby quashed and set aside and it is held that the petitioner is entitled to refund of the amount of ₹ 2,38,83,203/paid by it towards IGST with interest at the statutory rate - the controversy does not come to an end over here. After the present writ application was filed on 18th December 2020, Section 49 of the CGST came to be amended w.e.f. 01/02/2019 and new Section 49A and Section 49B were inserted in the said Act. By virtue of power under Section 49B, Rule 88A was inserted w.e.f. 29/03/2019 in the CGST Rules vide Notification No.16/2019CT, dated 29/03/2019. In such circumstances, w.e.f. 01/02/2019, the ITC available on account of IGST has to be first utilized for the payment of GST or CGST or SGST. This provision was amended w.e.f. 01/02/2019, but the GST portal started functioning as per the amended provisions w.e.f. 01/06/2019. Therefore, w.e.f. 01/06/2019, the accumulated ITC of IGST of ₹ 3,37,79,196/- (Additional Customs duty paid by the writ applicants, EPCG holder) started getting utilized automatically during the pendency of the petition. The ITC of CGST and SGST started accumulating correspondingly. In such circumstances, as on date on account of such amendment in operation, the writ applicants have Nil balance of IGST in its electronic credit ledger and the IGST balance is converted into CGST and SGST. In other words, the balance of CGST and SGST got artificially inflated as a result of the appropriation of IGST credit - The respondents are directed to sanction and pay the refund of ₹ 3,37,79,196/- after first reversing the entries of utilization of the subject credit and debiting the said amount from the credit ledger consequently available to the writ applicant - Application allowed.

Summary

Issues involved:
Challenge to notification amending customs duty, refund of IGST, applicability of recent GST provisions, utilization of ITC, conversion of IGST to CGST/SGST, direction for refund.

Analysis:

1. Challenge to Notification and Refund of IGST:
The writ applicants sought to quash a notification amending customs duty and a trade notice requiring importers to pay IGST. The Court noted that the issue was similar to a previous judgment and allowed the writ application. The Court held that the petitioners were entitled to a refund of the IGST amount paid, along with interest. The Court directed the respondents to pay the refund amount and set aside the impugned orders.

2. Applicability of Recent GST Provisions:
After the writ application was filed, amendments were made to Section 49 of the CGST Act, introducing new sections and rules. The Court highlighted the insertion of Rule 88A, which affected the utilization of IGST for GST payments. The Court observed that the ITC of IGST was automatically utilized post the amendments, leading to the accumulation of CGST and SGST balances. The Court noted that the IGST balance was converted into CGST and SGST due to the amendments.

3. Utilization of ITC and Conversion of IGST:
The judgment discussed how the ITC of CGST and SGST started accumulating due to the amendments, resulting in the writ applicants having a nil balance of IGST in their electronic credit ledger. The Court emphasized that the balance of CGST and SGST increased artificially due to the appropriation of IGST credit. Consequently, the Court directed the respondents to pay the refund amount after reversing the entries of credit utilization and adjusting the balance available to the writ applicants.

In conclusion, the High Court of Gujarat allowed the writ application, directing the respondents to pay the refund of the IGST amount to the petitioners. The judgment addressed the impact of recent GST provisions on the utilization of ITC and the conversion of IGST to CGST and SGST. The Court emphasized the need to reverse credit entries and adjust balances before sanctioning the refund, ensuring compliance with the amended provisions.