2022 (9) TMI 1386 - HC - GST

Rejection of refund claim - zero rated supply - whether the petitioner has supplied Electrical Energy across the border? - entitlement for refund of Input Tax Credit - whether amended Rule 89(2) of CGST Rules, 2022 is clarificatory or declaratory? - HELD THAT - Circular No.175/07/2022-GST dated 06.07.2022 issued by Ministry of Finance, Government of India clearly establishes that amendment to Rule 89 of CGST (Amendment) Rules, 2022 was carried out to cure the defect in Rule 89 of CGST Rules, 2017, because of the problem faced by power generating units in filing refund claims of unutilised Input Tax Credit on export of electricity. Further, a perusal of the amendment to Rule 89(2) of CGST Rules, would inter-alia show that the said Rule came to be amended only to clarify the anomaly that was existing with regard to production of material evidencing export of a thing which is intangible in nature. This clarification came to be made since the situation namely transmission of energy could not have been visualized when Rule 89(2) was incorporated in the Statute book. Production of shipping bills will not prove or establish by any means the quantity of energy transmitted. Hence, by no stretch of imagination, the amendment can be said to be declaratory in nature, but it can only be a one, which would be curing the defect by issuing necessary clarification as to how transmission of electrical energy can be proved - Rule 89 of CGST (Amendment) Rules, 2022 is only clarificatory in nature. When amendment/notification dated 05.07.2022 issued by Government of India is held to be curative or clarificatory in nature, the question now would be whether the said clarification is retrospective in nature? - HELD THAT - A proviso, which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole - The Constitutional Bench of Hon ble Supreme Court in COMMISSIONER OF INCOME TAX (CENTRAL) -I, NEW DELHI VERSUS VATIKA TOWNSHIP PRIVATE LIMITED 2014 (9) TMI 576 - SUPREME COURT while deciding the question as to whether the insertion of proviso to Section 113 by Finance Act, 2002 is retrospective, discussed the general principles concerning retrospectivity and it was held that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators' object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. It is well settled law that no statute shall be construed to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This court held that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to the proceedings pending at the time of enactment as also to the proceedings commenced thereafter, notwithstanding that the cause of action may have arisen before the new provisions came into force - it is clear that any benefit that gets accrued by way of legislation cannot be denied/curtailed, more so, when it is clarificatory in nature like the present one and as such it has to be made retrospective in operation. Petition allowed - remanded back to the Deputy Commissioner of Central Tax to deal with the claim of refund in terms of this common order.

Summary

Issues Involved:
1. Non-submission of shipping bills.
2. Proof of export of electricity.
3. Maintainability of writ petitions without availing alternate remedies.
4. Retrospective application of the amended Rule 89 of CGST Rules, 2022.

Detailed Analysis:

1. Non-submission of Shipping Bills:
The petitioner contended that under Rule 89 of CGST Rules, 2017, it is impossible to generate shipping bills for electricity as it is intangible and transmitted through transmission lines. The authorities initially rejected the refund claim due to the non-submission of shipping bills as required under Rule 89(2)(b) of CGST Rules, 2017. The petitioner argued that shipping bills are custom documents not applicable to electricity. The court acknowledged that the transmission of electricity across borders is a recent phenomenon and suitable amendments should have been made to accommodate this.

2. Proof of Export of Electricity:
The petitioner provided Regional Energy Account (REA) reports as proof of export, which was accepted in subsequent notices. The court noted that the authorities had realized their mistake in insisting on proof of export to Bangladesh from the delivery point in Bohrompur, West Bengal, and thus, in later orders, only rejected the claim due to non-production of shipping bills. The court concluded that the REA reports could be used to establish the export of electricity.

3. Maintainability of Writ Petitions:
The respondents argued that the writ petitions were not maintainable as some were filed directly under Article 226 of the Constitution of India without availing alternate remedies. The petitioner countered that the GST Tribunal was not yet constituted, leaving no efficacious or alternative remedy. The court held that in the absence of the Tribunal, the writ petitions were maintainable and that filing appeals before the Appellate Authority again would serve no useful purpose.

4. Retrospective Application of Amended Rule 89 of CGST Rules, 2022:
The petitioner argued that the amendment to Rule 89 of CGST Rules, 2022, which allows the use of REA reports as proof of export, should be given retrospective effect. The court examined the amendment and concluded that it was clarificatory and beneficial, thus should be applied retrospectively. The court referenced several judgments supporting the principle that beneficial legislation should be applied retrospectively.

Conclusion:
The court allowed the writ petitions, set aside the orders under challenge, and remanded the cases back to the respective authorities to deal with the refund claims in terms of the court's order. The petitioner was directed to file relevant reports evidencing the transmission of electricity before the appropriate authorities if not already filed. The court emphasized that the amendment to Rule 89 of CGST Rules, 2022, should be applied retrospectively, acknowledging the department's application of the amendment for refund claims filed before the amendment date.