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2023 (10) TMI 924 - HC - GSTRefund of excess availed/utilised Input Tax Credit - violation of Rule 36(4) of the CGST Rules, 2017 - HELD THAT - As to the merits, the language of the first proviso to Rule 36(4) is plain and clear. Read along with the main part of sub-Rule 4, it only provides an exception to the scheme contained in that sub-Rule. Thus, in the first place Rule 36(4) is complete and provides for a functional rule to avail ITC. It contemplated (during the relevant period) that the eligible ITC for each month would not exceed 10% of the eligible ITC available in respect of the Tax Invoices or Debit Notes, details of which stood furnished by the suppliers under sub-Section 1 of Section 36 in Form GSTR-1 or using Invoice Furnishing Facility (IFF). Therefore, if the first proviso to Rule 36(4) had not been introduced, the petitioner would stand non-suited. In fact, the dispute itself would not have arisen as neither party before us offers any different reading to the main part of Rule 36(4) of the Rules. To that extent, the learned Additional Advocate General is right in his submission that for the purpose of computation of eligible ITC in terms of Rule 36(4), the date of filing of GSTR-1 would remain relevant. No departure thereto may have been made so long as the first proviso to Rule 36(4) did not interject. Coming to the core issue of the language used, the proviso first contemplates that the condition prescribed under Rule 36(4) shall apply cumulatively. The word cumulative has not been defined under the Act or the Rules. However, plainly it conveys increase or addition to size (here quantum) with successive additions without corresponding losses (here deductions). It may be useful to refer to a few dictionary meanings given to the word cumulative - the condition contained in sub-Rule 4 of Rule 36 that the eligible ITC would not exceed 10% of the eligible credit as per Tax Invoice or Debit Note etc., filed on GSTR-1 would have to be seen cumulatively i.e., with all additions made, taken together. The period for which such cumulative effect was to be given has also been specified in that proviso, being for the months of February 2020 to August 2020. To that extent, there is no dispute between the parties. If the effort and intent of the legislature had only been to delay the computation of eligible ITC in terms of Rule 36(4), all that was required to be done was to extend the date of filing of return for the months of February 2020 to August 2020, to September 2020. As rightly submitted by the learned Additional Advocate General, that date of filing of monthly returns was never extended. All that was done by means of subsequent Notifications was to waive/reduce late filing fee, interest, and penalty liabilities. On the contrary, the date of filing of monthly returns remained unchanged. Though the Circular letter no. 113 dated 11.11.2019 was valid, it cannot be enforced contrary to the first proviso to Rule 36(4). It lost its efficacy and force and to that extent its relevance, for a limited period of February 2020 to August 2020. For that period, the law intervened and ruled otherwise. That is the plain effect in law caused by the first proviso to Rule 36(4). For the period to which the said proviso applies, the administrative instruction dated 11.11.2019 must survive in complete hibernation. Else, it may lose life to the higher statutory law. The revenue authorities have erred in relying on the said Circular letter to read a condition - as on date of filing the return in GSTR-I, all the suppliers for the said tax period . For that period, the said condition otherwise enforceable in law by virtue of the language of Rule 36(4) , stood absolutely relaxed. To the extent the Circular dated 11.11.2019 is contrary to the first proviso to Rule 36(4) of the Rules, it would remain unenforceable in law. That principle is well settled. Insofar as the present petitioner had offered amount of ITC reconciliation by way of its explanation furnished in its reply dated 17.01.2021 and such facts are also stated in the writ petition which again have not been contradicted or denied as may support the objection being now raised, it is not appropriate to remit the matter to the assessing authority, for that purpose. The entire amount recovered may be returned to the petitioner within a period of six weeks from the date a copy of this order is served on the proper officer, by the petitioner. At the same time, the petitioner would remain entitled to interest that we provide @ 6% on the amount of excess recovery of Rs. 11,00,69,010/-, from the date of that excess recovery to the date of its actual refund. The impugned order is quashed - petition allowed.
Issues Involved:
1. Primary Relief Against Order Dated 7.4.2021 2. Recovery of Disputed Amount During Pendency of Writ Petition 3. Interpretation of Rule 36(4) and First Proviso of CGST Rules, 2017 4. Validity and Applicability of Circular No. 123/42/219-GST Summary: 1. Primary Relief Against Order Dated 7.4.2021 The petitioner challenged the order dated 7.4.2021 passed by the Deputy Commissioner, which directed the reversal of excess Input Tax Credit (ITC) amounting to Rs. 110,06,90,100.31 for the period February 2020 to August 2020. This was construed as a violation of Rule 36(4) of the CGST Rules, 2017, leading to a total demand of Rs. 235.52 crores, including interest and penalty. The petitioner had provisionally deposited Rs. 11,00,69,010/- against the disputed demand but disputed the entire liability. 2. Recovery of Disputed Amount During Pendency of Writ Petition Despite the stay application pending, the respondents recovered the entire tax amount and penalty, excluding interest, totaling Rs. 220,13,80,200.60. The court noted that there is no implied stay of recovery unless granted by the court, and the revenue authorities were not in error for recovering the disputed amount during the pendency of the writ petition. However, it was unacceptable that the authorities recovered 110% of the disputed amount without accounting for the pre-deposited amount. 3. Interpretation of Rule 36(4) and First Proviso of CGST Rules, 2017 The primary issue was the interpretation of the first proviso to Rule 36(4) of the CGST Rules, 2017. The court held that the cumulative adjustment of ITC for the months February 2020 to August 2020 should be considered as a single tax period for the purpose of filing the return for September 2020. The court rejected the revenue's contention that the ITC should be computed on a month-to-month basis and emphasized that the proviso allowed for a cumulative adjustment to be made in the return for September 2020. 4. Validity and Applicability of Circular No. 123/42/219-GST The court found that the reliance on Circular No. 123/42/219-GST dated 11.11.2019 by the revenue authorities was misplaced. The circular, being an administrative instruction, could not override the statutory law introduced by the first proviso to Rule 36(4). The court held that the circular lost its enforceability for the period February 2020 to August 2020 due to the statutory intervention made by the first proviso to Rule 36(4). Conclusion: The impugned order was quashed, and the court directed the refund of the entire amount recovered within six weeks, along with interest at 6% on the excess recovery of Rs. 11,00,69,010/-. The court also left it open for the respondent State to recover up to 10% of the interest amount from the erring officers. The writ petition was allowed with no order as to costs.
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