2025 (1) TMI 1131 - HC - GST

Applicability of Rule 96(10) of the CGST Rules as amended by Notification No. 54/2018-Central Tax dated 9.10.2018 - retrospective or prospective effect - validity of summons and recovery proceedings based on the retrospective application of Notification No. 54/2018 - HELD THAT - This Court in case of Cosmo Films Limited 2024 (10) TMI 275 - GUJARAT HIGH COURT has held that On perusal of above notification it is clear that same has come into effect from 9th October 2018 and as such there is a mistake apparent on record in CAV judgment dated 20th October 2020 wherein it is incorrectly stated that said notification has come into effect from 23rd October 2017. This Court while considering the mistakes pointed out in Misc. Civil Application No.1 of 2020 in Special Civil Application No. 15833 of 2018 has passed the rectification order holding that Notification No.54 of 2018 shall apply prospectively with effect from 9th October 2018 only. The summons issued notices as well as recovery proceedings on the basis of retrospective operation of Notification No.54 of 2018 dated 09.10.2018 is held to be without jurisdiction. The summons issued notices as well as recovery proceedings are quashed and set aside as Notification No.54/2018 would be applicable prospectively with effect from 09.10.2018 and therefore the amount quantified for the period prior to 09.10.2018 towards alleged erroneous refund would not survive. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether Rule 96(10) of the CGST Rules, as amended by Notification No. 54/2018-Central Tax dated 9.10.2018, should be applied retrospectively or prospectively.
Whether the retrospective application of Notification No. 54/2018 violates Article 14 of the Constitution of India due to its arbitrary nature.
Whether the summons and recovery proceedings based on the retrospective application of Notification No. 54/2018 are valid and within jurisdiction.
What is the effect of the rectification order passed in the case of Cosmo Films Ltd. v. Union of India on the applicability of Notification No. 54/2018?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Retrospective vs. Prospective Application of Notification No. 54/2018

Relevant Legal Framework and Precedents: The primary legal framework involves Rule 96(10) of the CGST Rules, Notification No. 54/2018, and the Constitution of India, particularly Article 14. The case of Cosmo Films Ltd. v. Union of India is a significant precedent.
Court's Interpretation and Reasoning: The court examined the amendments to Rule 96(10) and the subsequent notifications. It considered the intent and language of Notification No. 54/2018, which was initially interpreted to have retrospective effect from 23.10.2017.
Key Evidence and Findings: The court noted the issuance of Notification No. 54/2018 and the subsequent rectification order in the Cosmo Films case, which clarified the prospective application from 9.10.2018.
Application of Law to Facts: The court applied the rectification order to the facts of the case, determining that Notification No. 54/2018 should apply prospectively from 9.10.2018.
Treatment of Competing Arguments: The petitioners argued against the retrospective application, citing the rectification order and the potential violation of Article 14. The respondents relied on the initial interpretation of the notification.
Conclusions: The court concluded that Notification No. 54/2018 applies prospectively from 9.10.2018, aligning with the rectification order in the Cosmo Films case.

Issue 2: Validity of Summons and Recovery Proceedings

Relevant Legal Framework and Precedents: The validity of the summons and recovery proceedings is assessed under the CGST Rules and the Constitution of India.
Court's Interpretation and Reasoning: The court scrutinized the basis for the summons and recovery proceedings, which relied on the retrospective application of Notification No. 54/2018.
Key Evidence and Findings: The court found that the proceedings were initiated based on a misinterpretation of the notification's effective date.
Application of Law to Facts: By applying the rectification order, the court determined that the proceedings lacked jurisdiction as they were predicated on an incorrect retrospective application.
Treatment of Competing Arguments: The petitioners challenged the jurisdiction of the proceedings, while the respondents maintained their validity based on the initial interpretation.
Conclusions: The court held that the summons and recovery proceedings were without jurisdiction and quashed them, as Notification No. 54/2018 applies prospectively.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Notification No. 54/2018 is required to be made applicable w.e.f. 9th October, 2018 and not prior thereto from the inception of the Rule 96(10) of the CGST Act."
Core Principles Established: The court established that amendments to tax rules should be applied prospectively unless expressly stated otherwise, aligning with principles of fairness and non-arbitrariness under Article 14.
Final Determinations on Each Issue: The court determined that Notification No. 54/2018 applies prospectively from 9.10.2018. Consequently, the summons and recovery proceedings based on its retrospective application were quashed as without jurisdiction.

The judgment emphasizes the importance of clarity in legislative amendments and the protection of constitutional rights against arbitrary retrospective applications. It underscores the necessity for tax authorities to adhere to the correct interpretation of notifications and amendments to avoid unjust consequences for taxpayers.

← Previous Next →