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2025 (2) TMI 1093 - HC - GSTMaintainability of petition - availability of alternative remedy of appeal - Constitutional validity of Rule 36(4) of the Central Goods and Services Tax/Assam Goods and Services Tax Rules 2017. Maintainability of petition - HELD THAT - Since a statutory remedy is available to the petitioner to challenge the validity of the order dated 12.02.2024 as well as the order dated 31.03.2023 passed by the Commissioner (Appeals) i.e. respondent No.3 and Additional Commissioner i.e. respondent No.2 respectively the challenge of the petitioner to the aforesaid orders cannot be entertained in this writ petition and it is confined to examine the question regarding the validity of Rule 36(4) of the CGST Rules. Validity of Rule 36(4) of the CGST Rules - Whether Section 43A of the CGST Act has been enforced before enactment of the Finance Act 2022 with effect from 01.10.2022 whereby Section 43A is omitted? - HELD THAT - It is to be noticed that in sub-section (2) of Section 1 in the CGST (Amendment) Act 2018 whereby Section 43A is enacted it is provided that the provisions of the Amendment Act of 2018 shall come into force on such date the Central Government may by Notification in the Official Gazette appoint. The proviso to sub-section (2) of Section 1 says that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as reference to the coming into force of that provision - it is clear that the Central Government in its discretion can appoint different dates for different provisions of the CGST (Amendment) Act 2018 for their enforcement by issuing Notification in Official Gazette. Section 43A has never come into operation because the Central Government has never notified any date for its enforcement till it was omitted. Whether Rule 36(4) of the CGST Rules draws its power only from Section 43A or in particular sub-section (4) of Section 43A? - HELD THAT - Section 16 of the CGST Act and Rule 36 of CGST Rules are in relation to eligibility of a registered person who can avail input tax credit by furnishing required documents whereas Section 43A of the CGST Act is defining procedure for furnishing returns for availing input tax credit - Rule 36 of CGST Rules is relatable to Section 16 of the CGST Act and as such sub-rule (4) of Rule 36 of the said Rules is also relatable to Section 16 of the CGST Act only. Sub-section (1) of Section 164 of the CGST Act enables the Government to make rules for carrying out the provisions of the said Act. Sub-section (2) of Section 164 clarifies that the Central Government may make rules for all or any of the matters which by CGST Act are required to be or may be prescribed without prejudice to the generality of the provisions of sub-section (1) of Section 164. It means that provisions of sub-section (2) of Section 164 are not restrictive of sub-Section (1) and after careful scrutiny of the CGST Act there are no doubt that Rule 36 or in particular sub-rule (4) of Rule 36 is framed as per the objects of the CGST Act and falls within the scope of general power conferred by sub-section (2) of Section 164 of the said Act. Rule 36 of CGST Rules and in particular sub-Rule (4) of Rule 36 derives power from Section 16 of the CGST Act as well as from the general powers conferred by the CGST Act. Another simple reason for not accepting the contention of the learned counsel for the petitioner that sub-rule (4) of Rule 36 derives power from subsection (4) of Section 43A is that since Section 43A has not been enforced at any point of time till its omission vide Finance Act 2022 with effect from 01.10.2022 it is impossible to conclude that a rule or sub-rule derives power from a provision which has never been enforced - when a provision of an Act never comes into operation it cannot be treated as a source of power of a provision of a rule. Conclusion - Rule 36(4) of the CGST Rules is valid and derives its authority from Section 16 of the CGST Act and the general rule-making powers under Section 164 not from the non-enforced Section 43A. There are no merit in the challenge of the petitioner to the validity of sub-rule (4) of Rule 36 of CGST Rules - petition dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Validity of Rule 36(4) of the CGST Rules Relevant legal framework and precedents: The petitioner challenged the constitutional validity of Rule 36(4), arguing it was enacted under Section 43A(4) of the CGST Act, which was never enforced. The petitioner contended that since Section 43A was omitted without being enforced, Rule 36(4) lacked legal validity until Section 16(2)(aa) came into effect on 01.01.2022. Court's interpretation and reasoning: The Court examined whether Section 43A had been enforced before its omission and concluded that no notification was issued to enforce Section 43A. Consequently, Rule 36(4) could not derive its power from a non-enforced section. Key evidence and findings: The Court noted that the Central Government never notified the enforcement date for Section 43A, as required by the CGST (Amendment) Act, 2018. Application of law to facts: The Court determined that Rule 36(4) was related to Section 16 of the CGST Act, which deals with eligibility for input tax credit, rather than Section 43A, which pertains to return procedures. Treatment of competing arguments: The Revenue argued the validity of Rule 36(4) was upheld by the Kerala High Court, but the Court distinguished this case as the challenge was based on the non-enforcement of Section 43A rather than constitutional grounds. Conclusions: The Court concluded that Rule 36(4) derives its power from Section 16 and the general rule-making powers under Section 164 of the CGST Act, and thus, the petitioner's challenge lacked merit. 2. Applicability and Enforcement of Section 43A Relevant legal framework and precedents: The petitioner argued that Section 43A was never enforced, as no notification was issued by the Central Government. Court's interpretation and reasoning: The Court found that the absence of a notification meant Section 43A was never in force, and therefore, Rule 36(4) could not derive its authority from it. Key evidence and findings: The Court analyzed the provisions of the CGST (Amendment) Act, 2018, which required a notification for enforcement, and found none was issued. Application of law to facts: The Court applied the principle that a rule cannot derive power from a statutory provision that was never enforced. Treatment of competing arguments: The Revenue's argument that Section 43A was effective from the notification of the CGST (Amendment) Act was rejected due to the lack of a specific enforcement notification. Conclusions: The Court concluded that Section 43A was never operational, and thus, Rule 36(4) could not be based on it. 3. Challenge Against Orders Dated 31.03.2023 and 12.02.2024 Relevant legal framework and precedents: The petitioner challenged the orders on the grounds of limitation and the validity of Rule 36(4). Court's interpretation and reasoning: The Court noted that the petitioner had a statutory remedy available under Section 112(1) of the CGST Act and should pursue that route for challenging the orders. Key evidence and findings: The Court focused on the procedural aspect, emphasizing the availability of an appellate remedy. Application of law to facts: The Court applied the principle of exhaustion of statutory remedies, directing the petitioner to pursue an appeal. Treatment of competing arguments: The Court found the petitioner's approach to bypass the statutory remedy by challenging Rule 36(4) directly in the writ petition inappropriate. Conclusions: The Court dismissed the writ petition, emphasizing the need for the petitioner to utilize the available statutory remedies. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "In view of above discussion, we conclude that Rule 36 of CGST Rules and in particular sub-Rule (4) of Rule 36 derives power from Section 16 of the CGST Act as well as from the general powers conferred by the CGST Act." Core principles established: The Court established that Rule 36(4) of the CGST Rules is valid and derives its authority from Section 16 of the CGST Act and the general rule-making powers under Section 164, not from the non-enforced Section 43A. Final determinations on each issue: The Court dismissed the petitioner's challenge to Rule 36(4) and directed the petitioner to pursue statutory remedies for challenging the orders dated 31.03.2023 and 12.02.2024.
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