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TMI Blog2019 (8) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner - Shabnam Petrofils Pvt. Ltd. has prayed for the following main reliefs:- "16[B]. Your Lordships may be pleased to issue writ of mandamus or any other writ in the nature of mandamus or any other appropriate writ quashing and setting aside the Notification dated 26.07.2018 being No.20/2018 and Circular dated 24.08.2018 being Circular No.56/30/2018-GST as contrary to Section 54(3) of the Central Goods and Service Tax Act, 2017 as well as notification dated 28.06.2017 being Notification No.5/2017-Central Tax [Rate] and declare the said Notification and Circular as violative of Articles 14 and 19(1)(g) of the Constitution of India. 2.01. By way of Special Civil Application No.20626 of 2018, petitioners - federation of Gujarat Weavers Welfare Association and others have prayed for the following main reliefs:- "9(a). YOUR LORDSHIPS may be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioners case and after going into the validity and legality thereof to quash and set aside: (i). proviso (ii) of the opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve challenged Notification No.20/2018-central Tax (Rate) dated 26.07.2018 issued by the Government of India, Ministry of Finance, Department of Revenue, by which it is resolved that, the accumulated input tax credit lying unutilised in balance in respect of the goods specified at Sr.Nos.1, 2, 3, 4, 5, 6, 6A, 6B, 6C, and 7 of the table below Notification dated 28/6/2017, after payment of tax for and upto the month of July, 2018, on the inward supplies received upto 31st day of July, 2018, shall lapse. In short, by way of the aforesaid Government Resolution, the inverted tax structure refund of excess duty is not granted. 3.00. The petitioner of Special Civil Application No.16213 of 2018, is a company registered under the Companies Act, 1956 and is engaged in manufacturing polyester texturized yarn (HSN Code : 5402) and also manufactures polyester woven fabrics and polyester knitted fabrics from polyester partially oriented yarn / polyester texturized yarn (HSN Code : 5402) while the petitioner No.1 of Special Civil Application No.20626 of 2018 is a duly registered under the Maharashtra Public Trust Act, 1950 and Societies Registration Act and representing its members who are mostl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of July, 2018, shall lapse. It is contended by the learned counsel for the petitioners that the impugned notification is without application of mind inasmuch as the assessees are losing huge amount of money paid towards input tax credit. It is contended that a registered person's right to claim input tax credit arises from section 16 of the CGST Act. It is contended by the learned counsel for the petitioners that there is no statutory provision under the CGST Act empowering the respondents to issue notifications providing for lapsing of input tax credit. It is contended that rule can be made or notification can be issued under the guise of section 164 for lapsing input tax credit. It is also contended that power under section 54(3)(ii) of the CGST Act is limited to notify the supplies not entitled to refund of input tax credit accumulated on account of the inverted rate structure. It is contended that the the impugned notifications have exceeded powers delegated under section 54(3)(ii) of the CGST Act. It is contended that the impugned notification to the extend providing for the lapsing of input tax credit are discriminatory. It is vehemently contended that the input tax cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. The effect of the rescinded notifications is, in our opinion, that from the date on which the said notifications came to be rescinded, the manufacturers of Vanaspati and soap ceased to earn the benefit of credit of money while manufacturing their final products - Vanaspati or soap - with the help of notified inputs, but they were not deprived of their right to utilise the credit of money which they had already earned validly so long as the same was or intended to be used for payment of excise duty in the manufacture of Vanaspati or soap, as the case may be, merely because the notifications have been rescinded, it cannot be said that Rule 57N has ceased to operate. For these reasons the contention raised on behalf of the respondents will have to be rejected." 3.05. The learned counsel for the petitioners has also And the decision of the Apex Court in the case of Eicher Motors Ltd. Vs. Union of India, reported in 1999 (106) ELT 3 (S.C.). The Apex Court in the case of Eicher Motors Ltd. (supra) has observed and held as under :- "5. Rule 57F (4A) was introduced into the Rules pursuant to Budget for 1995-96 providing for lapsing of credit lying unutilised on 16-3-1995 with a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factory on the basis of the existing scheme. Now by application of Rule 57F(4A) credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3-1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate, that the scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect. submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered. necessarily it follows that right, which had accrued to a party such as availability of a scheme, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (322) ELT 587(SC) [5] Commissioner of Central Excise Vs/ New Swadeshi Sugar Mills (2016) 1 SCC 614, [6] TATA Engineering & Locomotive Co. Ltd. V/s. Union of India [2003 (159) ELT 129 (Bom.)] [7] Grasim Industries Ltd. V/s. CBEC [2004 (163) ELT 10] & [8] Shree Rajastban Texchem Ltd. V/s. Union of India [2005 (182) ELT 311. 3.07. It is further contended by the learned counsel appearing for the petitioners that from the above, it is clear that the impugned notification and circular are required to be struck down as unconstitutional on the ground that it took away the vested right of the assessee without there being any justifiable reason. 4.00. Both these appeals are vehemently opposed by the learned counsel for the respondents - revenue. It is contended that to reduce the accumulation of ITC with fabrics weavers, the GST council, in its meeting held on 6th October 2017 recommended reduction in GST rate on man-made fiber yarns from 18% to 12% which was notified vide notification No. 35/2017-Central Tax (Rate) dated 13th October 2017. This gave significant relief to the sector and accumulation of ITC got reduced. Subsequently, requests were received from textile indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that it is now well settled in the field of taxation, hardship or equity has no role to play in determining eligibility to tax and it is for the legislature to determine the same. 5.00. Heard the learned counsel for the respective parties and considered the material on record. 5.01. Having heard the rival submissions and considering the provisions of section 54(3(ii), which empowers the respondents - revenue to frame the rules, does not empower the respondents - Central Government to frame rule providing for lapsing of the input tax credit. 5.02. The decision of the Apex Court in the case of Dal Ichi Karkaria Ltd. (supra) as well as decision of the Apex Court in the case of Eicher Motors Ltd. (supra) are squarely applicable to the facts of the case on hand. 5.03. In the case of Dal Ichi Karkaria Ltd. (supra), the Apex Court in the context of rule 57A to 57J of the Central Excise Rules, 1944 has held that a manufacturer obtains credit for central excise duty on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. Therefore, it is entitled to use the credit at any time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knitters engaged in the manufacture and sale of MMF knitted fabrics. 9.00. The members of the writ applicants are engaged in the supply of textiles and textile articles of Chapters 52 to 63 of the First Schedule to the Customs Tariff Act, 1975. 10.00. With the introduction of the Goods and Services Tax (hereinafter referred to as "GST') in India w.e.f. 01.07.2017, the Central Goods and Service Tax Act, 2017 ("CGST Act"), Integrated Goods and Service Tax Act, 2017 ("IGST Act"), and Gujarat Goods and Service Tax Act, 2017 ("SGST Act"), has come into force. 11.00. The CGST Act and SGST Act provides for the levy and collection of the GST on the supply of goods and services within the State of Gujarat. The IGST Act levies and collects GST on the inter-state supply of goods and services. 12.00. The Scheme of levy of GST is to tax supply of goods and services on value addition. 13.00. Section 16 of the CGST Act allows the registered person to take input tax credit ("ITC") of tax charged on the inputs and input services or both used or intended to be used in the course or furtherance of his business. 14.00. Section 140 of the CGST Act allows a registered person to take credit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than (I) zero-rated supplies made without payment of tax, (ii) where the credit has accumulated an account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council : Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty : Provided also that no refund of input tax credit shall be allowed, If the supplier of goods or services or both claims refund of the integrated tax paid on such supplies." 20.00. Vide Notification No.05/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 29/2017- Central Tax (Rate) dated 22.09.2017 and Notification No. 44/2017-Central Tax (Rate) dated 14.11.2017, the Central Government, on recommendation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies received up to the 31.07.2018, shall lapse. 25.00. The relevant extracts of the Notification No.20/2018-Central Tax (Rate) dated 26.07.2018 are reproduced as follows: "Refund of unutilized/accumulated credit on specified fabrics - Amendment to Notification No. 5/2017-C. T. (Rate) In exercise of the powers conferred by clause (ii) of the proviso to sub-section (3) of section 54 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 5/2017-Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part 1], Section 3, Sub-section (i). vide number G.S.R. 677(E), dated the 28th June, 2017, namely : In the said notification. In the opening paragraph the following proviso shall be inserted. Namely : "Provided that, (i) nothing contained in this notification shall apply to the input tax credit accumulated on supplies received on or after the 1st day of August, 2018, in respect of goods mentioned at serial numbers 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) The CGST Act itself provides for the lapsing of the ITC at Sections 17(4) and 18(4) respectively of the CGST Act. Thus, where the legislature wanted the ITC to lapse, it has been expressly provided for in the Act itself. No such express provision has been made in Section 54(3) of the CGST Act. (ix) No inherent power can be inferred from the provision of Section 54(3) of the CGST Act empowering the Central Government to provide for the lapsing of the unutilised ITC accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies (inverted rate structure). (x) The members of the writ applicants have a vested right to unutilised ITC accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies. (xi) It is a well settled principle that the delegated legislation has to be in conformity with the provisions of the parent statute. By prescribing for lapsing of ITC, the Notification No.05/2017-C.T. (Rate) dated 28.06.2017, as amended by Notification No.20/2018-C.T. (Rate) dated 26.07.2018, has exceeded the power delegated under Section 54(3)(ii) of the CGST Act. (xii) In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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