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TMI Blog2021 (6) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... present problem before us on this issue - The amendment by the Notification No. 26/2018-Central Tax, dated 13-6-2018 is intra vires to the Section 54(3) of the CGST Act, 2017 provisions. Further, the Rule 89(5) is not contrary to the provisions of Section 54(3) of the CGST Act, 2017 as amended albeit it, as a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). The lexes of the amendments are amply justified. Further, as the appellant has not provided any documents relating to input in spite of providing sufficient opportunities to come forthwith for evidencing stake of inputs for impugned refund claims - Appeal dismissed. - 12 to 20 (MAA)CGST/JPR/2021 - - - Dated:- 15-1-2021 - Shri Manzoor Ali Ansari, Additional Commissioner (Appeals) ORDER These nine appeals have been filed under Section 107 of Central Goods and Services Tax Act, 2017 (hereinafter also referred to as the Act ) against Orders as enumerated below in the table (hereinafter referred to as the impugned order(s) or order(s) ) filed by M/s. Udaipur Mineral Development Syndicate Pvt. Ltd., Golcha Trade Centre, M.I. Road, Jaipur-302001 having GST No. 08AAACU846 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r HSN 2526. The appellant stated that for the purpose of excavation/production of soap stone/soap stone powder, the assessee have used capital goods and input services as the input is nothing in this case expect soap stone itself. The input services and capital goods used in the production and supply of the goods in the course of business by the assessee, attracts higher rate of tax than the rate of tax on their output supplies which resulted in accumulation of Input Tax Credit for which the assessee has filed refund applications of Input Tax Credit (Hereinafter referred to as the ITC also) claiming to be accumulated due to inverted tax structure, under Section 54 of the CGST Act, 2017. On scrutiny of the records and invoices of refund application, the Proper Officer has found that the said ITC have been availed on Input Services and Capital Goods which is not included in Net ITC for the purpose of refund amount as per Rule 89(5) of the CGST Rules, 2017 as amended vide Notification No. 26/2018-C.T., dated 13-6-2018. Accordingly the Show Cause Notices (GST-RFD-08) proposing rejection of refund claims were issued in the matter mainly on account of :- The claimant has claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 13-6-2018. Accordingly, the Adjudicating Authority has rejected the refund claims, mainly, on the underlying grounds :- Since the refund of ITC on input service and capital goods have been included in net ITC for the purpose of refund by the assessee, they, as per sub-Rule (5) of Rule 89 of the CGST Rules, 2017 as amended vide Board s Notification No. 26/2018-C.T., dated 13-6-2018 are not entitled to claim refund of ITC as per the formula and the expression of Net ITC given under the said Rule. 4. Being aggrieved with the impugned orders, the appellant has filed appeals mainly on the following grounds that :- (A) The Learned AC grossly erred in the law and on the facts of the case by overlooking the contention made by the assessee that the amended definition of Net ITC u/r 89(5) vide Notification No. 26/2018 is not in line with Section 54(3) hence the same should not be adhered to and refund should be granted to the assessee. (B) The appellant is mine owner of soap stone, who extracts soap stone, grinds the same and then it is being sold. The rate of goods and services tax applicable on soap stone powder is 5%, where, goods and services procured for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand that the formula under Rule 89(5) is arbitrary, incorrect and ultra vires to the CGST Act, 2017. (J) Thus, with all these judgments of Apex Court and other Courts, we can safely conclude that the amended Rule 89(5) is ultra vires to the CGST Act, 2017. This being a subordinate legislation cannot go beyond the powers of the law and therefore should be restricted to the position taken by law. The refund as allowed by Sec. 54 should be granted to the appellant. (K) Further reliance is placed on the decision of Gujarat High Court in case of Suchitra Dyeing Printing Mills Pvt. Ltd. SCA No. 20505 of 2018, Kalakruti Processors Pvt. Ltd. - SCA 20505 of 2018, South Gujarat Textile Processors Association - SCA 14148 of 2019, wherein the HC held that the Net ITC in formula given under Rule 89(5) of CGST Rules, 2017 will include the value of input services also. So this supports our contention that the refund of input services should be allowed in case of inverted duty structure as it is the intention of the legislature. (L) This also makes it truly clear that the CGST Act, 2017 was also formulated to keep in mind that there should not be any cascading of taxes. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority has rejected the refund of appellant mainly on the ground that Since the refund of ITC on input service and capital goods have been included in net ITC for the purpose of refund by the assessee, they, as per sub-Rule (5) of Rule 89 of the CGST Rules, 2017 as amended vide Board s Notification No. 26/2018-C.T., dated 13-6-2018 are not entitled to claim refund of ITC as per the formula and the expression of Net ITC given under the said Rule. 8. In this regard, I find that the appellant has pleaded that the input tax credit is accumulated on account of inverted duty structure. The refund of the same is claimed under the clause (ii) of the proviso to Section 54(3) of the Act and it may not be denied by the Authorities merely by virtue of Notification No. 26/2018-C.T., dated 13-6-2018. They also submitted that the formula given under Rule 89(5) of the CGST Rules, 2017 is arbitrary, Incorrect and ultra vires to the CGST Act, 2017. They also submitted the following case laws in support of their plea. VKC Footsteps India Pvt. Ltd. v. Union of India (Gujarat High Court) Gujarat High Court in case of Suchitra Dyeing Printing Mills Pvt. Ltd. SCA No. 20505 of 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 21/2018-C.T., dated 18-4-2018 for (5) in the case of refund on account of inverted duty structure, refund of input tar credit shall be granted as per the following formula - Maximum Refund Amount = ((Turnover of inverted rated supply of goods service) x Net ITC Adjusted Total Turnover) tax payable on such inverted rated supply of goods Explanation. - For the purposes of this sub-rule, the expressions Net ITC and Adjusted Total turnover shall have the same meanings as assigned to them in sub-rule (4) 10. Further, I find that the Central Goods and Services. Tax Rules have been amended by the Notification No. 26/2018-Central Tax, dated 13-6-2018 to provide substitution, with effect from 1st July, 2017, in Rule 89, for sub-rule (5), that :- (5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula :- Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services. Explanation :- For the purposes of this sub-rule, the expressions - (a) Net ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put supplies by excluding unutilised input tax credit that accumulated on account of input services is a valid classification and a valid exercise of legislative power. (3) Therefore, there is no necessity to adopt the interpretive device of reading down so as to save the constitutionality of Section 54(3)(ii). (4) Section 54(3)(ii) curtails a refund claim to the unutilised credit that accumulates only on account of the rate of tax on input goods being higher than the rate of tax on output supplies. In other words, it qualifies and curtails not only the class of registered persons who are entitled to refund but also the imposes a source-based restriction on refund entitlement and, consequently, the quantum thereof. (5) As a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii). Consequently, it is not necessary to interpret Rule 89(5) and. in particular, the definition of Net ITC therein so as to include the words input services. 16. Therefore, I am in opinion and thoroughly satisfied that the dictum of the Hon ble High Court has extensively tested the tenability of legislative powers to the span of contentions made by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns a refund claim to the unutilised credit that accumulates only on account of the rate of tax on input goods being higher than the rate of tax on output supplies. In other words, it qualifies and curtails not only the class of registered persons who are entitled to refund but also the imposes a source-based restriction on refund entitlement and, consequently, the quantum thereof. 19. Further, the case of M/s. VKC Footsteps India Pvt. Ltd. v. Union of India (Gujarat High Court) in respect of which the appellant placed reliance, I find that the case of VKC Footsteps India Pvt. Ltd. v. Union of India (Gujarat High Court) has already been discussed at length in the judgment of M/s. Tvl. Transtonnelstroy Afcons v. Union of India (in W.P. No. 8596 of 2019 Batch etc.). Therefore, I do not find any modus vivendi to extend or curtail down the meaning defined within the parameters of the CGST Act or Rules made thereunder. 20. In view of scope, function and role of amendment as adumbrated in above paras and on applying the ratio decidendi of the Hon ble Madras High Court, I find that the lexes of the amendments are amply justified. Further, as the appellant has not provided any docu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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