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TMI Blog2021 (6) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ication on 15-5-2020 under Section 54 of the CGST Act, 2017 in respect of unutilized Input Tax Credit of Rs. 23,62,917/- for the month of June, 2019 on account of ITC accumulated due to Inverted Tax Structure. 2.2 On verification of the refund claim submitted by the appellant, the adjudicating authority had issued a show cause notice in Form GST RFD-08 vide reference No. ZS0805200215549, dated 24-5-2020 to the appellant that the refund claim was liable to be rejected on the ground of Wrong ITC claim and given the remark "It is found that ITC (as availed) of Input Services and Capital Goods, should not be included in 'Net ITC' for the purpose of refund amount as per Rule 89(5) of CGST Rules, 2017 as amended vide Notification No. 26/2018-C.T., dated 13-6-2018. Further, the appellant was directed to furnish a reply to the notice within fifteen days from the date of service of the notice and also directed to appear for personal hearing on 6-6-2020 01.30 PM. 2.3 Thereafter, the adjudicating authority has passed the Order-In-Original No. ZW0806200177951, dated 15-6-2020 in Form GST-RFD-06 and rejected the refund claim amounting to Rs. 23,62,917/- with remarks that "Refund of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d attend the hearing with submissions and records require. * that no reply or acknowledgement was given to the letter of adjournment by the department. No letter for personal hearing was issued to the appellant to inform any time for appearing before the authorities. * that 7 days from the date of letter of adjournment requesting additional time for submission of reply were supposed to end on 15-6-2020. The detailed reply for submission was prepared and the same was in course of being uploaded on GS portal at 15-6-2020. However, before the end of the day i.e. the due date to submit reply, to the shock of appellant, the Authority issued an ex parte Rejection Order to the appellant on GST portal at 02.45 PM. It was arbitrarily mentioned for the appellant that they do not appear for PH on today. * that the appellant vigorously submits that it was deprived of its right to submit the reply to the Show Cause Notice on the due date and appear before the authority to explain the merits of the case and validity of the refund claimed in light of correct interpretation of law. That issue of order of rejection on 02.45 PM of the same day, i.e. 15-6-2020, when appellant was supposed to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower delegated by the statute does not enable the authority by regulations to extend the scope or general operation of the enactment but is strictly ancillary. Therefore, anything which is not intended or missed by the legislature in the statute cannot be brought into authority by these rules. Further, the appellant has cited various case laws in their support which are as under :- Swadeshi Cotton Mills v. Union of India - AIR 1981 SC 818. Oryx Fisheries Private Limited v. UOI - 2011 (266) E.L.T. 422 (S.C.). J.A. Motor Spirit v. State of Tamil Nadu - 2017 (345) E.L.T. 205 (Mad.) Tata Engineering & Locomotive Co. Ltd. v. Collector of Central Excise, Pune - 2006 (9) TMI 185 = 2006 (203) E.L.T. 360 (S.C.) Devi Food Products v. A-One Products, the importance of well-reasoned orders was considered by the Rajasthan High Court India Logistics and Cargo Movers v. State of Gujarat Hukamchand v. Union of India - AIR 1972 SC 2427 St. Johns Teachers Training Institute v. Regional Director - (2003) 3 SCC 321 VKC Footsteps India Pvt. Ltd. v. Union of India - (2020) 118 taxmann.com 81 (Gujarat) = 2020 (43) G.S.T.L. 336 (Guj.) M/s. Raymond UCO Denim Private Limited v. The Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that :- With regard to the contention of the appellant about admissibility of refund for the tax period for the month of June, 2019, on perusal of records, I find that the adjudication authority has rejected the refund for the tax period from June, 2019. 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 of the Act and also submitted that the formula given under Rule 89(5) of the CGST Rules, 2017 is inconsistent with Section 54 of the Act and hence is ultra vires. They also placed reliance to judgments of VKC Footsteps India Pvt. Ltd. v. Union of India (Gujarat High Court). Before embarking upon the issue, I would like to reproduce the statutory provisions which are relevant in this case. Section 54(3) of the Act provides - "CHAPTER XI REFUNDS 54. Refund of tax. - ... (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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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)." 8. 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 shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rule (4A) or (4B) or both; and (b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4)." 9. Now I shall proximate ahead, step by step, toward the gradient descent of crux in the instant matter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 11. 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 appellant in conformity to the Tax jurisdiction. It is therefore, established that 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the quantum thereof. 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. 13. 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 expressions of the amendments are amply justified. In light of the above findings and discussions, I also find that refund of input services is not includible in the "Net ITC" as explained in the clause under Rule 89(5) of the CGST Rules, as amended. Further, as the appellant has not submitted any segregated documents relating to input to the proper officer in spite of providing sufficient opportunities to come forthwith for evidencing stake of inputs for i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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