EXECUTIVE SUMMARY

Notifications:

Customs, FTP and SEZ

• Notification No. 87/2022 – Customs (N.T) – dated 06.10.2022

The CBIC by virtue of this notification has notified the exchange rate to be used for valuation purposes in the import and export of goods denominated in different currencies.

• Notification No. 53/2022 – Customs dated 03.10.2022

This notification seeks to reduce import duty on goods falling under Tariff Head 7110 (platinum, unwrought or in semi-manufactured forms, or in powder form) other than platinum, palladium (used in the manufacture of all goods falling under 2843, all goods falling under 3815 12 and catalytic convertors falling under tariff item 8421 32 00) & rhodium to 1.5%.

• Notification No. 52/2022 – Customs dated 03.10.2022

This notification seeks to substitute platinum – Entry against 364B in Notification No. 50/201, in order to give effect to Notification No. 53 explained above.

Public Notice:

Customs, FTP and SEZ

• Public Notice No. 28/2015-20, dated 06.09.2022:

This public notice seeks to extend the last date for application of Tariff Rate Quota (TRQ) under the head 7108 Gold(including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form] for the 3^rd quarter of FY 2022-23 to 10.10.2022. TRQ issued under the head 7108 for the import in 1^st and 2^nd quarter of FY 2022-23 shall be revalidated till 30.11.2022.

Instructions:

Customs, FTP and SEZ

• Instruction No. 27/2022 – Customs, dated 07.10.2022:

This instruction seeks to amend import policy condition under ITC (HS) 08028010 (areca nut) of Chapter 08 of ITC (HS) 2022 for import from Bhutan.

• Instruction No. 26/2022 – Customs, dated 06.10.2022:

This instruction seeks to lay down that an integrated/single certificate, incorporating food safety related requirements/attestations will be accepted by FSSAI at the time of import clearance of certain food consignments, in continuation of the CBIC’s Instruction No.18/2022 – Customs dated 12.08.2022.

• Instruction No.25/2022 – Customs, dated 03.10.2022

This instruction seeks to clarify the implications of the judgement of the Apex Court in the case of M/s Westinghouse Saxby Farmer Ltd Vs Commissioner of Central Excise, Kolkata, that the classification of ’relay’ (used as a part of railway signalling system) will not be applicable to all goods.

SUPREME COURT AND HIGH COURT JUDGEMENTS

Goods and Service Tax

High Court

• Seema Gupta Vs Union of India and Ors

Issue:

The petitioner alleges that Clause (A)(b) of Notification No. 04/2022 – Central Tax (Rate) dated 13.07.2022 (which brought the supply of service of renting of residential dwellings to a GST registered person into the tax net) is ultra-vires the Article 14 of the Constitution of India and also beyond powers conferred under the CGST Act of 2017.

Held:

Renting of a residential dwelling by a proprietor of a registered proprietorship firm, who rents it in his/her own personal capacity for use as his/her own residence as well as not for use in the course or furtherance of business of his/her proprietorship firm and such renting is on his/her own account and not that of proprietorship firm, shall be exempt from GST

• Baker Hughes Asia Pacific Ltd Vs Union of India and Ors

Issue:

The petitioner alleges that it is entitled to claim  refund under the inverted duty structure, even when the input and output goods are the same (goods have not been subject to any value addition), on the strength of Circular No. 125/44/2019-GST-CBEC-20/16/04/18-GST, dated 18-11-2019, which has allowed for refund under inverted duty structure, when output supplies are being made at a lower GST rate as per a concessional rate notification.

Held:

Section 54(3)(ii) of the CGST Act is absolutely unambiguous and does not carve out any exception that Input Tax Credit under the Inverted Tax Structure would not be applicable where the input and the output goods are the same. The respondents are directed to refund the accumulated input tax credit.

• Sembcorp Energy India Vs State of Andhra Pradesh

Issue:

The petitioner alleges that it is entitled to a refund of ITC on the zero-rated exports of electricity, which has been denied by the Revenue mainly on the procedural premise that no shipping bill and EGM has been filed (which is usually the case for tangible goods) even though electricity is intangible goods that’s transported through transmission lines (unlike tangible goods that are transported by road, air, water).

Held:

Writ Petition is allowed, and the matter has been remanded back to the appellate authority and the adjudicating authority.  

NOTIFICATIONS

Customs, FTP and SEZ

• Notification No. 87/2022 – Customs (N.T) – dated 06.10.2022

Summary:

The CBIC by virtue of this notification has notified the exchange rate to be used for valuation purposes in the import and export of goods denominated in different currencies.

SCHEDULE I

SCHEDULE II

Novello Comments:

The importers of goods denominated in the currencies mentioned above shall save this notification for future references to substantiate the valuations of their imports.

• Notification No. 53/2022 – Customs – dated 03.10.2022

Summary:

This notification seeks to reduce import duty on goods falling under Tariff Head 7110 (platinum, unwrought or in semi-manufactured forms, or in powder form) other than platinum, palladium (used in the manufacture of all goods falling under 2843, all goods falling under 3815 12 and catalytic convertors falling under tariff item 8421 32 00) & rhodium to 1.5%.

Novello Comments:

The importers of above-mentioned shall take note of this notification and pay duty on the above-mentioned goods, at 1.5%.

• Notification No. 52/2022 – Customs dated 03.10.2022

Summary:

This notification seeks to substitute platinum – Entry against 364B in Notification No. 50/2017 in order to give effect to Notification No. 53 explained above.

Novello Comments:

The importers of platinum shall take due note of both Notification No. 52 and 53 explained above.

PUBLIC NOTICE

Customs, FTP and SEZ

• Public Notice No. 28/2015-20 dated 06.10.2022:

Summary:

This public notice seeks to extend the last date for application of Tariff Rate Quota (TRQ) under the head 7108 [Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form] for the 3^rd quarter of FY 2022-23 to 10.10.2022. TRQ issued under the head 7108 for the import in 1^st and 2^nd quarter of FY 2022-23 shall be revalidated till 30.11.2022.  

Novello Comments:

Importers of Gold shall take due note of this public notice and submit all pending applications for the TRQ allotment.  

INSTRUCTIONS

Customs, FTP and SEZ

• Instruction No. 27/2022, dated 07.10.2022:

Summary:

This instruction seeks to amend import policy condition under ITC (HS) 08028010 (Areca Nut) of Chapter 08 of ITC (HS) 2022, for import from Bhutan

Considering that the Fresh (green) Areca Nut is a prohibited item, in the absence of the compliance to the policy conditions stipulated therein, the Kolkata Customs Zone may devise an appropriate mechanism for registration of Registration Certificates (RC), debit/utilisation of the quantity in the RC, monitoring validity of the RC and an overall monitoring mechanism for the effective implementation of the revised policy stipulation.

Novello Comments:

The importers of areca nut from Bhutan shall take due note of this instruction and follow all the procedures laid down by the Kolkata Customs Zone.

• Instruction No. 26/2022, dated 06.10.2022:

Summary:

This instruction seeks to lay down that an integrated/single certificate, incorporating food safety related requirements/attestations will be accepted by FSSAI at the time of import clearance of certain food consignments, in continuation of the Board’s Instruction No.18/2022 – Customs dated 12.08.2022.

Novello Comments:

The importers of food items for which FSSAI clearance is required at the time of import shall have a better ease of doing business via an integrated/single certificate.

• Instruction No.25/2022 – Customs, dated 03.10.2022

Summary:

This instruction seeks to clarify the implications of the judgement of the Apex Court in the case of M/s Westinghouse Saxby Farmer Ltd Vs Commissioner of Central Excise, Kolkata, that the classification of ’relay’ (used as a part of railway signalling system) is not applicable to all goods.

An instruction 01/2022-Customs dated 05.01.2022 was issued by the Board pursuant to the various representations received from the field and trade regarding the divergent practices pertaining to the classification of ‘automobile parts’ in light of the judgment of the Supreme Court dated 08.03.2021 in the case of M/s Westinghouse Saxby Farmer Ltd, Vs. Commissioner of Central Excise, Kolkata.

Concerns have been raised on the validity of the above instruction, as the Review Petition (Civil) D.No. 802/2022 filed in the instant case, vide its order dated 10.08.2022, was dismissed. The matter was examined and the opinion of the learned Additional Solicitor General was also sought on the matter.

In terms of the opinion received, it is clarified that the instruction 01/2022 dated 05-01-­2022 has brought out distinguishing reasons as to how the decision of the Supreme Court would apply only to the goods in the facts and circumstances. The law continues to remain the same and therefore, the instruction remains valid and does not require any changes.

Novello Comments:

Taxpayers broadly classifying goods automobile parts under a lower tax rate on the strength of the Westinghouse case shall take due note of this instruction and see whether the facts of their case fall within the case specific ruling.

SUPREME COURT AND HIGH COURT JUDGEMENTS

Goods and Service Tax

HIGH COURT:

• Seema Gupta Vs Union of India and Ors – Delhi High Court – 2022-TIOL-1244-HC-DEL-GST

Issue:

The petitioner alleges that Clause (A)(b) of Notification No. 04/2022 – Central Tax (Rate) dated 13.07.2022 (which brought the supply of service of renting of residential dwellings to a GST registered person into the tax net) is ultra-vires the Article 14 of the Constitution of India and also beyond powers conferred under the CGST Act of 2017.

Facts:

• The present petition has been filed challenging Clause (A)(b) of Notification No. 04/2022-Central Tax dated 13.07.2022, which sought to amend earlier Notification No. 12/2017 – Central Tax (Rate) dated 18.07.2022 and bring supply of service pertaining to renting of residential dwelling to a GST Registered recipient under the GST Tax Net.

Petitioner’s Contentions:

• The petitioner submits the said amendment is particularly affecting those who are doing their business as a proprietary concern.
• The petitioner submits that denial of exemption granted by the earlier notification solely on the basis that the tenant is registered under GST is not based upon any intelligible differentia and the said differentia has no rational relation to the object sought to be achieved.

Revenue’s Contentions:

• GoM observed that renting of dwelling to businesses merited imposition of GST, while the existing exemption of renting of residential dwellings to non-businesses may continue. There is no justification for exemption where the service of renting of residential dwellings is supplied to a business (registered person).
• Where the residential dwelling is rented by a person who is the proprietor of a proprietorship firm in his personal capacity for use as his own residential dwelling, and such renting is not on account of its business i.e., not accounted for in the firms account but is on personal account, the exemption shall continue to be available to him.
• Similarly, where the residential dwelling is rented by a partner of a partnership firm in his personal capacity for his own residential use and not accounted for in business entity’s account, the exemption will be available.
• Since the government is bound by the recommendations of the GST Council, a proposal to amend Notification No.04/2022 – Central Tax (Rate) to bring in greater clarity regarding taxability of registered persons, is being examined to be placed before the GST Council.
• However, for the present purposes, it is reiterated for clarity that renting of a residential dwelling to a proprietor of a registered proprietorship firm who rents it in his personal capacity for use as his own residence and not for use in the course or furtherance of business of his proprietorship firm and such renting is on his own account and not that of the proprietorship firm, shall be exempt from tax under Notification No.04/2022-Central Tax (Rate) dated 13.07.2022.

HC Judgement:

• Renting of a residential dwelling by a proprietor of a registered proprietorship firm, who rents it in his/her own personal capacity for use as his/her own residence as well as not for use in the course or furtherance of business of his/her proprietorship firm and such renting is on his/her own account and not that of proprietorship firm shall be exempt from GST.

• Baker Hughes Asia Pacific Ltd Vs Union of India and Ors – Rajasthan High Court – 2022-TIOL-1236-HC-Raj-GST

Issue:

The petitioner alleges that it is entitled to refund under the inverted duty structure, even when the input and output goods are the same (goods have not been subject to any value addition), on the strength of Circular No. 125/44/2019-GST-CBEC-20/16/04/18-GST, dated 18-11-2019, which has allowed for refund under inverted duty structure, when output supplies are being made at a lower GST rate as per a concessional rate notification.

Facts:

• The petitioner who is operating in the State of Rajasthan, has entered into a development contract with the company Vedanta Limited, which has been granted exclusive rights to carry out petroleum operations in Rajasthan by the Government of India via a production sharing contract.
• Vedanta entered into a subcontract dated 11.12.2018 with the petitioner for supply of these articles.
• The petitioner procured the inputs at 5% – 28% (from India and abroad) and supplied the same at a concessional rate of 5% as per Notification No. 3/2017 – CGST dated 28.06.2017 which provided for a concessional rate of GST at 5% to give a boost to the oil and gas industry, which has in turn led to an accumulation of input tax credit due to the inverted duty structure.
• The petitioner claims to have filed a legitimate refund claim quantified at Rs.27,02,26,876/- in FORM No.GST-RFD-01 to the respondent for the period between September 2018 to September 2019 as per the inverted duty structure in terms of Section 54(3)(ii) of the CGST Act.
• The petitioner alleges that subsequently, a notice under FORM-GST-RFD-08 dated 19.12.2020 was received requiring the petitioner to show cause as to why the refund claim to the tune of Rs.27,02,26,876/- be not rejected in light of the Circular dated 31.03.2020 issued by the CBIC which stipulates that refund under the inverted duty structure in terms of Section 54(3)(ii) of the CGST/RGST Act would not be available where the input and output supplies are the same.
• The petitioner filed a detailed reply to the show cause notice dated 09.12.2020 claiming that there was no restriction on claiming refund in such cases where the inputs and output supplies are same as outward supplies were made at concessional GST rates under the CGST notification dated 18.11.2019 which approves refund in cases where input and output supplies are same and where GST on output supply is fixed at a lower rate
• The respondent subsequently rejected the refund claim submitted by the petitioner with reference to para 3 of the Circular dated 31.03.2020 following which the petitioner has filed the current writ petition.

Petitioner’s Contentions:

• The petitioner submitted that in the case of B.M.G. Informatics Pvt. Ltd. Vs. Union of India & Ors, reported in 2021-VIL-650-GAU- 2021-TIOL-1831-HC-GUW-GST, the Guwahati High Court categorically disapproved the stipulation made in the circular dated 31.03.2020 providing that even though different tax rates may be attracted at different points of time but the refund of accumulated unutilised tax credit will not be available under Section 54(3)(ii) of the CGST Act where the input and output supplies are same. It has been directed by the Guwahati High Court that this Circular would have to be ignored in situations akin to the case at hand.
• Further the petitioner submitted that in the case of M/s. Shivaco Associates & Anr. vs. Joint Commissioner of State Tax, Directorate of Commercial Taxes & Ors, reported in 2022-VIL- 209-CAL, The Calcutta High Court went on to hold that the respondent authority, ought not to have rejected the claim of the petitioners by relying on the circular dated 31.03.2020 as the same was contrary to the provisions of the Act.
• The petitioner submitted that the subordinate legislation in form of a statutory circular cannot supersede or override the parent statute and as such, the impugned circular, to the extent it disallows Input Tax Credit under the Inverted Duty Structure where input and output supplies are same, and so also the impugned order dated 05.01.2021, are per se illegal and hence deserve to be struck down.

Revenue’s Contentions:

• The Revenue submits that input and output supplies made by the petitioner are same thereby, leading to no value addition on the goods supplied by it and hence, the petitioner’s claim for refund is not compliant with the criteria of inverted duty structure prescribed under Section 54(3) of CGST Act, 2017.
• The Revenue contended that the petitioner is not entitled to the refund claim for ITC in face of the Circular dated 31.03.2020 and implored the Court to affirm the impugned order and sought dismissal of the writ petition.

HC Observations:

• Section 54(3)(ii) of the CGST Act is absolutely unambiguous and does not carve out any exception that Input Tax Credit under the Inverted Tax Structure would not be applicable where the input and the output goods are the same.
• The above provision allows refund of credit accumulated on account of supplies and does not mention that the credit could be claimed only if the supplier has made any value addition/ enhancement to the goods supplied.
• The impugned circular dated 31.03.2020 issued by CBIC was challenged before Hon’ble Guwahati High Court in the case of B.M.G. Informatics Pvt. Ltd. (supra). The learned Single bench of Guwahati High Court, vide judgment dated 02.09.2021, held that the supplying dealer would be entitled to claim refund of accumulated unutilised tax credit under Section 54(3)(ii) of the CGST Act irrespective of the fact the input and output supplies are the same by ignoring the circular dated 31.03.2020. Similar vie w was taken by Hon’ble Calcutta High Court in the case of M/s. Shivaco Associates (supra).
• Further the Revenue has confirmed that the Revenue has not preferred a SLP at the Apex Court in the case of B.M.G Informatics Pvt Ltd (supra).
• Further, circular issued on 31.03.2020 is explanatory, whereas the petitioner’s claim for refund was a prior period between September, 2018 to September, 2019 on which date, the clarification dated 18.11.2019 was in force which clearly stipulates that a registered dealer who supplies goods at concessional rate is eligible for refund under the Inverted Tax Structure.

HC Judgement:

• The High Court is of the opinion that the circular dated 31.03.2020, being a subordinate legislation, is repugnant and conflicting to the parent legislation i.e. Section 54(3)(ii) of the CGST Act and hence, the same cannot be applied to oust the legitimate claim for accumulated ITC refund filed by the petitioner.
• Further, The High Court opines that otherwise also, the claim for refund of ITC filed by the petitioner was for a period prior to issuance of the circular dated 31.03.2020. Consequently, rejection of the petitioner’s claim for accumulated input tax credit by the respondent with reference to para 3 of the Circular dated 31.03.2020, is invalid on the face of the record and cannot be sustained.
• The order dated 05.01.2021 is set aside and the respondents are directed to forthwith, refund the accumulated input tax credit to the petitioner as per its entitlement.

• Sembcorp Energy India Ltd Vs State of Andhra Pradesh – Andhra Pradesh High Court – 2022-TIOL-1236-HC-Raj-GST

Issue:

The petitioner alleges that it is entitled to a refund of ITC on the zero-rated exports of electricity, which has been denied by the Revenue mainly on the procedural premise that no shipping bill and EGM has been filed (which is usually the case for tangible goods) even though electricity is intangible goods that’s transported through transmission lines (unlike tangible goods that are transported by road, air, water). The petitioner alleges that the procedure of filing a shipping bill for the same has not even been specified in the Customs Act of 1962.

Facts:

• The petitioner had entered into a Power Purchase Agreements (PPAs) with Bangladesh Power Development Board BPDB and started supplying electricity/electrical energy to BPDB in accordance with the Indian Electricity Act, 2003 and the Rules and Regulations made thereunder, pursuant to a formal tender process and a letter of interest for purchase of 250 MW electricity power.
• The electricity to be supplied by the petitioner to BPDB would be as per the dispatch schedule provided by BPDB and then injected to the Transmission Grid at the interconnection point located in Andhra Pradesh. Reading meters would be installed at the place, where the electricity generated is injected into Inter- State transmission line, so as to record the quantum of electricity that has been supplied by the petitioner to BPDB.
• The injected electricity would then get transmitted from the interconnection point to Bohrompur substation, West Bengal, India, which is the ‘Delivery Point’ through an Inter-State transmission line. From the said point, the electricity would be transmitted to Bangladesh through the cross-border transmission line, between Bohrompur substation, India and Bheramara substation, Bangladesh.
• On 17.05.2019, the Revenue issued a memo, demanding the petitioner to file (1) Copy of Input Tax Credit Register; (2) Copy of Input Tax Credit Invoices and (3) A statement containing the number and date of shipping bills or bills of exports and the number and date of the relevant export invoices. Except for the statement containing the number and date of shipping bills or bills of export.
• The petitioner submitted all other documents including the Regional Energy Account (report which was issued on monthly basis by the Southern Regional Power Committee, which is a unit of Central Electricity Authority of Government of India) showing the units of electricity exported as demanded in the memo. In so far as non-submission of the shipping bill, the petitioner addressed a letter to third respondent, stating that shipping bill will not be available and there is no requirement under the Customs Law, for filing of shipping bill or any similar documents showing export of electrical energy as required for physical export of tangible goods.
• 4 Show Cause Notices (SCN) were served on the petitioner, rejecting the claim for refund to an extent of Rs.5,67,94,499/-, on the ground that as the Petitioner failed to submit shipping bill and Export General Manifest [EGM] along with refund application, evidencing delivery of electricity at Bohrompur Station, the same cannot be termed as ‘export of goods’ under Section 2(5) of the IGST Act.
• An order was passed, following the personal hearing and receipt of the reply to the notice, denying the refund claim following which an appeal was filed.
• The appeal was also rejected on the grounds that Adjudicating Authority cannot be expected to condone or overlook non-filing of shipping bill since they are not vested with such discretion power and as the delivery point of electricity is in India, it cannot be said that the impugned transaction amounts to export of goods. Challenging the same, 3 of the 7 present writ petitions came to be filed.
• In the subsequent 4 notices issued by the Adjudicating Authority during the tax period June 2019 to September, 2021, the Revenue had dropped the grounds demanding proof of export of electricity in lieu of Notification 14/2022 – Central Tax dated 05.07.2022 issued by Govt of India following the Ministry of Power’s meeting (explained later) and the Revenue via the adjudicating order had denied the refund claim only on the grounds that the above mentioned notification was not retrospective in nature. The petitioner had then filed a Writ Petition against the Adjudicating orders, which has then been tagged with the 3 writ petitions mentioned supra.

Petitioner’s Contentions:

• The petitioner submitted that in so far as transmission of electricity is concerned, it is impossible to generate shipping bills (which are a supporting document for a refund claim as per Rule 89 of the CGST Rules), as the supply from one place to another place and from one country to another country is only through transmission lines. In other words, his argument is that shipping bill is a custom document and the same cannot be made applicable to show supply of electricity, which is intangible in nature.
• The petitioner submitted that in a meeting held on 18.02.2020, The Ministry of Power, under the Chairmanship of the Central Electrical Authority, had decided that monthly Regional Energy Accounts [REAs] issued by the Regional Power Committee [RPC] can be used as a document to establish proof of export in case of electricity.
• The petitioner also placed on record the Notification No.14/2022-CT dated 05.07.2022 issued by the Government of India amending Rule 89 of CGST Rules, 2017, which gives clarification as to how the export of electricity can be proved.
• The petitioner would contend that though in first three cases, the authorities issued show cause notice demanding proof, for export of electricity to Bheramara substation, Bangladesh, but in subsequent notices issued for the months-June, 2019 to September, 2021, they realized their mistake and dropped the said issue in the notice.
• The very fact of dropping the demand, with regard to filing of proof in respect of export of electricity in the subsequent notices, would show that the authorities realized the impossibility in fulfilling the same and as such the same applies to earlier notices as well.
• The petitioner submits that amendment to Rule 89(2) of CGST Rules, should be given a retrospective effect as it is a beneficial legislature.
• The petitioner stated that they have not challenged the statutory provision, but only prays that Rule 89 of CGST Rules, 2017 requiring production of shipping bills as proof of export, is impossible to be fulfilled in their case, owing to its intangible nature.
• The Petitioner urged that though the remedy of filing of an appeal lies before the GST Tribunal, but the same is not done, as the Tribunal is not yet constituted and that there was no efficacious or alternative remedy as on the date of filing of the writ petitions.
• The petitioner is further urged that when some of the appeals filed before the Appellate Authority are rejected, against which, the writ petitions are filed, no useful purpose would be served in preferring an appeal before the Appellate Authority again seeking the very same relief.
• In these circumstances, the petitioner pleaded that filing of writ petitions directly before this Court, questioning the order-in-original cannot be said to be improper or incorrect.

Revenue’s Contentions:

• The Revenue submits that the documents produced by the petitioner do not confirm export of goods, as defined in Section 2(5) of IGST Act.
• It is further urged that in the absence of any material showing that the energy generated by the petitioner was the same energy, which was transmitted from India to Bangladesh, and in the absence of any documents evidencing the same, in terms of Rule 89 of CGST Rules, 2017, the order impugned warrants no interference.
• The Revenue further submits that some of the writ petitions (against the latter 4 adjudicating orders) filed directly before this Court under Article 226 of Constitution of India without availing the alternate remedy is bad in law and relied on some Apex Court Judgements in support of the same (Assistant Commissioner of State Tax and Ors Vs Commercial Steel Limited MANU/SC/0872/2021″).
• He further submits that rejection for refund is made not only on the ground of procedural violation, but also on the ground that the supply of electricity by the petitioner does not constitute export of goods, as the delivery point is only up to a local area (up to Bohrompur, West Bengal).
• The Revenue further submits that the petitioner has no dedicated electrical lines for transmission of electrical energy from their thermal plant to Bohrompur sub-station and has no dedicated International/ Cross Border Transmission lines for transmission of electricity to Bangladesh. The power is transmitted pursuant to an agreement with Central Electricity Authority under the supervision of Government of India and as such, no benefit can be given for refund of input tax credit.
• The Revenue submitted that the Notification No. 14/2022-CT dated 05.07.2022, amending Rule 89 of CGST Rules, 2017 can be extended only be after 05.07.2022 and the same cannot be retrospective in operation.

HC Observations:

• A perusal of Section 54 of CGST Act, 2017, which deals with claim for refund, would show that the petitioner is entitled to claim refund of Input Tax Credit. This provision nowhere refers to furnishing of shipping bill for claim of refund, which aspect is not disputed. However, the authorities only refer to Rule 89 2(b) of CGST Rules, 2017, for production of shipping bills, so as to accept the claim made. A situation of this nature would not have been contemplated, at the time when Rule 89 of CGST Rules was framed and incorporated in the statute book.
• Requiring the petitioner to produce shipping bills, as proof of export cannot be made applicable to electricity, as it is impossible to produce shipping bill for export of electricity, since the Custom Law does not refer to electricity and shipping bill is a Customs document.
• The situation reminds the Court of an age-old maxim ‘Lex Non Cogit ad impossibilia’, meaning that the law does not compel a man to do things which he cannot possibly perform and in this regard, the Court relies on Wipro Ltd Vs UOI 2023.
• The petitioner was justified in not producing shipping bills to prove the quantity of energy units transmitted and that the reports of REA filed by the petitioner, could be made the basis to deal with the claim for refund of Input Tax Credit.
• Circular No. 175/07/2022-GST dated 06.07.2022 clearly establishes that amendment to Rule 89 of CGST (Amendment) Rules, 2022 was carried out to cure the defect in Rule 89 of CGST Rules, 2017, because of the problem faced by power generating units in filing refund claims of unutilised Input Tax Credit on export of electricity.
• A perusal of the amendment to Rule 89(2) of CGST Rules, would inter-alia show that the said Rule came to be amended only to clarify the anomaly that was existing with regard to production of material evidencing export of a thing which is intangible in nature.
• Production of shipping bills will not prove or establish by any means the quantity of energy transmitted. Hence, by no stretch of imagination, the amendment can be said to be declaratory in nature.
• A proviso, which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole and reliance is placed on R.B. Jodha Mai Kuthiala v. Commissioner of Income Tax, Punjab, Jammu & Kashmir and Himachal Pradesh] (1971) 82 ITR 570 (SC) = 2002-TIOL-943-SC-IT.
• Pursuant to repeated representations by Generators of Electrical Energy, and their negotiations with the Central Authorities from the year 2020, fructified into a notification, which came to be issued in the month of July 2022, amending Rule 89 of CGST (Amendment) Rules, 2022.
• A reading of the above rules makes it clear that the petitioner herein can now prove the quantity of electricity transmitted basing on the statement of scheduled energy for export of electricity issued by Regional Power Committee [RPC] Secretariat, as a part of Regional Energy Account [REA] under clause (nnn) of Sub-Regulation (1) of Regulation (2) of Central Electricity Regulatory Commission.
• Further a perusal of the rejection orders would show that the authorities have realized the mistake committed in insisting on production of material, evidencing export of energy to Bangladesh from the delivery point in Bohrompur, West Bengal, and for the said reason, in the subsequent orders the refund claim was rejected only on the ground that shipping bills were not produced.
• In other words, the subsequent show cause notices, for the period June, 2019 to September, 2021 does not dispute export of energy to Bangladesh as the claim came to be rejected due to non- production of shipping bills only. Hence, transmission to Bangladesh by the petitioner was accepted by the Revenue.
• The High Court is of the opinion that it is well settled principle that the court can entertain writ petitions only in exceptional circumstances. The existence of an alternate remedy is also not an absolute bar to the maintainability of the writ petitions.
• Moreover, the respondents’ contention that the petitioner has to approach Tribunal under section 112 of CGST Act, when and where it is constituted, cannot be accepted as it may cause irreparable loss to the petitioner.
• With regard to the Writ Petitions filed against order-in- original, the court was inclined towards the contention raised by the Petitioner, wherein it is urged that when appeals of similar issues are rejected by Appellate authority, it would serve no useful purpose to file the same again before the same authority, by the same party, seeking the very same relief.

HC Judgement:

• As the GST Tribunal is not yet constituted by the GST Council and as there is no efficacious remedy available to the Petitioner, except approaching this court, the Court is of the view that the writ petitions can be entertained.
• The High Court is of the opinion Rule 89 of CGST (Amendment) Rules, 2022 is only clarificatory in nature.
• Any benefit that gets accrued by way of legislation cannot be denied/curtailed, more so, when it is clarificatory in nature like the present one and as such it has to be made retrospective in operation.
• The writ petitions are allowed and the orders under challenge are set aside and are remanded back to Commissioner (Appeals) and the adjudicating officer respectively to deal with the claim of refund in terms of this common order. The petitioner shall file relevant reports evidencing transmission of electricity before appropriate authorities, if not already filed.