Denial of refund of IGST to Advance-Authorisation holders is valid but operates prospectively w.e.f October 23, 2017

By Bimal Jain Goods and Services Tax Judiciary , Trending October 20, 2020 2 comments

TaxGuru Citation: 2020 taxguru.in 2112
Case Name: Cosmo Films India Vs Union of India & Ors. (Gujarat High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Gujarat High Court

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The Hon’ble HC, Gujarat in Cosmo Films India v. Union of India & Ors. [R/SLP No. 15833/2018 dated October 20, 2020] upheld the validity of rule 96(10) of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”) and rules that notification is required to be made applicable prospectively only w.e.f. October 23, 2017 and not prior thereto from the inception of Rule 96(10) of the CGST Rules w.e.f. July 1, 2017.

Facts:

Cosmo Films India (“the Petitioner”) is a public limited company engaged in the business of manufacturing and sale of flexible packaging films and holds Advance Authorization Licenses (“the AA License”) granted in terms of the Foreign Trade Policy, issued and amended from time to time.

The Petitioner was entitled to import raw materials without payment of IGST under the AA License and pay IGST on exports and claim Rebate (Refund) of the IGST so paid on exports. The Petitioner has received benefits of rebate of IGST at the relevant point of time. Thereafter, subrule (10) of Rule 96 of the CGST Rules was amended by Notification No. 39/2018- Central Tax dated September 4, 2018 with retrospective effect from October 23, 2017, providing that rebate on exports cannot be availed by the Petitioner, if the inputs procured by the Petitioner have enjoyed AA benefits or Deemed Export Benefits under the said notification. Therefore, the Petitioner was unable to utilize the benefit of dutyfree imports under AA Licenses and take the benefit of rebate on exports.

Thereafter, by Notification No. 53/2018-Central Tax dated October 9, 2018, subclause (a) and (b) of subrule 10 of Rule 96 of the CGST Rules were merged. Thereafter, vide Notification No. 54/2018-Central Tax dated October 9, 2018 (“Impugned Notification”), the subrule 10 of Rule 96 of the CGST Rules was again demerged and “with effect from October 23, 2017”.

Issue:

Challenged the validity of sub-rule (10) of Rule 96 of CGST Rules substituted vide Notification No. 54/2018-Central Tax dated October 9, 2018 denying the option to claim rebate to the Petitioner for importing goods under AA licenses.

Held:

The Hon’ble HC, Gujarat in R/SLP No. 15833/2018 dated October 20, 2020 held as under: