Vires Of Rule 96(10) CGST Rules Challenged Before Allahabad High Court

A petition has been filed before the Allahabad High Court challenging the validity of Rule 96(10) of the Central Goods and Service Tax Rules, 2017 which has been inserted vide notification No. 54/ 2018-CT dated 09.10.2018. It has been stated in the plea that the said Rule is ultra vires Section 16 (Zero Rated Supply) of the IGST Act read with Section 54 (Refund of Tax) of the CGST Act and the Constitution of India. Petitioner procures raw materials from Indian markets and also imports raw materials for manufacture on which exemption is claimed under Custom Notifications from payment of Integrated Goods and Service Tax under Advanced Authorization License. On the export of the final product, the Petitioner pays IGST for which refund/rebate claims are filed at a later stage. Proceedings were initiated against the Petitioner due to alleged discrepancies in the refund claimed by it. According to the Department, the Petitioner had claimed input tax credit in excess and was liable to refund the same. Section 16 of the IGST Act provides for a claim of credit of input tax on zero-rated supplies. Clause 10 of Rule 96 of the CGST Rules was amended to exclude persons who have, inter alia, claimed benefits under the Custom Notification 79/2017 dated 13.10.207. Thus, the restriction placed on exporters or zero-rated suppliers who procured products under the Custom Notification are ultra vires Section 16 of the IGST Act.Petitioner alleged that Clause 10 of Rule 96 which was inserted by way of amendment, retrospectively restricts the refund of IGST at the time of exports where at the time of import the Assesee was claiming exemption under Custom Notification 79/2017. The Authority does not have the power to enact a notification to determine the substantive rights of assesees. Imposing conditions that inhibit the assessee from claiming the refund due to it under the Act is arbitrary and beyond the legislative competence of the Authority, the petitioner submitted.Further, it was submitted in the plea that Section 16 of the IGST Act and Section 54 of the CGST Act enable the assesses to claim a refund on zero-rated supply. No restrictions are contemplated in the said sections. The petitioner also states that since the parent provisions do not provide any impediments, the same cannot be enforced by way of Rules. Any such rule would be ultra vires the parent act.Lastly, it has been contended in the petition that the statute only empowers the Authority to make rules for enabling the refund contemplated in the statute and not to restrict the claims of legitimate exporters.A bench comprising Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava refused any interim relief to the petitioner against the summons issued to its officers in proceedings initiated by the Department based on discrepancies in the refund of input tax credit on exports. Further, Advocates Parv Agarwal and Ankur Agarwal, counsels appearing for the Department and State, sought time to file counter affidavits. Case Title: M/s Saru Silver Alloys Pvt. Ltd. v. Union of India & OrsCounsel for Petitioner: Bharat Bhagwan Raichandani, Namit SharmaCounsel for Respondents: Parv Agarwal, Ankur Agarwal

Vires Of Rule 96(10) CGST Rules Challenged Before Allahabad High Court

Upasna Agrawal

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