Amendment In CGST Rule 89(4) To Have Prospective Effect: Jharkhand High Court

The above decision was reached in response to a petition where the refund claim of the petitioner was rejected due to the contention that, in processing refund claims related to exports, the lower of values indicated in the tax invoice and the shipping bill should be taken into account. In response, the petitioner filed a writ petition, asserting that the 2022 amendment to Rule 89(4) of CGST Rules, which introduced a comparison between values indicated in the tax invoice and the shipping bill, should have a prospective effect.

The Court, dealing with 14 petitions in total, considered the facts of W.P.(T) No. 1719 of 2022 as representative, as the common issue pertained to the same assessee for different periods.

The Court, in its verdict delivered by Justices Rongon Mukhopadhyay and Deepak Roshan, meticulously examined the implications of the 2022 Amendment Rules to ascertain whether they should be applied retrospectively or prospectively.

The Court noted that the 2022 Amendment Rules introduced a new requirement for comparing two values, which was not present before the amendment. Previously, only the actual transaction value was considered. This substantial change in the law led the Court to conclude that the amendment should apply prospectively. The mere use of the term "explanation" in the amendment did not automatically make it clarificatory or declaratory in nature, the Court emphasized.

Furthermore, the Court observed that while Paragraph 47 of the rules involved a comparison of the value of export in the tax invoice and the export document (which could be either FOB or CIF value), the new explanation specifically required a comparison with only the FOB value. This distinction indicated that the explanation was not in line with Paragraph 47.

The Court stressed that changes in policy should be made through amendments to the parent Act rather than through circulars, and policy changes should take effect from the date of the amendment.

Referring to the Notification No. 14/ 2022 – Central Tax dated 05.07.2022, the Court said, “Rule 1 (2) of 2022 Amendment Rule specifically provides that save as otherwise provided in these Rules they shall come into force on their publication in the officials’ gazette. From the said notification it is also evident that except for Rule 7, 9, 10 and 19 for which dates with retrospective operation have been provided, no other rules have been given any retrospective effect. Actually, the legislature expressly indicated the date of application of respective rules and for Rule 89 (4), no retrospective date has been indicated in the notification itself; thus, from bare perusal of the notification itself the amendment made to Rule 89 (4) by Rule 8 of Amendment Rules will have a prospective effect.”

“Having regard to the aforesaid discussions, we hold that the amendment in Rule 89 (4) of CGST Rules, 2017 which came into effect vide Notification No. 14/2022-Central Tax dated 05.07.2022 is not clarificatory in nature and thus will have a prospective effect. In all these writ applications since the period involved is prior to the amendment; as such, we hold that the respective impugned orders deserve to be quashed and set aside,” the Court held.

Ultimately, the Court allowed all the writ applications, and any pending interim applications were also disposed of.

Counsel For the Petitioner : Mr. Tarun Gulati, Sr. Adv Mr. Sumeet Gadodia, Adv. Mr. Salona Mittal, Adv. (in all the cases)

Counsel For the Resp.- UOI : Mr. Anil Kumar, Addl. SGI

Counsel For the Respondents : Mr. P.A.S.Pati, Adv. Mrs. Ranjana Mukherjee, Adv

LL Citation: 2023 LiveLaw (Jha) 42

Case Title: M/s. Tata Steel Limited vs Union of India and Others

Case no.: W.P.(T)No. 1719 of 2022

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