Retrospective IGST Refund Demand Quashed Due to Prospective Operation of Rule 96(10)

Case Summary

• Case Title: M/s Shri Jagdamba Polymers Ltd. & Anr. v. Union of India & Ors.

• Court: High Court of Gujarat at Ahmedabad

• Petition No.: R/Special Civil Application No. 8404 of 2023

• Date of Judgment: 19/09/2024

• Category of Dispute: Refund under IGST Act

• Relevant Sections: Section 16 of IGST Act, Sections 54 and 164 of CGST Act, Rule 96(10) of CGST Rules

Facts of the Case [¶ 5–24]

• The petitioner is a manufacturer-exporter of PP/HDPE tapes, woven fabrics, FIBCs, and non-woven fabrics, registered under the GST regime [¶ 5–7].

• It procures raw materials domestically and imports a few inputs like polypropylene granules under Advance Authorization (AA) scheme, which are exempted from IGST [¶ 10–11].

• For the export of goods between 23.10.2017 and 10.10.2018, the petitioner paid IGST and claimed refunds under Section 16(3)(b) of the IGST Act [¶ 14].

• The refund of ₹12.07 crores was sanctioned after due verification [¶ 14].

• Subsequent to amendments to Rule 96(10) of CGST Rules and issuance of CBIC Circular No. 45/19/2018 dated 30.05.2018, a show cause notice was issued demanding refund reversal citing retrospective applicability of Rule 96(10) [¶ 16–23].

Questions in Consideration [¶ 4, 25]

1. Whether Rule 96(10) of CGST Rules, as amended by Notification No. 54/2018 dated 09.10.2018, could be applied retrospectively?

2. Whether the refund of IGST granted to the petitioner between October 2017 and October 2018 was legally sustainable?

Observations of the Court [¶ 26–29]

• The impugned SCN was based on the mistaken understanding that Notification No. 54/2018 had retrospective effect from 23.10.2017 [¶ 26].

• In Cosmo Films Ltd. v. Union of India (SCA No. 15833/2018), the Court had rectified its earlier order and clarified that Notification No. 54/2018 operates only prospectively from 09.10.2018 [¶ 27].

• Therefore, applying Rule 96(10) retrospectively to deny refund for the period before 09.10.2018 is without jurisdiction [¶ 29].

Judgment of the Court [¶ 30]

• The impugned show cause notice dated 31.03.2023 was quashed.

• The refund demand for the period prior to 09.10.2018 was held to be invalid.

• Petition allowed. Rule made absolute.

Between Fine Lines

• Refund of IGST under Section 16(3)(b) cannot be denied retrospectively based on Rule 96(10).

• Notification No. 54/2018-CT applies only from 09.10.2018, not earlier.

• Exporters who imported inputs under AA scheme before this date are eligible for IGST refunds.

• CBIC’s interpretation via circular cannot override statutory rights retrospectively.

• Rule 96(10) amendments must conform to constitutional guarantees of equality and trade freedom.

Summary of Referred Cases