Swastik Oil Industries vs. Union Of INDIA

Held

The Court held that the FAQ Annexure-7 dated 10.11.2022, to the extent it denied refund applications filed prior to 18.07.2022 for ITC claims, was unsustainable. The Court affirmed the view taken by a co-ordinate bench of the Rajasthan High Court in Shree Arihant Oil and General Mills Vs. Union of India & Ors., which had relied on Supreme Court and other High Court judgments. The reasoning was that Input Tax Credit is an indefeasible right that accrues to an assessee on the date goods were bought. The restriction imposed by the notification, which came into effect from 18.07.2022, should only apply to ITC arising after that date. The clarification in the impugned circular that applications cannot be made after 18.07.2022 was found to be neither logical nor in accordance with the understanding of law. The Court noted that the Supreme Court had rejected Special Leave Petitions against similar High Court judgments. The ratio decidendi is that ITC accrued before the effective date of a restrictive notification cannot be denied by subsequent clarifications or circulars. The Court allowed the writ petitions, setting aside the impugned orders of rejection and directing reconsideration of the applications without relying on the contested clarification.

Facts

The petitioners, including Swastik Oil Industries, Swastik Udyog, M/s Mother Dairy Fruit And Vegetable Pvt. Ltd., Vijay Solvex Limited, and M/s MO Industries, filed writ petitions before the Rajasthan High Court. The petitions challenged the denial of refund applications for Input Tax Credit (ITC). The denial was based on FAQ Annexure-7 dated 10.11.2022, which stipulated that refund applications filed prior to 18.07.2022 for ITC claims would be denied. The petitioners argued that their right to claim ITC had accrued before the said date, and the denial was arbitrary and unconstitutional. The respondents, including the Union of India and various GST authorities, contended that the FAQ provided a clarification on the applicability of a notification.

Key Issues

1. Whether the FAQ Annexure-7 dated 10.11.2022, which denied refund applications for ITC filed prior to 18.07.2022, is legally sustainable? (Question of law) Petitioner's arguments: The petitioners contended that Input Tax Credit is an indefeasible right that accrues when goods are bought. They argued that the denial of refunds for claims accrued before 18.07.2022, when a relevant notification came into force, impinges upon their fundamental rights under Article 19(1)(g) and 300A of the Constitution of India. They relied on judgments from the Rajasthan High Court in Shree Arihant Oil and General Mills Vs. Union of India, Gujarat High Court in Patanjali Foods Ltd. vs. Union of India, and Andhra Pradesh High Court in Priyanka Refineries Pvt. Ltd. vs. Deputy Commissioner ST & Ors. and Gemini Edibles and Fats India Ltd. vs. Assistant Commissioner of Central Taxes. Respondents' arguments: The judgment does not explicitly record arguments made by the respondents. However, it notes their stand and clarification reproduced in paragraph 14 of the Shree Arihant Oil and General Mills judgment, which was considered by the Court.