Cosmo Films Limited vs. Union Of INDIA

Held

The Court held that the grievance raised by the petitioner was addressed by a subsequent amendment, Notification No. 16/2020-CT dated March 23, 2020, which inserted an explanation to Rule 96(10) of the CGST Rules. This explanation clarified that the benefit of certain notifications would not be considered availed if the registered person paid Integrated Goods and Services Tax and Compensation Cess on inputs and only availed Basic Customs Duty (BCD) exemption. This allows exporters who paid IGST on raw materials to claim a refund. The Court further clarified that Notification No. 54/2018 should be made applicable from October 23, 2017, and not prior to that. Consequently, Notification No. 39/2018 dated September 4, 2018, as amended by Notification No. 54/2018, remains in force, aligning with Section 54(3) of the CGST Act and Section 16 of the IGST Act. The Court declared Notification No. 54/2018 effective from October 23, 2017.

Facts

The petitioner, Cosmo Films Limited, a manufacturer of flexible packaging films, holds Advance Authorization (AA) Licenses. These licenses allowed them to import goods without payment of import duty, including IGST, as per Notification No. 79/2017-Customs. The petitioner utilized these benefits and claimed rebate (refund) of IGST paid on exports. However, amendments to sub-rule (10) of Rule 96 of the CGST Rules, particularly via Notification No. 54/2018-Central Tax dated October 9, 2018, with retrospective effect from October 23, 2017, denied the option of rebate claim to AA license holders. This amendment was challenged by the petitioner as ultra vires the CGST Act, GGST Act, and the Constitution, seeking to quash the amendment and stay any demand related to rebate benefits.

Key Issues

1. Whether the amendments made to sub-rule (10) of Rule 96 of the CGST Rules by Notification No. 54/2018-Central Tax, dated October 9, 2018, are ultra vires the CGST Act, GGST Act, and the Constitution, to the extent they deny the option of rebate claim to the petitioner for importing goods under an AA License? Petitioner's contention: The petitioner argued that the amendment, particularly its retrospective application from October 23, 2017, illegally denied them the option of claiming a rebate on exports, which they were entitled to under earlier provisions. They contended that this amendment was arbitrary and discriminatory, violating Article 14 of the Constitution. They relied on the Foreign Trade Policy and the provisions of the IGST Act concerning zero-rated supplies and refunds. Revenue's contention: The revenue contended that the amendment was within the powers conferred by the Act and Rules. They argued that the denial of rebate was a consequence of availing benefits under specific notifications like Notification No. 48/2017-C.T. and that there was no discrimination. They pointed to the provisions of Section 16 of the IGST Act and Section 54 of the CGST Act, read with Rule 96 of the CGST Rules, to justify the amendment.