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2020 Supreme(Mad) 1743
IN THE HIGH COURT OF JUDICATURE AT MADRAS
A.P. SAHI, SENTHILKUMAR RAMAMOORTHY, JJ.
Tvl. Transtonnelstroy Afcons Joint Venture, Represented by its Authorised Signatory, Chennai - Appellant
Versus
Union of India, Represented by its Secretary, Ministry of Finance, New Delhi & Others - Respondents
Writ Petition Nos. 8596, 8597, 8602, 8603, 8605, 8608, 14799, 21432, 32308, 32311, 32314, 32316, 32317, 32327, 34219 & 34221 of 2019 & 12028, 12037, 12040, 12041 & 12042 of 2020 & WMP. Nos. 14781, 32599, 32600, 32602, 32603, 32604, 32619 of 2019 Decided on : 21-09-2020
For the Appellant :Sujit Ghosh, Adithya Reddy, R. Parthasarathy, P.B. Harish, R. Senniappan, Advocates
For the Respondents:R. Sankaranarayanan, ASGI, Assisted by Venkataswamy Babu, Mohammed Shaffiq, Spl.G.P. (Taxes) assisted by G. Dhana Madhri, GA (Taxes), A.P. Srinivas, Counsel, Hema Muralikrishnan, Advocate.
Headnote:(A) Central Goods and Services Tax Act, 2017 - Section 54(3) - High Court declared Section 54(3)(ii) valid - Refused to interpret the term 'inputs' to include 'input services' for refund of unutilized input tax credit, which was limited to tax on inputs only - Classification permissible under Article 14 for refund claims on accumulated credit from inputs due to higher tax rates. (Paras 62-64)
(B) Constitutional Law - Article 14 - Principle of equality and non-arbitrariness in taxation legislation - Wider legislative latitude acknowledged in taxation matters, particularly concerning classes of taxpayers - No violation of fundamental rights in classification between goods and services in refund entitlement. (Paras 56-60)
Facts of the case:
The case concerns multiple writ petitions under Article 226 challenging the constitutional validity of Section 54(3)(ii) of the CGST Act, arguing that it violates Article 14 by restricting refund claims only to accumulated credits from input goods, excluding input services.
Findings of Court:
The Court concluded that Section 54(3)(ii) validly restricts entitlement to refunds solely for unutilized input tax credit arising from higher rates of tax on input goods compared to output supplies, thus not infringing Article 14 as it constitutes a legitimate classification.
Issues: Whether the classification made in Section 54(3)(ii) violates Article 14 of the Constitution due to the exclusion of input services from the ambit of refund claims.
Ratio Decidendi: The Court found that the distinction made between input goods and input services for the purpose of refund is reasonable and does not constitute discrimination as permitted under economic legislation. (Paras 56-62)
Result: Writ petitions dismissed; no order as to costs.
| Table of Content |
|---|
| 1. entitlement to refund on unutilised input tax credit. (Para 1 , 2 , 3) |
| 2. arguments presented by petitioners regarding refund eligibility. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11) |
| 3. arguments presented by respondents defending the current law. (Para 14 , 15 , 16 , 17) |
| 4. judicial interpretation of statutory provisions and context. (Para 39 , 40 , 46 , 52) |
| 5. conclusions on the constitutional validity of section 54(3)(ii). (Para 62 , 63) |
| 6. final orders dismissing writ petitions. (Para 64) |
JUDGMENT :
Senthilkumar Ramamoorthy J.,
(Prayer: IN W.P.Nos.8596 & 8597 of 2019 : Petitions filed under Article 226 of the Constitution of India praying to issue a writ of Declaration to declare the provisions of impugned clause (ii) to proviso of Section 54 (3) of the CGST ACT , 2017 as ultra vires the Constitution of India, violative of the fundamental rights guaranteed by the Constitution under Article 14, 19(i)(g) of the Constitution of India.
W.P.Nos.8602 & 8603 of 2019 : Petitions filed under Article 226 of the Constitution of India praying to issue a writ of Declaration to declare the provisions of impugned Rule 89(5) of the CGST RULES , 2017 as ultra vires Article 14 of the Constitution as also ultra vires Section 5 4 of the CGST ACT ,2017 in so far as it excludes the component of credit of input services from the definition of “Net ITC” in the formula prescribed for claiming refund of unutilized credit in cases of inverted duty structure. PRAYER IN W.P.Nos.8605 & 8608 of 2019 : Petitions filed under Article 226 of the Constitution of India praying to issue a writ of Mandamus to direct the third Respondent to process and allow refunds in accordance with law by factoring input services in the computation of Net ITC for the purpose of formula prescribed in Rule 89(5) of the CGST RULES .
W.P.Nos.14799, 21432, 32308, 32311, 32314, 32316, 32317 and 32327 of 2019 : Petitions filed under Article 226 of the Constitution of India praying to issue a writ of Declaration to declare that the amended Rule 89(5) of the CGST RULES , 2017 vide Notification G.S.R.No.54[E] dated 13.06.2018 and Rule 89(5) of the TNGST Rules, 2017 vide Notification 26/2018-CT Dated 13.06.2018 as ultra vires, violative of the fundamental rights guaranteed under Article 14, 19(1)(g) of the Constitution of India.
W.P.Nos.34219 & 34221 of 2019 : Petitions filed under Article 226 of the Constitution of India, praying to issue a writ of Declaration to declare Rule 89(5) of the CGST RULES as ultra virus Section 5 4 of the CGST ACT , as well as violative of Article 14 of Constitution of India. PRAYER IN W.P.No.12028 of 2020 : Petitions filed under Article 226 of the Constitution of India praying to issue a writ of Declaration to declare that Rule 89(5) of the Central Goods and Services Tax Rules, 2017, as amended vide Notification No.21/2018 - Central Tax dated April 18, 2018 and Notification No.26/2018 - Central Tax dated June 13, 2018, to the extent that the said provision denies grant of refund of unutilised tax credit in respect of tax paid on input services, is ex facie ultra vires the Constitution of India and the provisions of the Central Goods and Services Act, 2017 and is without authority of law, manifestly, unreasonably, discriminatory, illegal and void.
W.P.Nos.12037, 12040, 12041 and 12042 of 2020: Petitions filed under Article 226 of the Constitution of India praying to issue a writ of Declaration to declare the provisions of impugned clause (ii) to proviso to Section 54 (3) of the TNGST Act, 2017 as ultra vires the Constitution of India, violative of the fundamental rights guaranteed by the Constitution under Article 14, 19(1)(g) of the Constitution of India, only in so far as it denies the benefit of refund for input Tax Credit from input Services.)
INTRODUCTION
1. At the heart of this batch of writ petitions is the question whether the Petitioners are entitled to a refund of the entire unutilized input tax credit that each of them has accumulated on acc
