The division bench of the Gujarat High Court has recently struck down CBIC Notification lapsing unutilized Input Tax Credit (ITC).
The petitioners Shabnam Petrofils Pvt. Ltd have challenged Notification No.20/2018-Central Tax (Rate) dated 26.07.2018 issued by the Government of India, Ministry of Finance, Department of Revenue, by which it is resolved that, the accumulated input tax credit lying unutilised in balance in respect of the goods specified at Sr.Nos.1, 2, 3, 4, 5, 6, 6A, 6B, 6C, and 7 of the table below Notification dated 28/6/2017, after payment of tax for and upto the month of July, 2018, on the inward supplies received upto 31st day of July, 2018, shall lapse. In short, by way of the aforesaid Government Resolution, the inverted tax structure refund of excess duty is not granted.
The petitioners contended that, Notification No.20/2018 dated 26/7/2018 issued extends the restriction on the utilization of unutilized input tax credit for and up to the month of July, 2018 and further states that on the inward supplies received upto 31.7.2018 shall lapse and further states that inward supplies received upto 31st day of July, 2018, shall lapse.
It is contended by the learned counsel for the petitioners that the impugned notification is without application of mind inasmuch as the assessees are losing huge amount of money paid towards the input tax credit. It is contended that a registered person’s right to claim input tax credit arises from section 16 of the CGST Act.
It is also contended by the learned counsel for the petitioners that there is no statutory provision under the CGST Act empowering the respondents to issue notifications providing for lapsing of the input tax credit. It is contended that rule can be made or notification can be issued under the guise of section 164 for lapsing input tax credit. It is also contended that power under section 54(3)(ii) of the CGST Act is limited to notify the supplies not entitled to refund of input tax credit accumulated on account of the inverted rate structure.
The division bench comprising of Justice J.B Pardiwala and Justice A.C Rao observed that, “The impugned Notification dated 26.07.2018 bearing No.20/2018 and Circular dated 24.08.2018 bearing Circular No.56/30/2018-GST to the extent it provides that the input tax credit lying unutilized in balance, after payment of tax for and upto the month of July, 2018, on the inward supplies received up to the 31st day of July, 2018, shall lapse, are hereby quashed and set aside and are hereby declared as ultra vires and beyond the scope of section 54(3)(ii) of the CGST Act,
The Court also observed that, as section 54(3)(ii) of the CGST Act does not empower to issue such notifications and consequently.
The Court also held that the petitioners and members of the petitioners are entitled for the credit and it be granted to them.
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