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CGST - Challenge to vires of Rule 44A of CGST Rules, 2017 - Prima facie case for interim relief - balance of convenience in favour of petitioner - no coercive action to be taken for reversal of credit: High Court

Published: Sep 06, 2017

By TIOL News Service    

NEW DELHI, SEPT 06, 2017: PETITIONERS challenge the Notification 22/2017-Central Tax dated 17th August 2017, whereby Rule 44 A is inserted in the  Central Goods and Services Rules, 2017 (CGS Rules)  requiring reversal of 5/6th of the CENVAT Credit which had already accrued to the Petitioner on account of payment of additional duty of customs ("Countervailing Duty"/"CVD") levied under Section 3(1) of the CTA, 1975 and paid at the time of importation of gold dore bar.

Incidentally, the said CVD was allowed to be carried forward in full as a transitional measure under Section 140 of the  CGST Act, 2017.

The Petitioners state that they fulfilled all the conditions and the credit of the CVD paid on imported gold dore bars accrued to them.However, the subject rule 44A has sought to deny the credit already accrued to the Petitioner.

The petitioner challenges this Rule 44 A as being ultra vires Section 140 of the CGST Act as well as the rule making powers under Section 164 thereof. It is contended that the impugned Notification is grossly discriminatory and unreasonable and has imposed the restrictions which are applicable only to imported gold dore bars. The contention is that the impugned Notification has singled out only imported gold dore bars resulting in imposition of a higher burden of tax on these goods as com pared to other imported goods as well as compared to any similar domestic goods.

The petitioner submits that if the interim orders are not granted then the credit of CVD already availed and utilized for payment of tax on finished goods by the Petitioners would be electronically reversed and they would have to deposit cash and would be severely prejudicial to them.

The High Court after considering the submissions observed -

"…Petitioners have made out a prima facie case for grant of interim relief in their favour. Further, the balance of convenience is in their favour for grant of interim relief. Accordingly, it is directed that till the next date of hearing, no coercive steps shall be taken by the Respondents to recover the credit already availed by the Petitioners ."

The matter is listed on 25th September, 2017.

(See 2017-TIOL-11-HC-DEL-GST)