Whether Gujarat HC Judgement on strike down CBIC Notification lapsing Unutilized ITC applicable to all State ?

Whether Gujarat HC Judgement on strike down CBIC Notification lapsing Unutilized ITC applicable to all State ?

Gujarat HC strikes down CBIC Notification lapsing Unutilized Input Tax Credit

Honourable Gujarat High Court In a landmark judgement (Shabnam Petrofils Pvt. Ltd. vs Union of India: Gujarat HC) which will benefit entire Textile Weaving Industry of India has struck down the second clause of Notification No 20/2018 extracts given below due to which now the Weavers Are Not Required To Lapse ITC.

 Notification No.5/2017 Central Tax (Rate) dated 28/6/2017 was amended vide Notification No.20/2018 Central Tax (Rate) dated 26/07/2018 to insert following provisos in it

a.) Unutilised input tax credit accumulated on account of inverted duty rate structure on inward supplies received on or after 01/08/2018 in respect of above mentioned textile goods shall be allowed

b.) In respect of above mentioned textile goods, unutilised input tax credit accumulated on account of inverted duty rate structure up to the month of July 2018, on inward supplies received up to 31/07/2018 shall lapse.

The above unlawfully notification struck down by Gujarat HC.

The Honourable High Court held the lapse of unutilised input tax credit accumulated on account of inverted duty rate structure up to the month of July in respect of textile goods as unlawful on the following grounds

a.) The only power conferred upon Central Government under section 54(3) of CGST Act, 2017 is to notify the goods and services which are not entitled for refund of unutilized input tax credit accumulated on account of inverted duty rate structure.

b.) Central Government has no power under section 54(3) of CGST Act, 2017 to grant lapse of accumulated input tax credit lying unutilised in balance on 31/07/2018. In other words, there is no express provision under section 54(3) of CGST Act, 2017 for lapsing unutilised input tax credit accumulated on account of inverted duty rate structure.

c.) Input tax credit once validly taken is indefeasible. In other words, input tax credit once validly taken cannot be cancelled in absence of express legal provision for lapsing it.

d.) Every assessee holds the right to utilize the input tax credit without any limitation of time. In other words, assessee have a right over unutilised input tax credit accumulated on account of inverted duty rate structure upto 31/7/2018. It is not liable to be cancelled or lapsed.

Now question is whether applicable to all state ?

Yes, because Constitutionally struck down the provision of Central Act. Once the legality of the provision of Central Act challenged by High Court are applicable to all states.

Reference: Kusum Ingots & Alloys Ltd. v. Union of India: SC 2003

Regards,

CA Hitesh Bansal

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