The court orders refund of IGST to M/s Shilpa Medicare Ltd, declaring the rule arbitrary and violative of constitutional provisions.
In a significant ruling, the Karnataka High Court's Kalaburagi Bench, presided over by Justice S.R. Krishna Kumar, has declared Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017, as unconstitutional. The decision came in response to a writ petition filed by M/s Shilpa Medicare Ltd, challenging the legal validity of the rule that had imposed restrictions on IGST refunds for exporters.
The court found Rule 96(10), as amended by Notification No. 54/2018, to be ultra vires Section 16 of the Integrated Goods and Services Tax (IGST) Act and Articles 14, 19(1)(g), and 265 of the Indian Constitution. The rule was criticized for its manifest arbitrariness, leading to hostile discrimination among exporters by imposing restrictions not envisioned by the IGST Act.
This judgment aligns with earlier rulings by various High Courts, including those of Kerala, Uttarakhand, Gujarat, and Bombay, which have also declared the rule unconstitutional. The court emphasized that the omission of Rule 96(10) without a saving clause means that all proceedings initiated under it must cease immediately, and any pending refund claims cannot be denied.
The Karnataka High Court directed the Union of India and other respondents to refund the IGST amount, totaling ?75,55,123, along with applicable interest, to M/s Shilpa Medicare Ltd within three months. This decision is expected to have wide implications for exporters facing similar refund denials under the now-omitted rule.
Bottom Line :
Rule 96(10) of the CGST Rules, 2017, as amended vide Notification No. 54/2018 dated 09.10.2018, was held ultra vires Section 16 of the IGST Act and Articles 14, 19(1)(g), and 265 of the Constitution. The rule was declared unconstitutional and unenforceable due to its manifest arbitrariness and inconsistency with the statutory framework.
Statutory provision(s): Articles 14, 19(1)(g), 265 of the Constitution of India, Section 16 of the IGST Act, Rule 96(10) of the CGST Rules, 2017.
