Jharkhand High Court held that the explanation inserted in Rule 89(4) of the CGST Rules, 2017, via Notification No. 14/2022-Central Tax on 05.07.2022, does not count as a clarificatory nature and therefore will be applied prospectively.
The aforementioned decision was made following a legal petition. The petitioner’s GST refund claim had been denied because there was a dispute regarding whether, in the processing of refund claims related to exports, the lower values mentioned in the tax invoice and the shipping bill should be used. In response to this, the petitioner filed a writ petition, arguing that the 2022 amendment to Rule 89(4) of CGST Rules, which introduced the comparison between values in the tax invoice and the shipping bill, should only apply to future cases.
The Court, handling a total of 14 petitions, took W.P.(T) No. 1719 of 2022 as representative because the common issue related to the identical taxpayer but for different time periods.
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In order to determine whether the 2022 Amendment Rules should be implemented prospectively or retrospectively, the Court carefully studied their consequences before issuing its ruling, which was delivered by Justices Rongon Mukhopadhyay and Deepak Roshan.
The Court took notice that the 2022 Amendment Rules introduced a new requirement for comparing two values, which was absent in the previous version of the rules. Previously, only the actual transaction value was taken into account. This significant alteration in the law directed the Court to conclude that the modification should be applied to future cases. The Court emphasized that simply using the term “explanation” in the amendment did not automatically classify it as clarifying or declaring the existing law.
The Court followed that while Paragraph 47 of the rules engaged a comparison of the value of exports in the GST tax invoice and the export document (which can be either FOB or CIF value), the new explanation mandated a comparison with only the FOB value. This distinction indicated that the explanation did not align with Paragraph 47.
The Court underscored that changes in policy should be implemented through amendments to the main Act instead of via circulars, and policy changes should take effect from the amendment date.
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Referring to Notification No. 14/ 2022 – Central Tax dated 05.07.2022, the Court said, “Rule 1 (2) of 2022 Amendment Rule specifically provides that save as otherwise provided in these Rules they shall come into force on their publication in the officials’ gazette. From the said notification it is also evident that except for Rules 7, 9, 10, and 19 for which dates with retrospective operation have been provided, no other rules have been given any retrospective effect.
Actually, the legislature expressly indicated the date of application of respective rules and for Rule 89 (4), no retrospective date has been indicated in the notification itself; thus, from a bare perusal of the notification itself the amendment made to Rule 89 (4) by Rule 8 of Amendment Rules will have a prospective effect.”
“Having regard to the aforesaid discussions, we hold that the amendment in Rule 89 (4) of CGST Rules, 2017 which came into effect vide Notification No. 14/2022-Central Tax dated 05.07.2022 is not clarificatory in nature and thus will have a prospective effect. In all these writ applications since the period involved is prior to the amendment; as such, we hold that the respective impugned orders deserve to be quashed and set aside,” the Court held.
Ultimately, the Court allowed all the writ applications, and any pending interim applications were also disposed of.
| Case Title | M/s. Tata Steel Limited vs Union of India |
| Date | 21.08.2023 |
| Citation | W.P.(T)No. 1719 of 2022 |
| Petitioner | Mr. Tarun Gulati, Mr. Sumeet Gadodia, Mr. Salona Mittal |
| Respondent | Mr. P.A.S.Pati, Mrs. Ranjana Mukherjee |
| Jharkhand High Court | Read Order |
