The Gauhati High Court declared that Clause 8 of the Assam Industries [Tax Reimbursement for Eligible units] Scheme, 2017, runs counter to the Constitutional protection enshrined by Sections 16 & 164 of the CGST Act. Hence, the denial of ITC based on such a scheme is not permitted.
Therefore, finding force in the submissions that framing of such a provision like Clause 8 in the Reimbursement Scheme, 2017 runs against the Constitutional and Statutory provisions, the Court ordered an interim suspension on the operation of the impugned SCNs.
A Single Judge Bench of Justice Manish Choudhury referred to the provisions of Article 246A & Article 279A of the Constitution of India; and Section 16 & Section 164 of the CGST Act read with Section 2[87] vis-a`-vis Clause 8 of the Reimbursement Scheme, to find that the SCNs were issued in derogation of the statutory provisions.
The Bench also referred to Clause 8 of the Reimbursement Scheme, which talks of blocked input tax credit on inter-State supplies, to observe that a registered supplier other than a unit availing tax reimbursement under this Scheme, who supplies goods in the course of inter-State trade or commerce taxable under the IGST Act, shall not be entitled to avail the ITC on inward supply of goods for utilizing the same for payment of IGST.
The Scheme contained a caveat that if the goods so supplied are manufactured by a unit eligible under the Reimbursement Scheme, then the proportionate amount of ITC, if any, would lapse, added the Bench, while staying the SCNs, and listing the matter for further discussion on December 15, 2025.
Briefly, Patanjali Foods, one of the largest FMCGs in India, was issued four show cause notices (SCNs) asking to show cause as to why it had availed ITC despite not being eligible for the same as per the provisions of the Assam Industries [Tax Reimbursement for Eligible units] Scheme, 2017. These SCNs were issued under Section 73 and Section 74A of the SGST Act, 2017, observing that, as per the provisions of clause 8 of the Reimbursement Scheme, the petitioner was not eligible for ITC.
The petitioner submitted that the vires of clause 8 of the Scheme have been challenged; that such a provision as contained in clause 8 of the Scheme to deny ITC by the State is beyond jurisdiction, qua the provisions of the Constitution of India and the CGST Act. This was opposed by the Revenue, contending that the challenge was made only to the SCN and the petitioner can respond to such SCNs at first; that if any decision is made after submission of reply, which the petitioner finds prejudicial to it, they still have a remedy of preferring an appeal under Section 107 of the CGST Act.
Appearances:
Advocates Ashwarya Sharma, P Das, Vaibhav Vyas, Keshav Jatwani, and Banshika Podder, for the Petitioner/ Taxpayer
S.G.I., for the Respondent/ Revenue
