Cosmo Film case: Gujarat HC order to provide relief to importers

In what could come as relief for many Indian Importers who were under investigation by the Directorate of Revenue Intelligence (DRII) and respective jurisdictional commissioners for allegedly availing dual benefits—specifically, exemption from Integrated Goods and Services Tax (IGST) and a rebate on the output side of exports, the Gujarat High Court Thursday held that one of the notification will have only prospective effect and reviewed its earlier decision to remove findings on interest applicability.

The central issue pertains to Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, which came into force in October 2017. On October 9, 2018, significant amendments were made to this rule via two separate notifications. While Notification No. 54/2018 was issued prospectively, Notification No. 53/2018 was given retrospective effect. Due to the differing language and effective dates of these notifications, clarity was required regarding their applicability, leading to litigation across several courts in India.

Cosmo Films moved the Gujarat HC against the said notification. . In its initial ruling, the court upheld the constitutional validity of Rule 96(10). However, a review petition was subsequently filed, led by advocate Abhishek A Rastogi, founder of Rastogi Chambers. “ The most crucial outcome of this judgment is that Notification No. 54/2018, which had been interpreted to apply retrospectively, will now only be applied prospectively. This correction ensures that exporters are not unfairly subjected to retrospective demands under this notification. Additionally, the court made specific amendments to various sections of its prior order, correcting incorrect dates and deleting paragraphs related to the imposition of interest on IGST. This revision is significant as it provides relief to Indian importers who would have otherwise faced liability for interest in transactions that are revenue-neutral,” Rastogi said. Recently in the 54th GST Council meeting, Rule 96(10) of the CGST Rules was omitted entirely.

The GST Council also introduced a mechanism for the reassessment of bills of entry, enabling Indian importers to regularize their imports by paying the appropriate duties. “This development, coupled with the Gujarat High Court’s revised judgment, provides much-needed clarity on how import transactions should be rectified and reassessed. The timing of the court’s order is especially fortuitous for Indian exporters, who can now adjust their systems and correct past import transactions by reassessing their bills of entry. However, the issue of interest remains unresolved, and the debate on this point is expected to continue” Rastogi added.. The review petition and several other petitions were argued by advocate Rastogi. This ruling is expected to have wide-ranging implications for Indian importers and the broader legal landscape surrounding GST and customs duties.