Background

The respondent, a manufacturer of electrical apparatus, also sold MEIS duty credit scrips (exempt from 13.10.2017). A Section 74 SCN required reversal of proportionate ITC of Rs. 74,75,604 under Section 17(2) and Rules 42/43 for FY 2017-18 to 2019-20, with interest and equal penalty, and this was confirmed. The First Appellate Authority set the demand aside, treating Notification 14/2022 (which excludes the value of scrips from exempt supplies) as clarificatory and beneficial, and so retrospective. Revenue appealed, and the respondent objected that the appeal was below the Rs. 20 lakh limit in Circular 207/1/2024-GST.

Final Verdict

The Tribunal held that CBIC circulars do not bind the Tribunal, but on the circular’s own terms the appeal was maintainable, because the composite amount exceeded the limit and the issue was interpretational. On merits, Notification 14/2022 commences on its publication and the rule-maker, though empowered under Section 164(3), chose not to give it retrospective effect; the insertion of clause (d) is not clarificatory or curative but confers a fresh benefit prospectively from 05.07.2022, and ITC being a concession cannot be claimed retrospectively as a vested right (Sedco Forex, Sree Sankaracharya University). The appellate authority’s contrary view was therefore wrong. However, since the respondent filed all returns, disclosed the scrip sales and acted on a bona fide view known to both sides, no fraud, wilful misstatement or suppression was established and Section 74(1) could not be invoked (Anand Nishikawa; CBIC Instruction 05/2023-GST). Applying Section 75(2), the proper officer was directed to re-determine the liability as if under Section 73 after a hearing, and the appeals were disposed of accordingly.