GST UPDATE NO. 64TH ON SECTION 17(5) VERSUS RATE NOTIFICATION PART-II:

In the earlier update regarding conflict between section 17(5) and the rate notification no. 11/2017-Central Tax (Rate) dated 28.06.2017, we had categorically concluded that since the rate notification has reference of section 16(1) of the CGST Act, 2017 and proviso to section 17(5)(b)(i) overrides section 16(1) of the CGST Act, 2017, the restriction imposed as regards credit availment by the rate notification does not has precedence over the provision contained in the Act. In the present update, we will discuss the alternative grounds for affirming the fact that the provision contained in proviso to section 17(5)(b)(i) will have precedence over the rate notification. It is a settled legal principle that the hierarchy of the applicability of the provisions of law is that the provisions contained in Act are to be considered as supreme whereas the provisions stated by way of issuance of notifications and rules or the clarifications issued by way of circulars are to be considered as subordinate to the provisions of Act thereby serving as accessory. Consequently, if there is any conflict or contrary provisions contained in the statue and notification issued under the statue, the provisions of the Act will always surpass the provisions of notifications. This is for the simple reason that notifications are issued in exercise of the provisions contained in the Act thereby meaning that the Act is parent and notifications are subsidiary to the Act. In this context, reference may be made to judicial pronouncements of erstwhile regime which have held that in case of conflict between the statutory provisions and rules, statutory provisions always prevail: - • TWINCITY GLASS PRIVATE LTD. VERSUS UNION OF INDIA [1992 (61) E.L.T. 440 (BOM.)]:Legislation - Act and Rules - Rules framed in exercise of statutory power become a part of the Act itself unless found to be in conflict with statutory provision - Section 37 of Central Excises and Salt Act, 1944. - • DEEPAK FERTILIZERS AND PETROCHEM VERSUS DESIGNATED AUTHORITY [2006 (203) E.L.T. 370 (DEL.)]:- Anti-dumping - Limitation - Section 9A of Customs Tariff Act, 1975 not provides for any limitation - When parent Act does not provide for a limitation for doing some act, then such limitation cannot be prescribed by Rules which are subordinate to Act - Delegated legislation cannot circumscribe powers of Act. • MINAKSHI CASTINGS VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR [1999 (112) E.L.T. 737 (TRIBUNAL)]:- Interpretation of statute - Statutory provisions and rules framed thereunder - Statutory provisions to prevail over Rules in case of conflict between the two. Although the above decisions pertain to erstwhile regime, their ratio is equally applicable in the GST era. In view of the analogy laid down by the above cited decisions, the restriction contained in rate notification is not to be applied as the provision contained in proviso to section 17(5)(b)(i) being part of CGST Act, 2017 would prevail. Hence, the denial of input tax credit on outdoor catering services when procured by person in similar line of business is admissible under GST laws. The expert views of our netizens would be welcomed.

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GST UPDATE NO. 64TH ON SECTION 17(5) VERSUS RATE NOTIFICATION PART-II:

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