2021 (2) TMI 477 - HC - GST

Constitutional validity of the retrospective amendment to Section 140 of the Central Goods and Services Tax Act, 2017 and Rule 117 of the Central Goods and Services Rules, 2017 - HELD THAT - The following questions arise for consideration in these writ petitions (1) Whether Input Tax Credit is a vested right and therefore, whether the imposition of a time limit for transitioning or utilisation thereof is constitutionally impermissible? (2) Whether the time limit imposed in Rule 117 of the CGST Rules is mandatory or directory? (3) Whether Section 140 of the CGST Act read with Rule 117 of the CGST Rules divests the assessee of an alleged vested right or whether it prescribes conditions relating to the enforcement of such right? (4) Whether the assessee has a legitimate expectation that the Input Tax Credit availed under the erstwhile tax regime should be permitted to be transitioned to the new tax regime without imposing a time limit? (5) Whether the deprivation of the benefit of transitional Input Tax Credit would amount to double taxation of the assessee as alleged? List on 18.09.2020. Issue notice to the second and third respondents returnable by then.

Summary

Issues involved: Constitutional validity of retrospective amendment to Section 140 of CGST Act and Rule 117 of CGST Rules challenged.

Analysis:
1. The judgment in M/s. P.R.Mani Electronics v. Union of India upheld the validity of Rule 117 of CGST Rules, which is now under challenge.
2. The petitioner argues that once Input Tax Credit is availed, a vested right accrues, protected by Section 174(2)(c) of CGST Act. Cites CENVAT Rules and various judgments to support the contention.
3. The petitioner contends that the primary object of CGST Act was to prevent cascading of taxes, and Section 140 of CGST Act and Rule 117 of CGST Rules should be interpreted in line with this objective.
4. The Additional Solicitor General refers to judgments where conditions were imposed for availing vested rights. Requests time to file a counter-affidavit.
5. The court identifies key questions for consideration, including whether Input Tax Credit is a vested right and if the time limit imposed by Rule 117 is mandatory or directory.
6. Other questions include whether the provisions divest the assessee of a vested right or merely prescribe conditions, and whether the deprivation of transitional Input Tax Credit would lead to double taxation.

The judgment raises crucial issues regarding the constitutional validity of retrospective amendments to the CGST Act and Rules. The arguments put forth by both parties revolve around the concept of vested rights in Input Tax Credit and the interpretation of relevant provisions in line with the legislative intent. The court will delve into these complex legal questions to determine the impact of the amendments on taxpayers and the potential implications for double taxation. The upcoming hearing will likely provide further clarity on these contentious issues.