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2023 (2) TMI 1088 - HC - GSTAvailment/utilization of excess Tax Deducted at Source - whether the petitioner is entitled to migrate in its electronic credit ledger the credit of amount of Excess Tax Deducted at source under section 45 of the JVAT Act, 2005 amounting to Rs. 1,19,41,937/- available as on 30.06.2017 under section 140(1) of the JGST Act being a credit of the amount of the Value Added Tax which a registered person is entitled to migrate in its electronic credit ledger? HELD THAT - The issue before this Court in W.P.(T) No. 2404/2020 2023 (1) TMI 1023 - JHARKHAND HIGH COURT was Where the amount deducted towards TDS under section 44 of the Jharkhand Value Added Tax is a credit of the amount of Value Added Tax which a registered person is entitled to migrate in its electronic credit ledger - This Court has interpreted the proviso to section 140(1) of the JGST Act and has held therein that the proviso restricts the migration of credit, if the credit pertains to transactions which were prohibited under section 17(5) of the JGST Act in which no input tax credit is available. Since the issue involved in this case is squarely covered by the judgment, the impugned order dated 30.07.2021 passed in revision and Demand Notice dated 31.07.2021 are quashed and set aside - Application allowed.
Issues Involved:
1. Entitlement to utilize excess Tax Deducted at Source (TDS) credit amounting to Rs. 1,19,41,937.36 as of 30th June 2017. 2. Acceptance of FORM GST TRAN-1 filed by the petitioner within the stipulated time. 3. Quashing of the ex-parte revision order dated 30.07.2021 and the consequential Demand Notice. 4. Quashing of the Audit Observation by the Accountant General, Jharkhand Ranchi. Issue-Wise Detailed Analysis: 1. Entitlement to Utilize Excess TDS Credit: The petitioner, engaged in manufacturing and selling aluminum cables, sought to utilize excess TDS credit amounting to Rs. 1,19,41,937.36 available as of 30th June 2017. The petitioner argued that the amount deducted under Section 45 of the JVAT Act should be credited in advance and assumes the character of tax, as supported by the Madras High Court judgment in D.M.R Constructions. The petitioner contended that Section 45(4) of the JVAT Act deems the payment deducted as payment by or on behalf of the seller. Therefore, the petitioner was entitled to migrate this TDS amount under Section 140(1) of the JGST Act. 2. Acceptance of FORM GST TRAN-1: The petitioner filed FORM GST TRAN-1 to migrate Rs. 1,19,41,397/- from the VAT regime to the GST regime, which was initially accepted by the respondent department. However, the department later rejected the claim based on an audit observation. The petitioner argued that the rejection was unjustified and that the amount deducted as TDS should be allowed to migrate as Input Tax Credit (ITC) under the GST regime. 3. Quashing of Ex-Parte Revision Order and Demand Notice: The petitioner received a notice for a revisional proceeding initiated under Section 108 of the JGST Act, without any assigned reason. Despite appearing and filing a written statement, the petitioner alleged that the Joint Commissioner of State Tax passed an ex-parte order without considering the objections and without granting a proper hearing. The order rejected the TRAN-1 claim and demanded a refund of the excess ITC along with penalties and interest, totaling Rs. 1,60,02,196.69/-. 4. Quashing of Audit Observation: The petitioner sought to quash the audit observation by the Accountant General, which pointed out an incorrect claim of transitional credit. The audit report led to the initiation of the revisional proceeding and the subsequent demand notice. The petitioner argued that the audit observation was flawed and that the revisional authority's reliance on it was misplaced. Court's Analysis and Judgment: The court considered the issue of whether the petitioner was entitled to migrate the excess TDS credit under Section 140(1) of the JGST Act. It referred to its previous judgment in W.P.(T) No. 2404/2020, which dealt with a similar issue. The court held that the proviso to Section 140(1) restricts migration of credit only for transactions prohibited under Section 17(5) of the JGST Act. It emphasized that one statutory provision should not defeat another, and the transitional provisions should not be nullified. The court also noted that Rule 117 of the JGST Rules, being subordinate legislation, could not restrict the scope of Section 140(1). It cited the Supreme Court's view that regulations inconsistent with statutory provisions should be ignored. The court further observed that unadjusted TDS amounts would have been refundable if not carried forward as ITC, and denying migration would entitle the petitioner to a refund with interest. Based on these findings, the court quashed the impugned order dated 30.07.2021 and the demand notice dated 31.07.2021. It directed that any amount recovered or paid should be refunded or adjusted for future liabilities, allowing the petitioner's application. Conclusion: The court ruled in favor of the petitioner, recognizing the entitlement to migrate excess TDS credit under Section 140(1) of the JGST Act. It quashed the ex-parte revision order, the consequential demand notice, and the audit observation, providing relief to the petitioner.
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