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2020 (7) TMI 443 - HC - GSTValidity of Period of limitation for transitional credit - GST TRANS-1 - Validity of Rule 117 of the Central Goods and Service Tax Rules, 2017 - Vires of Section 140 of the Central Goods and Services Tax Act, 2017 - direction to file Form GST TRANS 1 either electronically or manually to claim the transitional input tax credit - principal contention of the learned counsel for the Petitioner was that Rule 117 of the CGST Rules does not impose a mandatory obligation on registered persons, such as the Petitioner, to file Form GST TRAN-1 within the prescribed period - HELD THAT - The statutory and constitutional challenge, in this case, is on the basis that Rule 117 of the CGST Rules is ultra vires Section 140 of the CGST Act and Article 14 and 300-A of the Constitution - Section 140 stipulates that a registered person making a claim for input tax credit should furnish a return, within such time, and in such manner as may be prescribed. The rule making power is contained in Section 164, which is couched in wide terms, and enables the Government to frame rules to give effect to the provisions of the Act and, in particular, to make rules for matters that are required to be prescribed by the CGST Act. Interestingly, the power to frame rules with retrospective effect is also conferred subject to the limitation that it should not pre-date the date of entry into force of the CGST Act. Pursuant thereto, Rule 117 was framed whereby a time limit was fixed for submitting the on line Form GST TRAN -1. By the Finance Act of 2020, the words within such time were introduced in Section 140, with retrospective effect from 01.07.2020, thereby conferring expressly the power to prescribe time limits in Section 140 even without relying entirely on the generic Section 164. In this statutory context, there are reason to conclude that Rule 117 of the CGST Rules is intra vires Section 140 of the CGST Act but none to conclude otherwise. Whether the time limit in Section 19(11) of TNVAT is mandatory or directory? - HELD THAT - The said Section 19(11) also pertains to the time limit for claiming ITC and uses the word shall . After examining the language of Section 19(11) and the context, including the object and design of the statute, the Hon'ble Supreme Court concluded that the time limit specified in Section 19(11) is mandatory. In this case, the peremptory word shall is used. The relevant rule deals with the time limit for availing Transitional ITC by carrying it forward from the credit balance under tax legislations which have been repealed and replaced by the CGST Act. Thus, the object and purpose of Section 140 clearly warrants the necessity to be finite. ITC has been held to be a concession and not a vested right. In effect, it is a time limit relating to the availing of a concession or benefit. If construed as mandatory, the substantive rights of the assessees would be impacted; equally, if construed as directory, it would adversely impact the Government's revenue interest, including the predictability thereof. On weighing all the relevant factors, which may be not be conclusive in isolation, in the balance, we conclude that the time limit is mandatory and not directory. Also, Rule 117 specifies that the return in Form GST TRAN 1 is required to be filed electronically on the common portal - This requirement is not satisfied by handing over the form in person to the Sales Tax Collection Inspector, Tiruvannamalai. Consequently, in our view, the Petitioner has completely failed to make out a case to direct the Respondents to permit the Petitioner to file Form GST TRAN -1 and claim the Transitional ITC of ₹ 4,70,008/-. Petition dismissed.
Issues Involved:
1. Validity of Rule 117 of the Central Goods and Service Tax Rules, 2017 (CGST Rules). 2. Whether Rule 117 is ultra vires Section 140 of the Central Goods and Services Tax Act, 2017 (CGST Act). 3. Whether Rule 117 violates Articles 14 and 300A of the Constitution. 4. Whether the time limit prescribed in Rule 117 is mandatory or directory. 5. Entitlement to file Form GST TRAN-1 electronically or manually to claim transitional input tax credit (ITC). Detailed Analysis: 1. Validity of Rule 117 of the CGST Rules: The petitioner challenged the validity of Rule 117 on the grounds that it is ultra vires Section 140 of the CGST Act and infringes Articles 14 and 300A of the Constitution. The court examined Section 140, which deals with Transitional ITC, and noted that it requires a registered person to submit a return within such time and in such manner as prescribed. Section 164 of the CGST Act empowers the Government to frame rules for implementing the Act's provisions, including prescribing time limits. The court concluded that Rule 117, which prescribes the time limit for submitting Form GST TRAN-1, is intra vires Section 140 of the CGST Act. 2. Whether Rule 117 is ultra vires Section 140 of the CGST Act: The court observed that Section 140 stipulates that a registered person making a claim for input tax credit should furnish a return within such time and in such manner as may be prescribed. The rule-making power under Section 164 is broad and includes prescribing time limits. The Finance Act, 2020, retrospectively amended Section 140 to include the words "within such time," thereby expressly conferring the power to prescribe time limits. The court found that Rule 117 is intra vires Section 140 of the CGST Act. 3. Whether Rule 117 violates Articles 14 and 300A of the Constitution: The petitioner argued that ITC is in the nature of property and that Rule 117, by prescribing a time limit, deprives the petitioner of its property in violation of Article 300A. The court referred to the Supreme Court's judgment in Jayam and Company v. Assistant Commissioner, which held that ITC is a concession and not a vested right. Therefore, ITC can only be availed of by satisfying prescribed conditions. The court concluded that ITC is a concession and not property, and Rule 117 does not violate Article 300A. 4. Whether the time limit prescribed in Rule 117 is mandatory or directory: The petitioner contended that Rule 117 should be construed as a directory provision and not mandatory. The court examined various judgments, including the Supreme Court's decision in ALD Automotive, which held that time limits for availing ITC are mandatory. The court also noted that the use of the word "shall" in Rule 117 indicates a mandatory requirement. The court concluded that the time limit prescribed in Rule 117 is mandatory and not directory. 5. Entitlement to file Form GST TRAN-1 electronically or manually to claim transitional ITC: The petitioner claimed that they could not submit Form GST TRAN-1 electronically due to technical difficulties and submitted a hard copy to the Sales Tax Collection Inspector. The court held that Rule 117 requires the form to be filed electronically on the common portal, and submitting a hard copy does not satisfy this requirement. The court dismissed the petitioner's request to file Form GST TRAN-1 manually and claim transitional ITC. Conclusion: The court dismissed the writ petition, concluding that Rule 117 of the CGST Rules is intra vires Section 140 of the CGST Act, the time limit prescribed is mandatory, and ITC is a concession and not a vested right. The petitioner failed to make out a case for filing Form GST TRAN-1 manually to claim transitional ITC.
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