2023 (8) TMI 1222 - HC - GST

Transitional Provisions as contained in Section 140 of the Central Goods Services Act, 2017 - eligibility for benefit of the Input Tax Credit on any services prior to the appointed date by the Input Service Distributor - HELD THAT - There can hardly be any lis and/or a contrary assertion on the part of the revenue, against the provisions of sub-section (7) of Section 140, in denying input tax credit, to the bonafide Input Service Distributors when such provision as also the Act itself recognizes such benefit, being part of the transitional arrangement created under Section 140 of the CGST Act. Thus, the Revenue is required to take a holistic view of such impasse, as also, considering the provisions of the CGST Act it needs to take a stand which would not defeat the substantive provisions of the Act, which permits the benefit of the credit to be taken by the assessee under Section 140(7) read with other provisions of the Act - The cases of assessee s on that count can certainly be considered, which would be by a scrutiny on a case-to-case basis, and accordingly whether in a given case, the benefit of credit is available or not would certainly be decided, as the provision itself would envisage. The situation as canvassed by the petitioners is quite anomalous inasmuch as although the Act has Pan-India effect, as also the electronic portal is supposed to operate uniformly throughout the country, issues are stated to have arisen, in respect of input service distributors in Maharashtra and in Goa only - it is left to the wisdom of the revenue to take an appropriate call on the proceedings, before proceeding further to hear the parties so as to decide these proceedings on merits, as ordered by the Supreme Court. Application disposed off.

Summary

Issues: Interpretation of transitional provisions under Section 140 of the Central Goods & Services Act, 2017 regarding input tax credit for Input Service Distributors. Allegation of denial of credit benefit by the revenue to bonafide Input Service Distributors in Maharashtra and Goa.

Summary:

1. The High Court of Bombay took up the proceedings for hearing on merits based on the Supreme Court's order in a specific case.

2. The petitioners' counsels highlighted the importance of Section 140(7) of the CGST Act, emphasizing the non-obstante provision allowing Input Service Distributors to claim Input Tax Credit even if invoices were received after the appointed date. They argued that the revenue's interpretation and control over this provision were hindering the rightful credit claims.

3. The petitioners contended that the revenue's approach was nullifying the provision, thus preventing registered Input Service Distributors from availing the credit benefit permitted by law.

4. The court observed that there should be no dispute against the provisions of Section 140(7) and that the Revenue must consider the holistic view to avoid defeating the substantive provisions of the Act.

5. Before further proceedings, the court requested the revenue to assess if there would be any serious dispute regarding the implementation of Section 140(7) and emphasized that the benefit of credit should align with the law and be decided on a case-to-case basis.

6. The court noted the anomaly where issues regarding Input Service Distributors were specific to Maharashtra and Goa, creating a potential discriminatory situation compared to other states, possibly violating Article 14 of the Constitution.

7. Based on their observations, the court left the decision to the revenue to address the issues raised before proceeding with the case.

8. The proceedings were adjourned for three weeks to allow the Revenue to consider the aspects highlighted during the hearing.

9. The court directed for the filing of reply affidavits and completion of pleadings to prepare for the final hearing if necessary.