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TMI Blog2018 (7) TMI 1706X X X X Extracts X X X X X X X X Extracts X X X X ..... c Law for the Petitioner in WP No.2008 of 2018. Mr. Jitendra Motwani a/w Mr. Harsh Shah and Rinkey Jussuja i/b M/s. Economic Law for the Petitioner in WP No.2009 of 2018. Mr. V.A. Sonpal, Special Counsel a/w Mr. B.V. Samant AGP for Respondent Nos.2 and 3State. Mr. A.R. Bamane i/b Mr. A.R. Bamane and Co. for Respondent No.5. Smt. Nikita Badheka a/w Ms. Neha Chaudhary and Mr. Parth Badheka for the Petitioner in Writ Petition No.819 of 2018. Ms. Jyoti Chavan, AGP for the Respondents in Writ Petition No.819 of 2018. COMMON JUDGMENT: (Per S.C. Dharmadhikari, J) 1. Since the above petitions involve common questions of fact and law and identical arguments were canvased by both the sides, we proceed to dispose them of by this common judgment. 2. Rule in each of the petitions is issued. Respondents have waived service. With the consent of both the sides, the Writ Petitions are disposed of by this common judgment. 3. The challenge in these petitions is to a Trade Circular No.3T of 2018 dated 16th January 2018. 4. The prayer is that notification No.VAT1517/C.R.136(A)/Taxation1 dated 13th October 2017 should be given effect to and operated from 24th August 2017. The ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e residuary Entry of the MVAT Act, namely, ScheduleE and hence the applicable rate of tax on 30.06.2017 was 13.5%. Furthermore, the petitioner was eligible to claim setoff of the input MVAT paid by it subject to a reduction of 3% on account of the provisions of Rule 53(1) and Rule 53(1A) of the MVAT Rules. In other words, the net effective rate of MVAT on natural gas was only 3% prior to 01.07.2017 if the natural gas was consumed domestically as fuel or as an input for manufacture. 10. With effect from 01.07.2017, when any person purchased natural gas domestically, the seller would charge and collect full tax from him at the rate of 13.5%. However, since the person was no longer a dealer under the MVAT Act due to Section 16(6A), he could not claim setoff or refund of the input MVAT collected from him. Furthermore, he would be liable to pay GST on his outputs at the full rate since the GST Act only provided for adjustment of GST paid and not of VAT paid. Hence, such a person would be taxed at the full rate on his outputs without adjustment of the input tax paid by him. Whilst the effective rate of taxation on natural product prior to 01.07.2017 was 3%, the effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; to include goods covered by the MGST Act and persons registered under the MGST Act respectively. This effectively cured the anomaly in the Notification dated 24.08.2017. 15. The petitioner then contended that it submitted ProformaB as required by the Entry No.60 to the respondents and had been issued a ProformaA dated 15.09.2017 w.e.f. 15.09.2017. At the request of the respondent No.5, the petitioner applied for a revision of ProformaA and was duly issued a new ProformaA dated 1st November 2017 w.e.f. 24.08.2017 itself. ExhibitF to the petitions are copies of the original ProformaA and the revised ProformaA. It is claimed that the respondent No.5 charged rate of Rs. 13.5% upon the petitioner from the period of 24082017 to 13.10.2017, but after the issuance of the amended ProformaA, this fifth respondent issued credit notes reducing the tax charges from 13.5% to 3%. Copies of the various invoices raised by respondent No.5 and credit notes issued are annexed as ExhG to the petition. 16. However, the second respondent issued a subsequent Trade Circular No.3T of 2018 dated 16.01.2018 declaring that the earlier clarification iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shy;A of the value of purchase if it is used as fuel or raw material in manufacturing goods. Hence, net effective burden on dealers who use natural gas as fuel or raw material was 3%. However, if natural gas was not used as fuel or raw material, then, no retention of 3% was required. However, if the taxable person under the MGST Act does not continue to be registered under the MVAT Act, he is not entitled to input tax credit or refund of tax paid on purchases of goods covered by the MVAT Act, since under MGST Act any tax paid under MVAT Act is not available to be claimed as input credit. In order to extend the benefit to the taxable persons under the MGST Act and in order to ensure that impact of tax on dealers registered under the MVAT Act and MGST Act is same, the Government issued notification (ExhibitE) to the Writ Petition No.2424/2018 w.e.f. 14.10.2017. Earlier similar notification was issued on 24.08.2017 for benefit of MVAT Act registered dealers only and sales to MGST dealers were excluded. 20. The petitioners', cannot challenge any effective date because none of the fundamental rights are violated. Circular No.39T dated 08.09.2017 mentions that the purchaser of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the taxable person shall not get INPUT TAX CREDIT under MGST Act 2002 on the tax paid for purchase of natural gas under MVAT Act and will consequently bear a burden of tax at 13.5 %. In order to remove the brunt of 13.5% and make it comparable with the dealers who are manufacturers of any of the goods as mentioned in para 7 of this reply, the rate of VAT on the purchases made by taxable persons under MGST Act 2017 of Natural Gas when used in manufacture of any other goods or as fuel for manufacture of any other goods was reduced from 13.5% to 3%. Therefore the Notification dated 13.10.2017 with effect from 14.10.2017 was issued." 21. In paragraph 17, it is urged that the petitioner is not challenging the notification, copy of which is at ExhibitC to the petition, and the notification, copy of which is at ExhibitE to the petition which amends the rate of tax on natural gas as prescribed in ScheduleB of the MVAT Act. Thus, the circulars merely explain the ambit and scope of the notification and seek to interpret the same. They are explanatory and, therefore, so long as the law is clear, the circular does not either modify or amend it. The language of the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cancellation of registration revoked. However, the manner has not been prescribed as yet. The word 'business' includes trade or commerce and the word "dealer" is understood as including a person who buys and sells goods. It is submitted that the petitioner's applications and the subsequent issuances of proforma by the respondents w.e.f. 24.08.2017 itself should be considered as registration under the MVAT Act. Thus, the petitioner should be considered as a registered dealer. 24. In any case, the second notification dated 13.10.2017 is merely curative and declaratory in nature and hence, the amendments made by it would be applicable from 24.08.2017 itself. It is argued that curative/clarificatory amendments would have retrospective effect. The Circulars adverse to the assessee can only operate prospectively. Hence, the Trade Circular No.3T of 2018 dated 16.01.2018 would operate prospectively and would not affect the earlier period, namely, 24.07.2017 to 13.10.2017. The Department cannot argue that the circulars issued by them are contrary to law. Similarly, the Department cannot challenge the Trade Circular No.3T of 2018. Hence, it is only open to the purchaser to cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of MVAT Act. She submits that on 18th July 2017 itself the petitioners had pointed out to the Deputy Commissioner of Sales Tax, Large Tax Payer Unit, Alibag Division, Belapur Navi Mumbai that the amendment should be made to the registration certificate for the goods dealt by the petitioner under MVAT Act and Central Sales Tax (CST) Act and to allow the petitioner to continue to hold the registration certificate under the existing Act. She submits that there has been no reply to this communication. The petitioner has been following this certificate, copy of which is at page 35 and the benefit thereof cannot be taken away. She therefore, submits that the first interpretation by the notification dated 24.08.2017 is the correct one and that should be maintained. 30. On the other hand, Mr.Sonpal, learned Special Counsel appearing for the respondents argued that the Writ Petitions deserve to be dismissed. He pointed out that there is no substance in any of these petitions. Mr.Sonpal, has invited our attention to the affidavit in reply, which is filed in these petitions. 31. Mr.Sonpal while answering the contentions of Mr.Rafique Dada, learned Senior Counsel appearing for the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the MVAT Act, by the said notification, effective from 24.08.2017. The entry B16 provides that the sale of natural gas to a registered dealer, subject to the condition mentioned in the said notification, is entitled for a lower rate of VAT at 3%. To avail the benefit of reduced rate, namely, 3%, the purchasing dealer was required to be certified (as per ProformaA) by the concerned Joint Commissioner. 35. After issuance of the aforesaid notification dated 24th August 2017, certain queries were received from the trade as also from the Departmental Authorities and that query was whether the benefits given under the Notification dated 24th August 2017 are also available to the Tax payer registered under the Maharashtra Goods and Services Tax Act 2017. To clarify this aspect, a Trade Circular No.39T was issued on 08.09.2017 and it was clarified that the benefits of notification dated 24th August 2017 would also be available to the taxable persons registered under the MGST. 36. Subsequently, by Notification No..VAT1517/CR136(a)/Taxation1 dated 13th October 2017, the Schedule Entry B16 was amended with effect from 14th October 2017. In addition to certain othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from the 24th August 2017, issue an addenda and change the date of effect to the 14th October 2017. (d) From the date of issuance of this Trade Circular, the certificate in Proforma 'A' shall be issued effective from the date of filing of the application for the said certificate. (e) The dealers, who have sold natural gas during the period 24th August 2017 to 13th October 2017 to manufactures who were not holding registration certificate under the MVAT Act, applying lower rate of tax at 3% during the aforesaid period, are advised to arrange their affairs accordingly and take the necessary corrective steps at earliest. 8. In view of the above, the clarification issued vide Trade Circular No.39T of 2017 dated 8th September 2017 shall stand modified." 39. We have also perused the Maharashtra Act No.XLII of 2017. That Amendment Act amends inter alia the Maharashtra Value Added Tax Act, 2002. ChapterIX of the amendment Act contains the amendments to the MVAT Act 2002. In Section 54,55 and 56 of the amendment Act, the following amendments have been made: "54. In the long title of the Maharashtra Value Added Tax Act, 2002 (hereinafter, in this Chapter, refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as the case may be SCHEDULE B, as it exists on the appointed date for the Maharashtra Goods and Services Tax Act, shall be deemed to be cancelled with effect from the said appointed date: Provided that, any such dealer, whose registration is deemed to be cancelled, may apply in the prescribed manner for the revocation of the cancellation of his registration, if he intends to carry on the business in these goods." 41. A perusal of subsection (6A) would reveal as to how the original Section 16 which dealt with the registration would now provide for, by this subsection, a deemed cancellation of registration of a dealer, who has not affected sales during the year 20162017, of any goods specified in column(II) in ScheduleA or, as the case may be in ScheduleB as its exists on the appointed date for the MGST Act with effect from the appointed date. However, by the proviso any dealer whose registration is deemed to be cancelled may apply in the prescribed manner for the revocation of the cancellation of his registration if he intends to carry on the business in these goods. 42. There are various other amendments made to MVAT Act by this ChapterXI of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of tax or for specifying, rates of tax where Nil rates are specified. The mode in which this has to be done, namely, by issuing and publishing a notification in the official gazette is the same and identical to the manner and mode of making rules. 45. That is why by this notification of 24.08.2017, after Entry 15 in ScheduleB for the words appearing in earlier Entry 15 (natural gas), the words and figures 'natural gas, other than the natural gas specified in Entry 16' were substituted. After Entry 15, the portion set out in the notification and reproduced above has been added but this addition is conditional. Therefore, it is only if the conditions are satisified that the concessional rate of tax of 3% would be chargeable and leviable. The natural gas has to be sold to a registered dealer and that is also subject to the conditions reproduced herein above. Thereafter, ProformaA also would read accordingly. 46. After that a Trade Circular was issued on 08.09.2017 and that refer to this amendment to the scheduled entry. It is stated that for better implementation of this scheduled entry, the Trade Circular was issued, copy of which is at ExhibitD to the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made, namely, a registered dealer who uses natural gas as a raw material or fuel in the manufacture of goods and then there is an addition. That addition is by inserting the portion in ClauseII of this notification. That is inserted/added below the existing explanation. That will now stand numbered as explanation (a). There, the goods referred to in the Entry shall mean goods as defined under the MVAT Act and goods defined under the MGST Act. 'Registered dealer' referred to in the Entry shall also include taxable person registered under the MGST Act and then, as reproduced above, there are subsequent amendments. 49. Hence, the only question that we have to consider is whether this concessional rate of duty could be availed of by the petitioner from 24.08.2017 to 13.10.2017. The intervening period where the taxable person under MGST Act does not continue to be registered under the MVAT Act would result in denial of input tax credit or refund of tax paid on purchases of goods covered by MVAT Act. That is because under MGST Act any tax paid under MVAT Act is not available to be claimed as input tax credit. Hence, in order to benefit the person under the MGST Act and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amendment to the Schedule appended to the MVAT Act. In the earlier amendment by notification dated 24.08.2017 the registered dealers were not defined to include taxable persons registered under the MGST Act. Further, the word 'goods' referred to in the entry as defined under the Act did not take within their import the goods defined under the MGST Act. Hence, merely because the 24.08.2017 notification employs the words "or any other good's, whatsoever" for the purposes of availing of the concessional rate of duty that is not enough. By that we cannot infer that from 24.08.2017 itself both, the goods as defined the MGST Act and the taxable persons contemplated thereby, are included in the amendments to ScheduleB as the August2017 notification at page 51 first time brings in a substitution in Entry15 and after Entry15, inserts the portion as reproduced from the notification of 24.08.2017. Thus, the conditional relaxation from the rate of duty from 13.5% to 3% was a benefit not extended to taxable persons under the MGST Act as also to the goods defined under the MGST Act. 51. It is obvious from a reading of the subsequent notification dated 13th Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, provided the procedure set out in Chapter X of the Central Excise Rules, 1944, was followed. The Appellant before the Supreme Court enjoyed benefit of the exemption notification. It was found that a show cause notice was issued to the appellant as to why ammonium nitrate should not be reclassified under Tariff item No.68. One of the authorities came to the conclusion that there was no need to reclassify ammonium nitrate. Later on, there was some communication from the Central Board of Excise and Customs and the Ministry of Chemicals and Fertilizers. The reclassification would be necessary because ammonium nitrate is accepted as a fertilizer and hence it was not falling within the Tariff item 14HH. With the result the exemption notification could not have been availed of and the benefit thereof was sought to be denied. That is how there was a further show cause notice, adjudication and the demand. After this controversy reached the Supreme Court, the Hon'ble Supreme Court relied on observations, based on the contentions, noted from paras 9 to 12. The Supreme Court held that there was enough material to hold that the appellants suffered adverse consequences. Therefore, the Wri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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