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TMI Blog2018 (10) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they have no power to accept physical declarations. Held that:- It is well settled that the presumption of constitutionality would touch even the subordinate legislation. However, the grounds on which a statute framed by the Parliament or the State legislature are limited, as compared to the subordinate legislation. While a legislation framed by the subordinate legislature can also be questioned on the ground that the same is ultra vires the Act, or is beyond the rule making powers of the authority or that the same is wholly arbitrary and unreasonable, the law framed by the Parliament and the State legislature, could be struck down only on two grounds viz., lack of legislative competence, or violation of the fundamental rights or any other constitutional provisions. It was further observed that no enactment can be struck down by just saying that it is arbitrary or unreasonable. Vires of second proviso to Section 140 [1] of the GGST Act - Held that:- As per the main provision, credit would be available on the amount of Value Added Tax and Entry Tax carried forward in the return. As per the further proviso or the second proviso, such credit to that extent would not be trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreting such powers as merely directory would give rise to unending claims of transfer of credit of tax on inputs and such other claims from old to the new regime. Under the new GST laws, the existing tax structure was being replaced by the new set of statutes, through an exercise which was unprecedented in the Indian context. The claims of carry forward of the existing duties and credits during the period of migration, therefore, had to be within the prescribed time. Doing away with the time limit for making declarations could give rise to multiple largescale claims trickling in for years together, after the new tax structure is put in place - there is no substance in the petitioners’ challenge to rule 117 (1) of the CGST Rules as well as GGST Rules. The contention of the counsel for the petitioners that the saving clause inserted in the Gujarat Value Added Tax Act would protect and preserve the tax credits of the past regime, after introduction of the Goods and Service tax is to be noted only for rejection. Petition dismissed - decided against petitioner. - R/SPECIAL CIVIL APPLICATION No. 4252 of 2018 - - - Dated:- 19-9-2018 - Mr. AKIL KURESHI AND Mr. B.N. KARIA J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rame the rules for the purpose of carrying out provisions of the Act. In exercise of such powers, the Central Government has framed CGST Rules. Rule 117 contained therein pertains to carry forward of tax credits under the existing law. Sub rule [1] thereof envisages that every registered person entitled to take credit of input tax under Section 140, shall submit a declaration electronically in Form GST Tran 1 within ninety days of the appointed day. This time limit was extended from time to time. The final extension was granted upto 27.12.2017, beyond which the respondents did not accept any further declarations. 2.2 Likewise, Section 140 of the GGST Act also envisages carry forward of the tax credits available to a dealer as on 30th June 2017; subject to certain conditions. Rule 117 of the GGST Rules also contains a provision for filing declaration electronically of the tax credit which, as initially prescribed, had to be within ninety days from the appointed day. This was also extended simultaneously with the CGST finally upto 27th December 2017 and beyond which there was no further extension. 2.3 Case of the petitioners is that in terms of Rule 117 of the CGST Rules, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich pertains to tax credit which a registered dealer could avail under the said Act. Our attention was also drawn to Section 100 of the GVAT Act which pertains to Repeal and Savings . Sub section [2A] was inserted in Section 100 of the GVAT Act by the Gujarat Value Added Tax [Amendment] Act, 2017 which inter alia provides that nothing done in the amendment of the GVAT Act shall affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act prior to the coming into force of the said amendment. On this basis, it was argued that the tax credit at the disposal of the petitioners as on 30th June 2017 is in the nature of accrued or vested right which could not be taken away by putting restrictions in enjoyment thereof, as was done through the second proviso to Section 140 [1] of the GGST Act. In this context, reliance was placed on the following judgments : [a] In case of Eicher Motors Limited v. Union of India., reported in 1999 [106] ELT 3 [SC] in which the Supreme Court, in the context of MODVAT credit, had observed as under : 6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 140 [1] of the GGST Act is a charging provision but without machinery for computation of credit which would be denied. In absence of any machinery for such computation, the charging provision would fail. In this respect, reliance was placed on the decision of Supreme Court in case of Commissioner of Income Tax, Bangalore vs. B.C Srinivasa Setty, reported in 128 ITR 294. For the same purpose, reliance was also placed on the decision of the Supreme Court in case of Govind Saran Ganga Saran vs. Commissioner of Sales Tax Ors., AIR 1985 SC 1041 and in case of Mathuram Agrawal vs. State of Madhya Pradesh, [1999] 8 SCC 667 . 4.2 It was further contended that there was no allegation of the Department that there has been any default in payment of tax by the petitioners. Obtaining necessary forms from the purchasers and exporters often take a long time and only on this count, the assessee would suffer higher tax; as if the sales were made intra-State. 4.3 Our attention was also drawn to a decision of Allahabad High Court in the case of Yamaha Motor Escorts Limited v. State of U.P Ors., reported in [2011] 38 VST 115 in which the Division Bench had observed that non produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the validity of the time limit for filing revision applications contained in Rule 18 framed under the Mysore Sales Tax Act, 1957 came up for consideration. The Court was of the opinion that such rule is an attempt to deny the dealers, the refund to which they are entitled under the law or at any rate to make the enforcement of such right unduly difficult. 4.9 Reference was also made to a decision of the Supreme Court in the case of Sambhaji Ors. vs. Gangabai Ors., reported in [2008] 17 SCC 117, in which, referring to a three Judge Bench decision of the Supreme Court in case of Salem Advocate Bar Association v. Union of India, reported AIR 2003 SC 189 and holding that time limit of ninety days provided in Rule 1 of Order VIII of CPC is directory in nature, it was observed that the procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice. 4.10 Reliance was also placed on the decision of Supreme Court in the case of Mangalore Chemicals Fertilizers Limited v. Deputy Commissioner, reported in 1991 [55] ELT 437 [SC] in which it was observed that while interpreting condition for exemption, a distinction had to be made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure was being changed in order to bring uniformity, simplicity and common tax rates across the country, certain transitional difficulties are bound to surface. It was for such purpose that the migrating dealers were granted the benefit of left over tax credits. Interpreting the time limit provision as merely directory would not be conducive of efficient tax mechanism. 5.2 In support of his contentions, learned AG has relied on the following decisions : [i] In case of Jayam Company v. Assistant Commissioner Anr., reported in [2016] 15 SCC 125 in which sub section (20) of Section 19 of the Tamil Nadu Value Added Tax Act, 2006 was challenged. This provision provided that notwithstanding anything contained in the said section, where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him, the amount of the input tax credit over and above the output tax of those goods shall be reversed. In this context, while rejecting challenge, the Court observed as under: 11. From the aforesaid scheme of section 19 following significant aspects emerge : (a) ITC is a form of concession provided by the Legislature. It is not admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the substituted second proviso to Rule 57 [4] of the MODVAT Rules which provided that the manufacturer shall not take credit after six months from the date of issuance of any documents specified in the first proviso to the said sub rule. Relying on decision of the Supreme Court in the case of Eicher Motors Limited v. Union of India [Supra] and Collector of Central Excise, Pune v. Dai Ichi Karkaria Limited [Supra], it was argued that this provision took away the existing rights. Rejecting such contention, it was observed that the plain reading of the said provision shows that it applies to those cases where the manufacturer is seeking to take the credit after introduction of the rules, and the cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer receives input. This rule does not operate retrospectively nor does it in any manner affect the right of those persons who have already taken credit before coming into force of the rule in question. It operates prospectively in regard to those manufacturers who seek to take credit after coming into force of the rule. 5.5 In case of USA Agencies [ Represented by its Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncil, extend the date for submitting the declaration electronically in FORM GST TRAN 1 by a further period not beyond 31st March 2019, in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension. 5.9 It is stated that corresponding amendment is made in sub-rule [4], wherein below Clause (b) in sub clauses (iii), the following proviso is inserted : Provided that the registered persons filing the declaration in FORM GST TRAN-1 in accordance with sub-rule [1A], may submit the statement in FORM GST TRAN-2 by 30th April 2019. 6. Before examining rival contentions, we may recall that the Government of India has amended Rule 117 of the CGST Rules by inserting sub rule [1A] which provides that notwithstanding anything contained in sub rule [1], the Commissioner may on recommendation of the Council, extend the date of submitting declaration electronically in FORM GST TRAN 1 by a further period not beyond 31st March 2019, in respect of registered persons who could not submit the said declaration by the due d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her constitutional provisions. It was further observed that no enactment can be struck down by just saying that it is arbitrary or unreasonable. In the later judgment in the case of Shayra Bano v. Union of India Ors., reported in [2017] 9 SCC 1 , Rohinton Fali Nariman, J., expressed a view in the following terms : 101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspaper v. Union of India, [1985] 1 SCC 641 , stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14. The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. 140. (3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely: (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of credit is not admissible as input tax credit under this Act, or [ii] where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or [iii] where the said amount credit relates to goods sold under notification no. [GHN 51 GST 2001 S.49 [355] TH, dated the 31st December 2001, [GHN 24] VAT 20123/S.40 [1](8) TH, dated the 11th October 2013 and any other notifications claiming refund of value added tax thereon : Provided further that so much of the said credit as it attributable to any claim related to Section 3, sub section [3] of Section 5, Section 6, Section 6A or sub section [8] of Section 8 of the Central Sales Tax Act, 1956 which is not substantiated in the manner and within the period prescribed in rule 12 of the Central Sales Tax [Registration Turnover] Rules, 1957 shall not be eligible to be credited to the electronic credit ledger : Provided also that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law when the said claims are substantiated in the manner prescribed in rule 12 of the Central Sales Tax [Regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o much of the said credit; as is attributable to any claim relating to Section 3, sub-Section (3) of Section 5, Section 6, Section 6A or sub section (8) of Section 8 of the Central Sales Tax, 1956 which is not substantiated in the manner and within the period prescribed in Rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957 shall not be eligible to be credited to the electronic credit ledger. In the simple terms, this further proviso provides that whenever the dealer has not furnished necessary forms supporting the interState sales, branch transfers or export sales, the credit related to such sales would not be available. The proviso, following this further proviso, however provides that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law, when the said claims are substantiated in the manner prescribed in Rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957. 13. The combined effect of further proviso and the proviso following such further proviso to sub section (1) of Section 140 of the GGST Act is that a dealer who fails to issue necessary prescribed forms in support of inter State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sub rule (7) of Rule 12 provides that declaration in Form C or Form F shall be furnished to the prescribed authority within three months after the end of the period to which the declaration or the certificate relates. Proviso to sub rule (7) provides that if the prescribed authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, that authority may allow such declaration or certificate to be furnished within such further time as that authority may permit. Thus, combined reading of the provisions contained in the CST Act, 1956 and the Registration and Turnover Rules of 1957 which held the field during the earlier regime would show that the requirement of issuing necessary declarations in the prescribed forms establishing inter State sales and other similar transactions inviting reduced tax, existed even then. As noted, sub section [1] of Section 8 of the CST Act, 1956 envisaged tax at a reduced rate on the inter State sales. Sub section [4] of Section 8 of the CST Act, however, provided that sub sec. [1] shall not apply to any sale in the course of inter State trade or commerce unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso, such credit to that extent would not be transferred when necessary declarations are not furnished by the dealer. The proviso thereafter however ensures that as and when declarations are filed, the amount equivalent to credit specified in the second schedule would be refunded to the dealer. We do not find any major change in the effect of late production of the forms by a dealer in the present statutory provisions; as compared to the earlier position, nor the statutory provisions deny the benefit of such credit, even where necessary declarations are furnished. Thus, no existing or vested right can be said to have been taken away. We do not think Section 140 [c] is a charging provision or that for want of mechanism for computing such charge, the provision itself would fail. The provision is in the nature of enabling the dealers to take credit of existing taxes paid by them but not utilized for discharging their tax liabilities. It contains conditions subject to which the benefit can be enjoyed. 18. This brings us to the petitioners challenge to rule 117 of the CGST Rules and GGST Rules. The statutory provisions being pari materia in both the Act and the Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b rule [1A] in Rule 117, authorizing the Commissioner to extend the date for submitting the declaration electronically by a further period not beyond 31st March 2019, in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom, the Council has made recommendation for such extension. Effectively thus, the last date for filing the declaration under sub rule [1] of Rule 117 in general class of persons remained 27th December 2017. For cases falling under sub rule [1A] of Rule 117, the same could be extended maximum upto 31st March 2019. As per the petitioners, this prescription of time limit per se is ultra vires the provisions of the Act and the Constitution of India. 21. In essence, sub rule [1] of Rule 117 lays down a time limit for making declaration only upon making of which, a person could take benefit of tax credit in terms of Section 140 of the CGST Act. We are conscious that sub sections [1] and [3] of Section 140 of the CGST Act use somewhat different phraseology. Under sub section [1] the legislature has provided that the benefit of credit in the electronic cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er empowering the Government to make the rules for carrying out the provisions of the Act. Sub section [2] to Section 164 is equally widely worded, when it provides that, without prejudice to the generality of the provisions of sub section (1), the Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be, or may be made by the rules. Sub section [3] of Section 164, to which we are not directly concerned, nevertheless provides that the power to make rules conferred in the said section would include the power to give retrospective effect to such rules. 24. It is in exercise of this rule making power, the Government has framed the CGST Rules, 2017 in which; as noted, sub rule (1) of Rule 117 has prescribed, besides other things, the time limit for making declaration in the prescribed form for every dealer entitled to take credit of input tax under Section 140. Sub rule [1] of Rule 117 thus applies to all cases of credits which may be claimed by a registered person under section 140 of the Act and is not confined to sub section [3]. This plenary prescription of time limit within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be either unreasonable or arbitrary. When the entire tax structure of the country is being shifted from earlier framework to a new one, there has to be a degree of finality on claims, credits, transfers of such credits and all issues related thereto. The petitioners cannot argue that without any reference to the time limit, such credits should be allowed to be transferred during the process of migration. Any such view would hamper the effective implementation of the new tax structure and would also lead to endless disputes and litigations. As noted in case of USA Agencies [Supra], the Supreme Court had upheld the vires of a statutory provision contained in the Tamil Nadu Value Added Tax Act which provided that the dealer would have to make a claim for input tax credit before the end of the financial year or before ninety days of purchase; whichever is later. The vires was upheld observing that the legislature consciously wanted to set up the time frame for availment of the input tax credit. Such conditions therefore must be strictly complied with. Thus, merely because the rule in question prescribes a time frame for making a declaration, such provision cannot necessarily be h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bring a proceeding before the Court of law for refund of tax after a number of years of collection on the ground that some other party had challenged the levy before Court and succeeded therein. In case of Tilokchand Motichand v. H.B Munshi, CST, reported in [1969] 1 SCC 110, the Constitution Bench of the Supreme Court, however, expressed somewhat different view. It was a case in which the Sales Tax Officer had forfeited a sum of ₹ 26,563/= of the petitioner, who thereupon had filed a writ petition before the High Court challenging such order. The petition was dismissed on 28th November 1958. The appeal was dismissed by Division Bench of the High Court on 7th July 1959. Later on, by a judgment dated 2nd December 1963, the Gujarat High Court held that the relevant provision of the Bombay Sales Tax Act under which the amount was collected was valid. The Supreme Court, however, by judgment dated 29th March 1967 struck down the provision as being infringement of Article 19 [1] of the Constitution of India. The petitioner thereupon filed a petition directly before the Supreme Court under Article 32 of the Constitution. The Supreme Court dismissed the petition. Hidayatulla CJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11 B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 [Amendment] Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excise and Sale Act or the Customs Act, as the case may be. It is necessary to emphasize in this behalf that Act provides a complete mechanism for correcting any errors whether or fact or law and that not only an appeal is provided to a Tribunal which is not a departmental organ but to this Court, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of a decision in another person s case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17 [1](c) of the Limitation Act, 1963, has no application to such a claim for refund. [v] Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Premable to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes like Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty. [vi] xx xx xx xx [vii] While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner plaintiff has suffered no real los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that while examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims would not be an irrelevant consideration. In case of large claims, the same may result in financial chaos in the administration of the affairs of the State. The decision in the case of STO vs. Kanhaiya Lal Mukundlal Saraf [Supra] to the extent it lays down or is understood to have laid down proposition contrary to these propositions was held to have been wrongly decided. 32. Thus, in the economic matters of such vast scale, the wider considerations of the State exchequer, while interpreting a statutory provisions cannot be kept out of purview. Quite apart from independently finding that the time limit provisions contained in sub rule (1) of Rule 117 of the CGST Rules is not ultra vires the Act or the powers of the rule making authority, interpreting such powers as merely directory would give rise to unending claims of transfer of credit of tax on inputs and such other claims from old to the new regime. Under the new GST laws, the existing tax structure was being replaced by the new set of statutes, through an exercise which was un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of CIT v. B.S Srinivasa Setty [Supra] is of no avail. The ratio of the said decision can be seen as holding that there cannot be taxing provision without mechanism having been provided by the statute. We do not see Section 140 (1) of the GGST Act is a charging provision. It, in fact, enables a registered person who has not opted for composition of tax to take credit in his electronic credit ledger, the credit of the amount of value added tax and entry tax in relation to the period ending immediately preceding the appointed day. This section further provides for conditions; subject to which, the same could be claimed. 37. The decision of Supreme Court in the cases of : (a) Sambhaji Ors. vs. Gangabhai Ors. [Supra], and (b) Salem Advocate Bar Assocaition vs. Union of India [Supra] were rendered in the context of the time limit prescribed under the amended CPC for the defendant to file written statement. The Court held that the ninety days of period provided in Rule 1 of Order VIII of CPC was directory in nature. The situation in the said cases and the one on hand before us are vastly different and the ratio in the said decisions cannot be importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sold the goods in course of inter State sale or Commerce, to furnish necessary declarations in prescribed manner. Rule 6 of the Central Sales Tax (Kerala) Rules, besides making other provisions, prescribes time limit for making declarations. Such rule was examined in light of rule making power contained in Section 13 (4) of the CST Act, clause (e) of which provided that the State Government may make rules for the purpose of the authority from whom, the conditions subject to which and the fees subject to payment of which any from declaration prescribed under sub Section (4) of Section 8 may be obtained, the manner in which the form shall be kept in custody and records relating thereto maintained. In this context, it was observed that the phrase, in the prescribed manner occurring in Section 8 (4) of the Act does not take into time element. While concluding that the time limit prescribed in Rule 6 (1) was ultra vires, and therefore, assessee was not bound to furnish declarations in Form C before 16th February 1961 into said case, the duty of the assessee was to furnish declaration within a reasonable time. In the said case, since the assessee had already furnished C Forms bef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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