9911796707
TMI Blog2018 (10) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the petitioner procures raw materials as well as capital goods. 4. We would take note of the statutory provisions existing before 01.03.2017 when the GST statutes were brought into force and those introduced with effect from 01.07.2017 under GST statutes in relation to credit on excise duty paid on inputs on capital goods later. For the time being, we may record that prior to 01.07.2017, a manufacturer would be entitled to take CENVAT credit of duty paid on inputs as well as on capital goods utilized in the manufacturing process, subject to conditions and restrictions provided in the CENVAT Credit Rules, 2004. With the introduction of Integrated Goods and Service Tax Act ('IGST Act' for short) and Gujarat Goods and Service Tax Act ('GGST Act' for short) with effect from 01.07.2017, such facility enabling the manufacturers to take credit of the duties paid on inputs as well as capital goods continued with certain modifications. CGST Act also contains transitional provisions as per which, unutilized CENVAT credit could be brought over to the GST regime. Such facility of migration would be available both in relation to inputs as well as capital goods. The statute a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of D.S. Nakara and Others v. Union of India reported in (1983) 1 SCC 305 was cited to contend that if a provision is found to be discriminatory, it is not necessary that the Court must strike down the entire provision. Instead, the offending portion can be removed. V. Counsel also contended that once the duty was paid by the assessee upon purchase of capital goods, the same could be utilized for discharging assessee's liability of tax. This right is a vested right and cannot be taken away by the legislation. 6. On the other hand, learned counsel for the department opposed the petition contending that the petitioner has not made out any ground for challenging the Statute. The parliament has framed the legislation after considering all aspects of the matter. As is wellsettled, in economics sphere and tax legislation, the legislature has grater latitude. The Court cannot strike down a statutory provision merely on the opinion that the same is unreasonable or harsh. 7. Under the erstwhile Central Excise Rules, 1944, rule 57Q was inserted vide notification dated 01.03.1994. Subrule (1) of rule 57Q essentially provided the benefit of duty paid on capital goods used by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l goods used or intended to be used by a supplier in the course or furtherance of a business. Section 2(62) defines the term 'input tax' in relation to a registered person as to mean the Central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and would include several taxes specified in clauses (a) to (e) contained therein. Term 'input tax credit' is defined under section 2(63) as to mean the credit of input tax. 10. Section 16 of the CGST Act pertains to eligibility and conditions for taking input tax credit. Subsection (1) of section 16 provides that every registered person shall subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course of furtherance of his business and said amount shall be credited to the electronic credit ledger of such person. Subsection (3) of section 16 provides that where the registered person has claimed depreciation on the tax component of the cost of capital goods and plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed: PROVIDED that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act. Explanation: For the purposes of this subsection, the expression "unavailed CENVAT credit" means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law. (5) A registered person shall be entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on the such tax component would not be allowed. Similarly, subsections (1) and (2) of section 17 which pertain to restriction of the tax credit when the goods or services are utilized partially for business purpose and partially for other purposes or partially for affecting taxable supplies and partially for nontaxable supplies, also makes no distinction between capital goods and inputs. Rule 43 of the CGST Rules makes detailed provision for working out such restriction on eligibility of input tax credit on capital goods to which subsections (1) or (2) of section 17 would apply. 16. However, when it comes to the transition from the central excise to GST regime, the legislature has made slightly different provisions for credit on inputs and capital goods. In this context, section 140 of the CGST Act assumes significance. Subsection (1) of section 140 enables a registered person other than a person who has opted for payment of tax on composition basis to carry forward CENVAT credit of eligible duties in relation to the period ending with the day immediately preceding the appointed day under the existing law in such manner as may be prescribed. Subsection (2) of section 140 provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the nature of concession. For valid reason, law can always be framed not granting such concession in certain cases. 19. The legislature, as we have noted, made a clear and conscious demarcation between capital goods and inputs when it comes to availing credit of the duties paid on the goods which are in transit. When the entire tax structure was being replaced by the GST provisions, there would arise a need for making transitional arrangements. Chapter XX of the CGST Act, as noted, contains transition provisions. Section 140 contained in the said chapter makes detailed provisions for transitional arrangements for input tax credit. Subject to contentions and in the manner as may be prescribed, the unused tax credit would be migrated to the GST regime. This section also would enable a registered person to claim credit of the duty paid prior to the appointed day on the inputs even though the inputs may be received after the appointed day. This section consciously does not provide any such facility in relation to the capital goods in transit. This demarcation itself would not be artificial, arbitrary or in any manner, discriminatory. The capital goods and inputs used in manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accepted, that the legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation. 8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. ... ... ... 10. The court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orari, conditions specified in section 10 must be fulfilled. In that hue, we find that section 10 makes original tax invoice relevant for the purpose of claiming tax. Therefore, under the scheme of the VAT Act, it is not permissible for the dealers to argue that the price as indicated in the tax invoice should not have been taken into consideration but the net purchase price after discount is to be the basis. If we were dealing with any other aspect de hors the issue of ITC as per section 19 of the VAT Act, possibly the arguments of Mr. Bagaria would have assumed some relevance. But, keeping in view the scope of the issue, such a plea is not admissible having regard to the plain language of sections of the VAT Act, read along with other provisions of the said Act, as referred to above." 23. In case of Godrej & Boyce Mfg. Company Prvt. Limited vs. Commissioner of Sales Tax & Ors., reported in [1992] 3 SCC 624, the Supreme Court had upheld a rule which restricted availment of MODVAT Credit to six months from the date of the documents specified in the proviso. The contention that such amendment would take away an existing right was rejected. In case of State of Gujarat v. Reliance In ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
