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TMI Blog2020 (7) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner to file Form GST TRANS 1 either electronically or manually to claim the transitional input tax credit of ₹ 4,70,008/-. 2. The Petitioner is a proprietary concern involved in the retail trade of mobile phones, electrical, electronic, and other items. Earlier, the Petitioner was registered as a dealer under the Tamil Nadu Value Added Tax Act, 2006 (the TNVAT Act) and, upon the coming into force of the CGST Act, the Integrated Goods and Services Tax Act, 2017 (the IGST Act) and the State Goods and Services Act, 2017 (the SGST Act) (two or more of which are referred to as the GST laws) on 01.07.2017, the Petitioner obtained registrations under the GST laws. When the CGST and SGST Acts were introduced, as a transitional measure, the carry forward of credit for taxes paid on inputs under previously existing indirect tax laws, which may be referred to as transitional ITC (Transitional ITC), was enabled by making provision in respect thereof. In terms thereof, according to the Petitioner, he is entitled to avail Transitional ITC of ₹ 4,62,496/- under the head of CGST and ₹ 7,512/- under the head of SGST under the respective GST laws. 3. Section 140 of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and (v) the supplier of services is not eligible for any abatement under this Act: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oriented Unit or a unit located in Electronic Hardware Technology Park, the credit shall be allowed to the extent as provided in sub-rule (7) of rule 3 of the CENVAT Credit Rules, 2004. (1A) Notwithstanding anything contained in sub-rule (1), the Commissioner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN-1 by a further period not beyond 31st March, 2020, 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. (2) Every declaration under sub-rule (1) shall- (a) in the case of a claim under sub-section (2) of section 140, specify separately the following particulars in respect of every item of capital goods as on the appointed day- (i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and (ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day; (b) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing conditions, namely:- (4) (b) (i) such goods were not unconditionally exempt from the whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule; (4) (b) (ii) the document for procurement of such goods is available with the registered person; (4) (b) (iii) The registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2), submits a statement in FORM GST TRAN 2 by 31st March 2018, or within such period as extended by the Commissioner, on the recommendations of the Council, for each of the six tax periods during which the scheme is in operation indicating therein, the details of supplies of such goods effected during the tax period; 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, 2020. (4) (b) (iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents 3 and 4. 8. The 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. As a corollary, a person does not lose the right to ITC upon default in submitting the declaration in time. Although a constitutional challenge is made in the writ petition, the learned counsel conceded that such constitutional challenge was not being pressed. Nonetheless, the learned counsel submitted that Rule 117 is ultra vires Section 140 of the CGST Act and, at a minimum, is liable to be construed as a directory provision in so far as it specifies a time limit for the submission of the declaration in Form GST TRAN-1. In support of this contention, the learned counsel pointed out that the tax authorities were fully cognizant of the fact that registered persons were unable to submit the on line declaration within the prescribed period on account of technical glitches. This is evident from the fact that the time limit was subsequently extended by inserting Sub Rule 1-A in Rule 117 whereby the Commissioner was pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court held in ALD Automotive that the time limit for filing the tax return under Section 19(11) of the TNVAT Act was mandatory because it used the word shall . By analogy, he contended that the time limit in Rule 117 should also be construed as mandatory. With regard to the judgment of the Division Bench of the Delhi High Court, he pointed out that the operation of the said judgment was stayed by the Supreme Court and that there was a judgment of the Division Bench of the Bombay High Court to the contrary. 11. We considered the submissions of the learned counsel for the respective parties and examined the records. 12. 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. At the time of arguments, the learned counsel for the Petitioner did not pursue the constitutional challenge. As regards the contention that Rule 117 is ultra vires Section 140 of the CGST Act, on examining Rule 117 of the CGST Rules and Section 140 of the CGST Act, we find that Section 140 stipulates that a registered person making a claim for input tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication, etc. the conditions thereof are to be strictly complied with in order to avail such concession. Thus, it is not the right of the dealers to get the benefit of ITC but it is a concession granted by virtue of Section 19. As a fortiori, 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 dehors 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. 14. The judgment in ALD Automotive (cited supra) dealt with the question whether the time limit in Section 19(11) of TNVAT is mandatory or directory. Paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. In drawing this conclusion, the Court relied on the judgment of the Delhi High Court in Brand Equity Treaties Ltd. v. Union of India [(2020) Taxmann.com 415] (Brand Equity Treaties) and Micromax Informatics (cited supra) , wherein the Court held that CENVAT credit had accrued and vested in the assessee and is, consequently, the property of the assessee. By order dated 19.06.2020 in SLP Nos 7425-7428 of 2020, the Hon'ble Supreme Court granted a stay of the operation of the judgment in Brand Equity Treaties. At this juncture, it is pertinent to point out that Brand Treaty Equities was decided prior to the amendment to Section 140 of the CGST Act whereby the words within such time were introduced. On the other hand, SKH Sheet Metals Components was decided after the amendment; nonetheless, the Delhi High Court concluded that the amendment settles the question as to the power to frame rules fixing the time limit for filing the declaration but does not fix a time limit for transitioning credit. 16. By contrast, a Division Bench of the Bombay High Court interpreted Rule 117 of the CGST Rules in Nelco Limited v. Union of India [2020 SCC Online Bom 437] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transitioning credit by also referring to the repeated extensions of time. Given the fact that the power to prescribe a time limit is expressly incorporated in Section 140, which deals with Transitional ITC, and Rule 117 fixes such a time limit, we are unable to subscribe to this view. The fact that such time limit may be extended under circumstances specified in Rule 117, including Rule 117A, does not lead to the sequitur that there is no time limit for transitioning credit. In this context, reference may be made to Section 16(4) of the CGST Act which provides as follows: Section 16(4): A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under Section 39 for the month of September following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. The above provision is indicative of the legislative intent to impose time limits for availing ITC. Besides, Section 19(3)(d) of the TNVAT Act itself imposed a time limit for availing ITC and further p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 19.We also note that 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/-. Needless to say, if any dispensations are granted by the tax authorities with regard to availing of Transitional ITC, whether by filing Form GST TRAN- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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