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TMI Blog2022 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 3, such restrictions shall cease to have effect after the expiry of a period of one year from the date of imposing such restrictions. The key word which falls for interpretation is the word available - The word available occurring in Rule 86 (1) cannot be read in isolation and it has to be read along with the remaining words which is in the electronic credit ledger has been fraudulently availed or is ineligible , has been fraudulently availed would undoubtedly denote a situation which has occurred in the past. What is the duty of the Court? It is to examine the true intention of the legislature. It is the domain of the legislature to determine what is best for the public good and to provide for it by proper legislation, it is the domain of a Court to expound the law not to legislate. Rule 86A falls in Chapter IX of the Rules which deals with payment of tax. Rule 85 deals with Electronic Liability Register. In terms of Sub-rule (7) of Rule 85, a registered person shall, upon noticing any discrepancy in his electronic liability ledger, communicate the same to the officer exercising jurisdiction in the manner, through common portal in FORM GST PMT- 04 - The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant was issued three show-cause notices which were served in 20.01.2022 and 28.01.2022. It was stated that in terms of Section 42(1) (a) of WBGST / CGST Act the details of every inward supply furnished by a registered person for a tax period shall, in such manner and within such time as may be prescribed, be matched with the corresponding details of outward supply furnished by the corresponding registered person, the supplier, in his valid return for the same tax period or any preceding tax period. It was stated that as per the data based record, there is a mismatch between the appellant s input tax credit Form GSTR-2A (auto-populated) from details of outward supplies furnished by the appellant s suppliers in their respective GSTR-1 and GSTR-3B for the tax periods from April 2018 to March 2019, March 2019 to March 2020 and April 2020 to March 2021 which is inadmissible as per the provisions of the WBGST / CGST Act, 2017. The appellant was advised to furnish an explanation by 4th February, 2022 or pay the amount of tax as assessed in the show-cause notices along with applicable interest through online mode failing which demand order containing tax, interest and penalty will be iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king of credit in the electronic credit ledger only to the extent the credit is available in the electronic credit ledger and on the date when the order was passed there was no credit available in the appellant s electronic credit ledger. Therefore, the blocking is in the nature of negative blocking which is not provided for under Rule 86A of the said Rules. Further, it is submitted that the learned Writ Court ought to have taken into account that when the reasons to believe by the proper officer that the credit of the input tax available in the electronic credit ledger has been fraudulently availed or ineligible as stated under Rule 86 of the said Rules has culminated into a show-cause notice under Section 73/74 of the Act, the blocking of the electronic credit ledger cannot be sustained. Further, it is reiterated that negative blocking of the electronic credit ledger would certainly amount to permanent recovery of the alleged ineligible input tax credit even before the conclusion of the adjudication as the appellant would have to additionally make the payment to the extent of the blocked input tax credit before discharging its output liability by claiming the input tax credit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Gujarat and Ors. MANU/GJ/0631/2022 and Milap Scrap Traders Versus State/Commercial Tax Officer MANU/GJ/0796/2022. With the above submissions the learned Advocate prayed for setting aside the order dated 23.05.2022 passed by the first respondent thereby revoking the blocking of the appellant s electronic credit ledger. 5. Mr. T.M. Siddiqui, learned Additional Government Pleader appearing for the respondent submitted that the conduct of the appellant has to be taken note of. Though the show-cause notices were served on the appellant on 20.01.2022/ 28.01.2022, reply was submitted only on 13.06.2022 that too after the writ petition was filed before this Court. Further, the representation praying for extension of time to submit reply was given only on 31.05.2022 and by then the first respondent has already passed the order dated 23.05.2022 blocking the electronic credit ledger of the appellant. It is further submitted that proceedings have already been initiated under Section 73/74 of the Act and it is for the appellant to contest the show-cause notice and participate in the adjudication proceedings. Further, it is submitted that a careful reading of Rule 86A of the Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail and it does not relate to the input tax credit available on the date when Rule 86A of the Rules is invoked and in this regard, the word has been used in rule 86A was held to leave no manner of doubt in that regard. 6. Therefore, it is submitted that the appellant should be directed to participate in the adjudication proceedings and the first respondent should be at liberty to consider the submissions and take a decision in the matter. With the above submissions, the learned Additional Government Pleader prayed for dismissal of the appeal. 7. We have elaborately heard the learned advocates for the parties and the carefully perused the materials available on record. 8. Before we examine the correctness of the submissions made on either side and in what manner Rule 86 A of the said rules is to be interpreted, we need to clarify as to what is the right conferred on the appellant to be entitled to claim input tax credit. In the Memorandum of Appeal, the appellant has contended that the right to claim tax credit is a vested right and the authority is not entitled to restrict the appellant from exercising such vested right. This contention raised by the appellant is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it notes or any other document prescribed under rule 36 in respect f any supply, the tax charged in respect of which has not been paid to the Government; or (c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or (d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36. May, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under Section 49 or for claim of any refund of any unutilized amount. (2) The Commissioner, or the officer authorized by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit. (3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.] 10. Rule 86A deals with conditions of use of amount available in electronic credit ledger. In term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of the WBGST/CGST Act, 2017. The said provision deals with matching, reversal and reclaim of input tax credit. Sub-Section 1 of Section 42 of the CGST Act states that the details of every inward supply furnished by a registered person (recipient) for a tax period shall in such manner and within such time as may be prescribed to be matched with the corresponding details of outward supplies furnished by corresponding registered person (supplier) in his valid return for the same tax period or any preceding tax period. Therefore, the allegations based on which the show cause notice has been issued is due to the mismatch. Section 42(1)(a) not only refers to the mismatch in the returns for the same period but also for any preceding tax period. Therefore, to state that Rule 86A can be invoked only if there is a balance available in the credit ledger would tantamount to making the rule redundant and defeating the very purpose of enacting such a rule. It cannot be disputed rather to be admitted that the power is invoked prior to the finalization of the assessment or raising the demand. Equally it cannot be disputed that Rule 86A has not been framed to recover the credit fraudulently ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee) had either been fraudulently availed or the assessee was not eligible to avail the same. The words input tax available have to be read only in the context of the infringement being alleged by the revenue, i.e. fraudulent availment or availment dehors eligibility to the same. Consequently, if an assessee is found to have either fraudulently availed or to have availed such input tax credit that he was ineligible to avail, he may expose himself to action under the Rule in future, when such an event may come to the knowledge of the authorized officer, subject of course to the rule of limitation. Thus, the word available used in the first part of sub-Rules of Rule 86-A would always relate back in time when the assessee allegedly availed input tax credit either fraudulently or which he was not eligible to avail. It does not refer to and, therefore, it does not relate to the input tax credit available on the date of Rule 86-A being invoked. The word has been used in Rule 86-A(1) leave no manner of doubt in that regard. 11. We are required to be conscious of the fact that the subject matter of interpretation is a taxation enactment. It had been pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the legislature. It is the domain of the legislature to determine what is best for the public good and to provide for it by proper legislation, it is the domain of a Court to expound the law not to legislate. It is the duty of the Court to interpret the legislation by liberally interpreting the statute ( Directorate of Enforcement Versus Deepak Mahajan (1994) 3 SCC 440). 15. In Utkal Contractors Joinery (P) Ltd. Versus State of Orissa (1987) 3 SCC 279 , it was held: The reason for a statute is the safest guide to its interpretation. The words of a statute take colour from the reason for it. The reasons can be discovered from the external and internal aids. No provision in the statute and no word of the statute may be construed in isolation. Every provision and every word must be looked at generally before any provision or word is attempted to be construed. The setting and the pattern are important. Further, Parliament is neither expected to use unnecessary expressions nor is expected to express itself unnecessarily. Even as Parliament does not use any word without meaning something, Parliament does not legislate where no legislation is called for. Again, while t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nifests that what was available in the electronic credit ledger at the relevant time has been fraudulently availed or is ineligible. This interpretation alone would be in consonance with the object of the Act and Rules. One of the objectives of the CGST Act is to incentivize tax compliance by tax payers. An interpretation of Rule 86A which would render the object of the enactment is to be avoided. 20. Rule 86A falls in Chapter IX of the Rules which deals with payment of tax. Rule 85 deals with Electronic Liability Register. In terms of Sub-rule (7) of Rule 85, a registered person shall, upon noticing any discrepancy in his electronic liability ledger, communicate the same to the officer exercising jurisdiction in the manner, through common portal in FORM GST PMT- 04. Rule 86 deals with Electronic Credit Ledger, Sub-Rule (6) states that a registered person shall, upon noticing any discrepancy in his electronic credit ledger, communicate the same to the officer exercising jurisdiction in the matter, through the common portal in FORM GST PMT- 04. Chapter IX of the CGST Act would be relevant which deals with Returns . Section 37 deals with Furnishing details of outward supplies, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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