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TMI Blog2023 (7) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... reby distinguishing other tax payers on account of COVID-19 pandemic is arbitrary, illegal and violative of Article 14 of Constitution of India. (d) That the action of Respondent No. 1 in passing summary order vide ref No. ZD370322002865K, dated 15.3.2022 in Form GST DRC-07 under the GST Acts, without serving proper show cause notice in Form GST DRC-01 and granting sufficient opportunity to the petitioner U/s 74(5) of the Act and not considering petitioner's submissions and COVID- 19 limitations r/w Amnesty Notifications but confirming the demand of tax, interest and penalty by restricting the credit with erroneous facts in spite of collection of late fee of Rs. 10,000/- for the delay for filing the returns is not only violative of principles of natural justice but also arbitrary, improper, illegal and violative of Article 14, 19(1)(g), 20, 21 and 300-A of Constitution of India and consequently set aside the summary order / proceedings of the 1st respondent as null and void and pass such other order deemed fit in the circumstances of the case. 2. Petitioner's case briefly is thus: (a) Petitioner is a sole proprietorship doing business in hardware and plywood with the trade n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotted to the 1st respondent. Further, the notice was sent in Form GST DRC-01 as per Rule 142 of GST Rules, 2017 and various contentions raised by the petitioner in his reply have been considered in a just and proper manner and without any bias and they were rejected on cogent reasons. Further, before passing order, in terms of Section 75(4) and (5) of GST Act, 2017 a brief show cause notice was issued and an opportunity of personal hearing was given to the petitioner. Thereby principles of natural justice were followed. As the reply filed by the petitioner was not in accordance with the provisions of GST Act and Rules, 2017 the same was rightly rejected. Therefore, it is false to core to contend that the reply filed by the petitioner was not considered before passing the impugned order. No provisions of Articles 14, 16 and 19(1)(g) of the Constitution of India have been infringed in the instant case. In fact those Articles have no relevancy to the case on hand. (c) It is further contended that in view of plethora of decisions of Apex Court reiterating that short circuiting of the statutory remedies is not permissible when statutory alternative remedy is available, the writ pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counter averments. 5. Heard arguments of Sri Rama Krishna Kumar Potturi, learned counsel for petitioner, learned Advocate General representing the respondents 1 & 2 and the Deputy Solicitor General Sri N.Harinath representing the 3rd respondent. 6. The following points emerge for consideration: (1) Whether by virtue of imposition of time limit for claiming Input Tax Credit (ITC), Section 16(4) of the APGST Act and CGST Act, 2017 violated Article 14, 19(1)(g) and 300A of the Constitution of India and thereby, liable to be struck down? (2) Whether Section 16(2) of the APGST / CGST Act, 2017 would prevail over 16(4) of APGST / CGST Act, 2017 and thereby if the conditions laid down in Section 16(2) of the APGST / CGST Act, 2017 are fulfilled, the time limit prescribed under Section 16(4) of the APGST / CGST Act, 2017 for claiming ITC will pale into insignificance? (3) Whether the acceptance of Form GSTR-3B returns of March 2020 filed on 27.11.2020 by the petitioner with a late fee of Rs. 10,000/- will exonerate the delay in claiming the ITC beyond the period specified under Section 16(4) of the APGST / CGST Act, 2017? (4) Whether summary of the order dated 15.03.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drop of facts, the imposition of interest and 100% of penalty that too without giving an opportunity of hearing the petitioner is atrocious and liable to be set aside. He placed reliance on (i) Graintoch Industries Ltd. v. Commissioner of C. EX, Aurangabad 1 2014 (310) E.L.T 812 (Trl. - Mumbai ) (ii) Sr. Post Master v. Commissioner of C. EX. & S.T. Bolpur 2016 (42) S.T.R. 542 (Tri. - Kolkata) (iii) Candid Security Services v. Commissioner of C. EX. & S.T., Raipur 2019 (28) G.S.T.L. 281 (Tri. - Del) (iv) Electic Developers Ltd. v. Commissioner of Central Excise, Goa 2019 (24) G.S.T.L. 459 (Tri - Mumbai). 9. Arguments of Advocate General: In oppugnation, the perspicuous argument of learned Advocate General is in the lines that it is misnomer to elevate the refund claim of ITC to the level of an unbridled legal right where in reality, it is no more than a statutory rebate or a mere concession given to a GST taxpayer as has been reverberated in a slew of judgments. He placed reliance on Jayam and co. v. Assistant Commissioner 2016 (15) SCC 125 = [MANU/SC/0956/2016], USA Agencies v. The Commercial Tax Officer 2013(5) CTC 63, ALD Automotive Private Limited v. Commercial Tax Officer (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 2020 and thereby claimed ITC of Rs. 4,78,626/- irregularly in contravention of the provisions under Section 16(4) of the APGST Act / CGST Act read with Section 20 of the IGST Act, 2017. S.No. Year Tax period GSTR 3B RETURN Prescribed date for filing for the month of succeeding year September Amount of ITC irregularly claimed under all acts Due date for filing Date of filing 1. 2019-20 Mar 2020 30.06.2020 27.11.2020 20.10.2020 4,78,626 (a) The petitioner was served with show cause notice, for which he filed written objections and according to the Department, personal hearing was accorded on 02.03.2022. The impugned assessment order dated 14.03.2022 would show, the petitioner had taken about 10 factual and legal objections which were discussed and rejected by 1st respondent in the impugned order by confirming the demand of Rs. 11,24,994/- comprising (i) tax of Rs. 4,78,626/- (ii) interest of RS. 1,67,742/- and (iii) penalty of Rs. 4,78,626/- (b) Of the objections raised, objection Nos. 6 and 7 are important, the substance of which is that in view of the non-obstante clause employed in Section 16(2) of the APGST Act / CGST Act, it would have primacy over Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APGST Act/CGST Act. Before examining the effect of Section 16(2) and (4) of APGST/CGST Act it is relevant to ruminate the cardinal principle of interpretation. In Reserve Bank of India v. Peerless General Finance and Investment Co Ltd AIR 1987 SC 1023 = MANU/SC/0073/1987, the Apex Court observed thus: "Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. 3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022] (c) subject to the provisions of [section 41] [Substituted for "Section 41, CGST (Amdt.) Act, 2018 (31 of 2018, dt.30-8-2018. Effective date yet to be notified] [***] [Words "or section 43A" omitted by Finance Act, 2022], the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: PROVIDED that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: PROVIDED FURTHER that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: PROVIDED ALSO that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not be entitled to claim ITC if his case falls within the limitations prescribed under sub-sections (3) and (4). (a) Pithily stating the eligibility criteria prescribed under sub-section (2) is thus: (i) The assessee shall be in possession of tax invoice or debit note or such other taxpaying documents as issued by a registered supplier. (ii) The assessee has physically received the goods or services or both. Provided, where the goods against invoices are received in lots or instalments, assessee shall be entitled to take ITC upon receipt of a last lot or instalment; (iii) The tax charged in respect of such supply has been actually paid to the Government (iv) The assessee has furnished the return under Section 39 (b) Then sub-section (3) imposes condition on ITC saying that where the assessee claimed depreciation on the tax component of the cost of capital goods and plant & machinery under the Income Tax Act, 1961, then ITC shall not be allowed on such tax component. (c) Then sub-section (4) prescribes another limitation for claiming ITC. It says that an assessee shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court observed: "22. On a conspectus of the above authorities it emerges that the non obstante clause is appended to a provision with a view to give the enacting part of the provision an overriding effect in case of a conflict." (iv) In Maru Ram v. Union of India AIR 1980 SC 2147 =MANU/SC/0159/1980 the Apex Court referred the ratio in Godse's case MANU/SC/0156/1961 and observed thus: "20. We cannot agree with counsel that the non obstante provision impliedly sustains. It is elementary that a non obstante tail should not wag a statutory dog (see for similar idea, "The Interpretation and Application of Statute's by Reed Dicker-son, p, 10). This Court has held way back in 1952 in Aswini Kumar Chose, MANU/SC/0022/1952 : [1953] 4 SCR1 that a non obstante clause cannot whittle down the wide import of the principal part. The enacting part is clear and the non obstante clause cannot cut down its scope" (v) In A.G Varadarajulu v. State of Tamilnadu reported in MANU/SC/0232/1998: (1998) 4 SCC 231, observed that it is well settled that while dealing with a non-obstante clause under which the legislature wants to give overriding effect to a section, the court must try to find out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in it are satisfied. Therefore, Section 16(2) in terms only overrides the provision which enables the ITC i.e., Section 16(1). This is evident from the manner in which Section 16(2) is couched. The non obstante clause in Section 16(2) is followed by a negative sentence "no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless". This negative sentence pellucidly tells that unless the conditions mentioned in Section 16(2) are satisfied, no credit will be eligible. This stipulation manifests that Section 16(2) is not an enabling provision but a restricting provision. What it restricts is the eligibility which was otherwise given U/s 16(1). (a) It should be noted, when a non obstante clause is a mere restricting provision, an interpretation that the other restricting provisions will not have effect or that the restricting provision will restrict other restricting provisions cannot be accepted for the reason that there is no contradiction between the restricting clause followed by non obstante and other restricting provisions. In R.S. Raghunath's case (supra 21) the Apex Court held thus: "11. Xxxx. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for availing ITC, there was no necessity to insert a specific provision U/s 16(4) and to further intend to override it through Section 16(2) which is a futile exercise. 20. Then the next contention of the petitioner is that since Form GSTR-3B return of March, 2020 filed on 27.11.2020 by the petitioner was accepted with a late fee of Rs. 10,000/-, such acceptance will exonerate the delay in filing return U/s 16(4) and therefore along with his return, the ITC claim shall also be considered. In our considered view this argument holds no much force for the reason that the conditions stipulated in Section 16(2) and (4) are mutually different and both will operate independently. Therefore, mere filing of the return with a delay fee will not act as a springboard for claiming ITC. As rightly argued by learned Advocate General, collection of late fee is only for the purpose of admitting the returns for verification of taxable turnover of the petitioner but not for consideration of ITC. Such a statutory limitation cannot be stifled by collecting late fee. 21. The further argument of the petitioner that Section 16(4) of APGST/CGST Act, 2017 violates Article 14, 19(1)(g) and 300-A of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India. IN that context while upholding the time prescription U/s 19(11) of the said Act the Apex Court on the following aspects observed thus: (i) Interpretation of taxing statutes: "36. This Court had the occasion to consider the Karnataka Value Added Tax Act, 2013 in State of Karnataka v. M.K. Agro Tech. (P) Ltd. This Court held that it is a settled proposition of law that taxing statutes are to be interpreted literally and further it is in the domain of the legislature as to how much tax credit is to be given under what circumstances. The following was stated in para 32: (SCC p. 223) "32. Fourthly, the entire scheme of the KVAT Act is to be kept in mind and Section 17 is to be applied in that context. Sunflower oil cake is subject to input tax. The legislature, however, has incorporated the provision, in the form of Section 10, to give tax credit in respect of such goods which are used as inputs/raw material for manufacturing other goods. Rationale behind the same is simple. When the finished product, after manufacture, is sold, VAT would be again payable thereon. This VAT is payable on the price at which such goods are sold, costing whereof is done keeping in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 19: "39. The constitutional validity of Section 19(20) was upheld. The above decision is a clear authority with proposition that input tax credit is admissible only as per conditions enumerated under Section 19 of the Tamil Nadu Value Added Tax Act, 2006. The interpretation put up by this Court on Sections 3(2) and 3(3) and Section 19(2) is fully attracted while considering the same provisions of Sections 3(2) and 3(3) and the provision of Section 19(11) of the Act. The statutory scheme delineated by Section 19(11) neither can be said to be arbitrary nor can be said to violate the right guaranteed to the dealer under Article 19(1)(g) of the Constitution." (iv) With regard to time prescription laid under section 19(11): "40. The alternative submission pressed by the learned counsel for the appellant was that Section 19(11) cannot be held to be mandatory and it is only a directory provision, non-compliance with which cannot be ground of denial of input tax credit to the appellant. The conditions under which input tax credit is to be given are all enumerated in Section 19 as noticed above. The condition under which the concession and benefit is given is always to be stri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Input Tax Credit can be claimed must be strictly observed." Regarding constitutional validity of fiscal legislation, the Court further observed thus: "61. Constitutional Validity of Fiscal Legislation: When there is a challenge to the Constitutional validity of the provisions of a Statute, Court exercising power of judicial review must be conscious of the limitation of judicial intervention, particularly, in matters relating to the legitimacy of the economic or fiscal legislation. While enacting fiscal legislation, the Legislature is entitled to a great deal of latitude. The Court would interfere only where a clear infraction of a Constitutional provision is established. The burden is on the person, who attacks the Constitutional validity of a statute, to establish clear transgression of Constitutional principle." 24. In Willowood Chemicals Pvt Ltd. v. Union of India (supra) before Gujarat High Court, inter alia the rule 117 of CGST Rules which prescribed the time limit for making declaration of available tax credits as on 30.06.2017 was challenged as ultra vires to the Constitution and it was contended such time limit should be read as directory and not mandatory. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, merely because the rule in question prescribes a time frame for making a declaration, such provision cannot necessarily be held to be directory in nature and must depend on the context of the statutory scheme." 25. Though above decisions deal with ITC claim related to the concerned State laws, however since concept of ITC is one and the same, those decisions will equally apply to the case on hand. Thus, it is clear that ITC being a concession/benefit/rebate, the legislature is within its competency to impose certain conditions, including time prescription for availing such right and the same cannot be challenged on the ground of violation of Constitutional provisions. As rightly argued by learned Advocate General, the operative spheres of those Articles is different from that of Section 16. In order to establish legislative arbitrariness, it must be proved that the action was not reasonable or done capriciously or at pleasure, non rational, not done or acting according to reason or judgment but depending on the will alone. Then only it can be held to have violated Article 14 of the Constitution vide State of Tamilnadu & others v. K. Syam sundar (supra). 26. We have gone thr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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