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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 ..... eria with Section 16 of APGST Act, 2017 with minor differences which are not much relevant in the present context. Hence this section needs no much elaboration. When analyzed, Section 16(2) shall not appear to be a provision which allows input tax credit, rather ITC enabling provision is Section 16(1). On the other hand, Section 16(2) restricts the credit which is otherwise allowed to only such cases where conditions prescribed 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). It should be noted, when a non obstante cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rejected by the 1st respondent. Hence there are no force in the present contentions. Petition dismissed. - HON BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON BLE SRI JUSTICE T. MALLIKARJUNA RAO For the Petitioner: Sri Rama Krishna Kumar Potturi For the Respondent : Learned Advocate General Nos.1 and 2 and The Deputy Solicitor General for 3rd respondent ORDER: (PER HON BLE SRI JUSTICE U. DURGA PRASAD RAO) The petitioner prays for writ of mandamus declaring (a) Section 16(4) of APGST Act, 2017 and Section 16(4) of CGST Act, is violative of Article 14, 19(1)(g) and Section 300-A of Constitution of India. (b) That the non-obstante clause in Section 16(2) of APGST/CGST Act, 2017 would prevail over Section 16(4) of APGST / CGST Act, 2017. (c) That notification issued by Government of Andhra Pradesh vide G.O.Ms. No. 264, dated 11.09.2020 and providing extension of time for filing returns only to the non-resident and not allowing such extension to the others and thereby 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. Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te confirmed that he already filed his reply dated 17.01.2022. (f) Subsequently the petitioner received e-mail dated 14.03.2022 sent by the 1st respondent along with an attachment containing order vide AOO No. ZH370322OD48625, dated 14.03.2022 whereunder, without considering the objections raised by the petitioner in his reply, the 1st respondent wrongly held as if the petitioner made an irregular claim of ITC of an amount of Rs. 4,78,626/- and fixed Rs. 11,24,994/- towards tax, penalty and interest. Hence the writ petition. 3. 1st respondent filed counter contending thus: (a) The writ petition is perverse and liable to be dismissed in limini as the writ petition cannot be filed contrary to the legislative intent. Further, the petitioner has an efficacious alternative remedy of appeal. (b) It is false to allege that notice dt: 16.12.2021 was sent by department through private e-mail ID. The said e-mail ID is the official e-mail ID 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery purpose of the limitation prescribed in the enactment. Therefore, it is the primary obligation of the taxable person to scrupulously abide the statutory obligations. (d) It is not obligatory on the part of Assessing Authority to issue opportunity under Section 74(5) of the APGST / CGST Acts, 2017 as it is only optional. The petitioner obtained registration voluntarily and therefore, there is no separate provision or special exemption for the taxable person. (e) It was only a proposal made to levy penalty at the rate equivalent to the amount of Input Tax irregularly claimed as the petitioner was reminded with an option for reduced penalty @ 25% of tax demanded if the petitioner pays tax and applicable interest within 30 days from the date of issuance of show cause notice. But the petitioner did not exercise this option also. Hence the writ petition is liable to be dismissed. 4. The petitioner filed a lengthy reply denying 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 follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is entitled to claim and placing stumbling blocks by way of imposing time limit under Section 16(4) of the APGST / CGST Act, 2017 from claiming such right tantamount to violation of Article 14, 19(1)(g) and 300A of the Constitution of India. He would further argue, Section 16(2) of APGST Act / CGST Act, 2017 which commences with a non-obstantee clause will override Section 16(4) of the said Act, meaning thereby, if the conditions mentioned in Section 16(2) are complied with by an assessee, he will be entitled to claim ITC without reference to the time limit prescribed under Section 16(4) and in the instant case, since the 1st respondent permitted the petitioner to file return with late fee of Rs. 10,000/-, the petitioner cannot be deprived of the right of ITC on the sole ground that claim was made beyond the period prescribed under Section 16(4). (a) Learned counsel would argue that in the backdrop 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d arbitrariness must be manifest from the provision impugned. In this context he relied upon State of Tamil Nadu v. K. Shyam Sunder (2011) 8 SCC 737 . Learned Advocate General while supporting the exaction of interest and 100% of penalty on the tax due, argued that the petitioner alone was not the sufferer of COVID-19 pandemic prevalent circumstances and other traders of his ilk who were under similar circumstances have filed their returns in due time and therefore the petitioner cannot be given special treatment. He thus prayed to dismiss the writ petition. 10. Court s Findings: The precise reason why the Department proposed to levy tax, penalty and applicable interest invoking powers under Section 74(1) of the APGST Act, 2017 is that the petitioner filed monthly returns belatedly as mentioned below, after due date prescribed under Section 39 of the APGST Act, 2017 for the month of September 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Acts to eradicate cascading effect of taxes which existed under Excise, VAT and Service tax. Input Tax is the tax paid by the buyer on purchase of goods or services. Such tax which is paid by the purchaser can be reduced from the liability payable on outward supplies known as Output Tax. Precisely input tax credit is the tax reduced from output tax payable on account of sale. For instance A purchased goods worth Rs. 18,000/- on which he paid GST of Rs. 3,240/- at 18%. Then he sold goods worth Rs. 22,000/- whereon GST payable @ 18% is Rs. 3,960/-. Thus the net GST payable after availing input tax credit is Rs. 720/- (3,960-3,240). In that manner the assessee gets the ITC. Under Section (2) (63) of APGST Act, 2017 an Input Tax Credit means the credit of Input Tax. 12. Be that as it may, the controversy revolves around the interpretation of Section 16 (2) and (4) of 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.] (c) subject to the provisions of [Section 41 or Section 43A], the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization 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 installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment: Provisional Reversal of ITC 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered person has received the goods or, as the case may be, services- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person;] [Substituted by the CGST (Amdt.) Act, 2018 (31 of 2018), dt. 30-08-2018, w.e.f. 1-2-2019 vide Noti. No. 02/2019-Central Tax, dt. 29-1-2019.] [(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;] [Inserted by Finance Act, 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 supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of said section for the month of March, 2019.] [Inserted vide Removal of Difficulties Order, 2018-Central Tax, dt. 31-12-2018, w.e.f. 31-12-2018] 15. On a careful scrutiny, Section 16 of the APGST Act, 2017 prescribes the eligibility and conditions for a GST assessee to claim credit of Input Tax which was charged on any supply of goods or services or both which were used or intended to be used in the course of furtherance of his business. Precisely while Section 16 sub-section (2) prescribes the eligibility criteria which is sine qua non for claiming ITC, subsection (3) and (4) impose conditions or limitation for claiming ITC. In other words, even if an assessee passes basic eligibility criteria imposed under section 16(2), still he will 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw for the time being in force, or in any contract is more often than not appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision of the Act or the contract mentioned in the non-obstante clause. It is equivalent to saying that in spite of the provision of the Act or any other Act mentioned in the non-obstante clause or any contract or document mentioned the enactment following it will have its full operation or that the provisions embraced in the non-obstante clause would not be an impediment for an operation of the enactment (iii) In R.S Raghunath v. State of Karnataka AIR 1992 SC 81 = MANU/SC/0012/1992 the Apex 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 element ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons over some other contradictory provisions in the same or other statute. The Court shall try to find out the extent to which the legislature had intended to give the overriding effect to the enacting part of the provision succeeding to the non obstante clause over rest of the provision. Now the pertinent question is whether Section 16 Sub Section (2) overrides the rest of the Section particularly Sub Section (4). 19. When analyzed, Section 16(2) shall not appear to be a provision which allows input tax credit, rather ITC enabling provision is Section 16(1). On the other hand, Section 16(2) restricts the credit which is otherwise allowed to only such cases where conditions prescribed 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) ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation, will not be overridden by non obstante provision U/s 16(2). As already stated supra 16(4) only prescribes time restriction to avail credit. For this reason, the argument that 16(2) overrides 16(4) is not correct. Thus in substance Section 16(1) is an enabling clause for ITC; 16(2) subjects such entitlement to certain conditions; Section 16(3) and (4) further restrict the entitlement given U/s 16(1). That being the scheme of the provision, it is out of context to contend that one of the restricting provisions overrides other two restrictions. The issue can be looked into otherwise also. If really the legislature has no intention to impose time limitation 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 22. In ALD Automotive Pvt. Ltd s case (supra) Section 19(11) of Tamilnadu VAT Act, 2006 which imposes time limit for claiming input tax credit was challenged on the ground that it was arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is not admissible to all kinds of sales and certain specified sales are specifically excluded. (b) Concession of ITC is available on certain conditions mentioned in this section. (c) One of the most important condition is that in order to enable the dealer to claim ITC it has to produce original tax invoice, completed in all respect, evidencing the amount of input tax. 38. This Court further held that it is a trite law that whenever concession is given by a statute the conditions thereof are to be strictly complied with in order to avail such concession. (iii) Constitutional validity of Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is granted by the State Government so that the beneficiaries of the concession are not required to pay the tax or duty which they are otherwise liable to pay under TN VAT Act. While so extending the concession, it is open to the Legislature to impose conditions. Section 19(11) is one such condition imposed making it mandatory for the registered Dealer to claim Input Tax Credit before the end of the financial year or before ninety days from the date of purchase, whichever is later. The entitlement to claim Input Tax Credit is created by TN VAT Act and the terms on which 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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