9911796707
TMI Blog2023 (12) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... seeks to challenge the constitutional validity of Section 16(4) of the CGST Act as violative of Articles 14, 19(1)(g) & 300A of the Constitution of India and further seeks a declaration that Section 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Sections 16(1) & 16(2) of the CGST Act, and eventually seeks to challenge the show cause notice dated 20-5-2022 (Annexure P-8) in light of Section 100 of the Finance Act, 2022 and to allow the ITC (Input Tax Credit) claimed in the month of March, 2019 and also to quash the proceedings initiated under Section 16(4) of the CGST Act by respondents No. 3 to 5 herein. 2. The constitutional validity of Section 16(4) of the CGST Act has been challenged on the following factual backdrop: - Relevant Facts 3. The petitioner is a proprietorship firm engaged in the trading of Oils and allied products thereof, registered under the provisions of the CGST Act as well as the Chhattisgarh Goods and Services Tax Act, 2017 having GSTIN: 22ACJPJ0020A1ZR and certificate of GST registration has been filed as Annexure P-1. It is further case of the petitioner that the petitioner being a trader, regularly pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , interest at applicable rate should not be demanded and recovered under Section 50 of the said Act and penalties should not be imposed under Section 73(9) of the said Act leading to filing of the instant writ petition questioning the constitutional validity of Section 16(4) of the CGST Act and eventually questioning the proceedings initiated for recovery of Rs. 9,43,920/- along with interest and penalties stating that the said recovery under Section 16(4) is violative of Articles 14, 19(1)(g) & 300A of the Constitution of India and that Section 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Section 16(1) & 16(2) and further called in question the recovery proceedings initiated in shape of show cause notice dated 20-5-2022. 4. Union of India has filed its return opposing the averments made in the writ petition stating inter alia that the writ petition as framed and filed is not maintainable and liable to be dismissed as premature, as the petitioner has also challenged the show cause notice issued by respondent No. 3 and same has till date not been adjudicated by the concerned authority and after adjudication of same by the compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return (Form GSTR-3B) should not be demanded and recovered along with applicable interest and penalty thereof. According to the learned counsel for the petitioner, ITC means the credit for input tax and Section 16(4) of the CGST Act provides a restriction on taking input tax credit based on time line as provided therewith. Whereas, Section 16(2) of the CGST Act is a non obstante clause starting with "Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax ...". Therefore, once the person claiming ITC satisfies the conditions of Section 16(2) of the CGST Act, the ITC becomes a vested right and cannot be taken away by virtue of time lines provided by the other provision, specifically Section 16(4), as Section 16(2) has an overriding effect over the other sub-sections of Section 16 including Section 16(4) and once all the conditions specified in Section 16(2) have been satisfied, the person claiming ITC vests upon him and cannot be taken away merely based on time lines. It is further submitted by learned counsel for the petitioner that it is the established principle of law that in construing the provisions of a non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling of return for September following the financial year to which ITC pertains. Returns under Section 39 of the CGST Act are allowed to be filed even after the due date September following the end of financial year and therefore the intention of law is not to bar the ITC by time lines by any means and therefore is bad in law. Finally, it is submitted that Section 16(4) of the CGST Act is also violative of Article 300A of the Constitution. Mr. Soni would rely upon the decision of the Calcutta High Court in the matter of Howrah Tax Payers' Association v. The Government of West Bengal and another 2010 SCC OnLine Cal 2520, that of the Gujarat High Court in the matter of M/s Siddharth Enterprises through Partner Mahesh Liladhar Tibdewal v. The Nodal Officer AIR OnLine 2019 Gujarat 355 and that of the Supreme Court in the matter of Chandavarkar Sita Ratna Rao v. Ashalata S. Guram (1986) 4 SCC 447 to bolster his submission. Submission on behalf of the Union of India: - 7. Mr. Ramakant Mishra, learned Deputy Solicitor General of India appearing for the Union of India / respondent No. 1, would submit that the petition as framed and filed against show cause notice would not be main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel appearing for respondents No. 3 to 5, would submit that the grant of input tax credit under Section 16 of the CGST Act is a concession or relaxation and nobody can claim it as a matter of vested right. The petitioner has no vested right to claim ITC except in accordance with Section 16(4) read with Section 44 of the CGST Act and Rule 61 of the CGST Rules. In that view of the matter, Mr. Kachhawaha would further submit that the show cause notice issued to the petitioner is strictly in accordance with the scheme of the CGST Act and therefore the writ petition deserves to be dismissed. Submission on behalf of Amicus Curiae 9. Mr. Neelabh Dubey, learned amicus curiae, would submit that Section 16 of the CGST Act lays down eligibility and certain conditions of taking input tax credit. A plain reading of the Section makes it abundantly clear that Section 16(1) is an enabling provision and Sections 16(2), (3) & (4) are restrictive provisions which list out certain mandatory conditions which are required to be followed to take credit of input tax credit as provided under Section 16(1). Section 16(4) imposes a condition that ITC cannot be claimed on the basis of invoice o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means: The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words. Re, Micklethwait, (1885) 11 Ex 452, p. 456. In a classic passage Lord Cairns stated the principle thus: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute.[Partington v AG, (1869) LR 4 HL 100 p 122 : 21 LT 370] Viscount Simon quote with approval a passage from Rowlatt J expressing the principle in the following words: In a taxing Act one has to look m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1998) 1 SCC 384] 15. The Constitution Bench of the Supreme Court in the matter of R.K. Garg v. Union of India (1981) 4 SCC 675, has enumerated established principles for interpreting law dealing with economic activities and held in paragraph 8 as under: - "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. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislature judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found (iii), the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence (iv), hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and (v), in the field of taxation, the Legislature enjoys greater latitude for classification." 19. From the principles laid down by their Lordships of the Supreme Court in the aforesaid cases, it is quite vivid that that the power of the legislature especially in fiscal statute is very wide and can only be challenged on two counts being it lacks legislative competence and that it infringes or takes away any of the fundamental rights or any of the constitutional provisions. However, in the instant case, the petitioner has challenged the constitutional validity of Section 16(4) of the CGST Act on the ground that it is violative of Articles 14, 19(1)(g) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 paid by him along with interest payable under section 50, 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 to the supplier 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 (43 of 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledger of such person subject to two conditions; (a) such conditions and restrictions as may be prescribed and (b) in the manner specified in Section 49. Sub-section (2) of Section 16 is a non obstante clause and states that 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 the conditions mentioned in clauses (a) to (d) are fulfilled. Sub-section (3) of Section 16 contemplates when the input tax credit on the tax component cannot be allowed i.e. 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. Sub-section (4) of Section 16, which has been called in question by the petitioner herein, clearly states that a registered person shall not be entitled to take input tax credit as defined under Section 2(63) after the due date of furnishing of the return under Section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. As such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Rules - which, as stated above, are conceived mainly in the interest of public - that he is entitled to such set-off. It is really a concession and an indulgence. More particularly, where the manufactured goods are not sold within the State of Maharashtra but are despatched to out - State branches and agents and sold there, no sales tax can be or is levied by the State of Maharashtra. The State of Maharashtra gets nothing in respect of such sales effected outside the State. In respect of such sales, the rule-making authority could well have denied the benefit of set-off. But it chose to be generous and has extended the said benefit to such out-State sales as well, subject, however to deduction of one per cent of the sale price of such goods sent out of the State and sold there. We fail to understand how a valid grievance can be made in respect of such deduction when the very extension of the benefit of set-off is itself a boon or a concession. It was open to the rule-making authority to provide for a small abridgement or curtailment while extending a concession. Viewed from this angle, the argument that providing for such deduction amounts to levy of tax either on purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified documents as prescribed thereunder a dealer cannot claim the benefits provided under Section 8 of the Act. Therefore, we are of the opinion that the requirements contained in Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory. Sections 12(1), (2) and (3) of the Central Sales Tax (R&T) Rules, 1957 provide that the registered dealer is required to file the declaration and the certificate referred to in Section 8(4) in Form C and D respectively. Form C is a declaration divided into three parts. All the three parts are identical, the first part of the form being the counter foil and the second part being the duplicate and the third part being the original. The counter foil is to be retained by the purchasing dealer. The original is to be filed before the Assessing Officer by the selling dealer to claim the concessional rate. The duplicate is to be retained by the selling dealer. If the C Form or the original part of it is lost whilst in the custody of the purchasing dealer or in transit, the purchasing dealer shall have to furnish an indemnity bond for the same as fixed by the authority concerned. If the original part of C Form is lost by the selling dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." Their Lordships 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, and observed in paragraph 12 as under: - "12. It is trite law that whenever concession is given by statute or notification, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot furnish either a valid basis for judicial review of the legislation or make out a ground for invalidating a validly enacted law unless it infringes constitutional parameters. While adopting the constitutional framework of a GST regime, Parliament in the exercise of its constituent power has had to make and draw balances to accommodate the interests of the States. Taxes on alcohol for human consumption and stamp duties provide a significant part of the revenues of the States. Complex balances have had to be drawn so as to accommodate the concerns of the States before bringing them within the umbrella of GST. These aspects must be borne in mind while assessing the jurisprudential vision and the economic rationale for GST legislation. But abstract doctrine cannot be a ground for the Court to undertake the task of redrawing the text or context of a statutory provision. This is clearly an area of law where judicial interpretation cannot be ahead of policy making. Fiscal policy ought not be dictated through the judgments of the High Courts or this Court. For it is not the function of the Court in the fiscal arena to compel Parliament to go further and to do more by, for instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same plane as the singular should not be applied. To construe "inputs" so as to include both input goods and input services would do violence to the provisions of Section 54(3) and would run contrary to the terms of Explanation I which have been noted earlier. Consequently, it is not open to the Court to accept the argument of the assessee that in the process of construing Section 54(3) contextually, the Court should broaden the expression "inputs" to cover both goods and services." 31. As such, ITC is a nature of benefit or concession extended to the dealer and it can be availed by the beneficiary as per the scheme of the statute subject to fulfillment of the conditions laid down in Section 16(4) of the CGST Act. In that view of the matter, Section 16(4) cannot be held to be violative of Article 14 of the Constitution. 32. Now, the next question for consideration is, whether the petitioner, which is a proprietorship firm, can claim protection of Article 19(1)(g) of the Constitution? 33. Article 19(1)(g) of the Constitution states as under: - "19. Protection of certain rights regarding freedom of speech, etc.-(1) All citizens shall have the right- (a) to (e) xxx xxx xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 14 of the Constitution and, therefore, it would be relevant to examine whether the respondents have committed breach of Article 14 by withdrawing the concession in electricity rates given/granted earlier." 37. Similarly, in Bennett Coleman & Co. (supra) also, the Supreme Court has held that a company does not have a fundamental right under Article 19 of the Constitution since it is not a citizen. It has been observed by their Lordships as under: - "11. This Court in State Trading Corporation of India Ltd. v. The Commercial Tax Officer, Visakhapatnam, and Tata Engineering and Locomotive Co. v. State of Bihar, expressed the view that a corporation was not a citizen within the meaning of Article 19, and, therefore, could not invoke that Article. The majority held that nationality and citizenship were distinct and separate concepts. The view of this Court was that the word "citizen" in Part II and in Article 19 of the Constitution meant the same thing. The result was that an incorporated company could not be a citizen so as to invoke fundamental rights. In the State Trading Corporation case (supra) the Court was not invited to "tear the corporate veil". In the Tata Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is means that only those provisions of Order 30 can be made applicable to proprietary concern which can be so made applicable keeping in view the nature of the case." 40. As such, in view of the aforesaid legal provision flowing from Article 19(1)(g) of the Constitution and the principles of law laid down by their Lordships of the Supreme Court, the petitioner herein, which has filed the present writ petition, is only a proprietorship firm and not a citizen and therefore cannot claim protection of Article 19(1)(g). It is held accordingly and this ground claiming protection of Article 19(1)(g) is not available to the petitioner, which is a proprietorship firm. 41. The next ground that has been raised on behalf of the petitioner that Section 16(4) of the CGST Act is violative of Article 300A of the Constitution of India, is also not at all made out, as Article 300A is 'right to property' which is the constitutional right and clearly provides that it cannot be taken away except in accordance with law. 42. The decision of the Supreme Court and that of the Calcutta High Court and the Gujarat High Court in Chandavarkar Sita Ratna Rao (supra), Howrah Tax Payers' Association (supra) an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
