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TMI Blog2024 (6) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... onal? - HELD THAT:- The Central Legislature and the State Legislature have been given concurrent power to enact laws to impose a tax on the supply of goods or services. GST legislation has been enacted under Article 246A, which empowers the Central and State legislatures to enact such a law. In view of the said provision, it cannot be said that the CGST/SGST Act has been enacted by the Legislature with no competence. It is also not the contention of the petitioners that the tax on the supply of goods and services is not for public purposes. The taxing statute can be declared unconstitutional if it infringes the fundamental rights guaranteed under Part III of the Constitution of India including Article 14. However, in view of the inherent complexity of fiscal adjustment of diverse elements, a larger discretion has to be permitted to the Legislature for classification so long as there is no transgression of the fundamental principles underlying the doctrine of classification. The Legislature must enjoy a wide and flexible power to enable the Legislature to adjust its system of taxation in all proper and reasonable ways - the mere fact that the tax is more on some goods/persons or cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 (2) (c) and Section 16 (4) of the CGST/SGST Act infringe the Constitutional provisions and are unsustainable? - HELD THAT:- The Supreme Court in RESERVE BANK OF INDIA VERSUS PEERLESS GENERAL FINANCE INVESTMENT CO. LTD. ORS. AND VICE [ 1987 (1) TMI 452 - SUPREME COURT] in paragraph 37 has held that the text and context of a taxing statute cannot be construed in isolation. The context and scheme of the Statute give meaning, and therefore, the same has to be taken into consideration while interpreting a Statute - In WILLOWOOD CHEMICALS PVT. LTD. VERSUS UNION OF INDIA [ 2018 (10) TMI 261 - GUJARAT HIGH COURT] it has been held that granting tax credit cannot be allowed to linger on indefinitely, for it would impact revenue collection for each financial year and budgetary allocations and, in rem, revenue deficit. When the ITC is not an absolute right but is an entitlement subject to the conditions and restrictions prescribed under the Statute, the conditions, restrictions and time limit specified by law form the fulcrum on which the grant of ITC and tax collection for each financial year are balanced. The Scheme of the Act also provides that only tax collected and paid to the governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrictions and time limit are crucial for granting ITC and collection of tax of each financial year, otherwise, it would impact revenue collection, budgetary allocation and in rem revenue deficite. Partial relief for the Period for 2017-18 and 2018-19 - Refund of unutilized ITC - Extension of time limit for furnishing annual return - HELD THAT:- The liberty is granted to the petitioners, who can claim the benefit of the two Circulars, namely, Circular No. 183/15/2022-GST dated 27.12.2022 and Circular No. 193/05/2023-GST dated 17.07.2023 to make their claim within one month from today before the appropriate authority who shall examine the claim of the individual dealer and process the claim - The time limit for furnishing the return for the month of September is to be treated as 30th November in each financial year with effect from 01.07.2017, in respect of the petitioners who had filed their returns for the month of September on or before 30th November, and their claim for ITC should be processed, if they are otherwise eligible for ITC. Petition disposed off. - HONOURABLE MR. JUSTICE DINESH KUMAR SINGH For The Petitioner: By Advs. Smt. Meera V. Menon, By Advs. K.P.Pradeep Shri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of central GST and State GST, legislated and administrated by the Central and States, respectively. 3. The 13th Finance Commission also made recommendations on Central and State GST. The Commission on Central State Relations 2010, headed by former Chief Justice of India, Madan Mohan Punchi J, broadly agreed with the suggestions and the recommendations of the 13th Finance Commission. The Central-State relation Commission recommended the concurrent levy of dual GST by the Central and the States on a common tax base. 4. The Constitution (115th Amendment) Bill 2011 was introduced in the Lok Sabha to provide the legal and constitutional structure for rolling out GST and empower the Central and States to levy dual GST on a common tax base. However, before the Standing Committee report could be considered, the 15th Lok Sabha was dissolved, and the Bill lapsed. 5. The second attempt was made by introducing the 122nd Amendment Bill in 2014, the said Bill was passed on 08.08.2016, received the Presidential assent and became the Constitution (101st Amendment) Act 2016. 6. Article 246-A was inserted, providing the establishment of the Goods and Services Tax Council, which came into force on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king the Indian trade industry more competitive, domestically as well as internationally. Seamless transfer of input tax credit from one station to another in the chain of value addition would incentivise tax combines by taxpayers. GST would broaden the tax base, resulting in better tax combined with the help of Robots Information Technology Infrastructure. In essence of GST has been contemplated as tax on value addition. Cascading tax effects are sought to be avoided by a continuous chain of set-offs from original suppliers to retailers. 9. One India, One market and One tax is the mantra of the GST regime. The structure of GST is of a destination-based consumption tax with input tax credit of the tax paid on goods or services at each stage available in the next stage of value addition for avoiding cascading effects irrespective of the destination, be it an inter-state supply or intra-state supply. 10. The flow of ITC along with the supply chain of registered persons by removing the cascading effect on one hand and the tax collection by the self-assessment method in every tax period, on the other hand, is to happen simultaneously in every financial year. Section 12 provides the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, 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,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed [(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;] (b) he has received the goods or services or both. [ Explanation .- For the purposes of this clause, it shall be deemed that the registered 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section till the due date for furnishing the details under sub-section (1) of said section for the month of March 2019.] 12. Each registered person is allotted three ledgers: (1) an electronic cash ledger, (2) an electronic credit ledger, and (3) an electronic liability ledger. The electronic cash ledger shows the cash available for settling the tax and related liabilities; the electronic credit ledger shows the input tax credit available to the registered person, and the electronic liability ledger shows the registered person s tax and any other liability. Admissible input tax is credited to the taxable person s electronic credit ledger. This amount represents the actual tax paid by the taxable person to his supplier, which in turn is paid to the Government, and subsection 4 of Section 49 enables the taxable person to pay his output tax utilising the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. Only the net liability after deducting the input tax credit is required to be satisfied by the purchaser. Section 16 (2) (c) restricts the claim of input tax by a purchasing dealer to the extent of the tax charge against the supply of goods has been paid to the Government by the supplier of goods. If the supplier dealer does not remit the tax collected from the purchasing dealer, the latter is denied the benefit of the input tax credit. 16. Rule 36 of the GST prescribes the documentary requirements and conditions for claiming the input tax credit. Rule 36 of the GST Act reads as under: (1) The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely,- (a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31; (b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax; (c) a debit note issued by a supplier in accordance with the provisions of section 34; (d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of valid tax invoice, proof of payment of value of goods along with GST components to the respective suppliers and receipt of the goods. It is submitted that in some cases respective supplier had remitted the tax (GST) but not reflected in their return GSTR due to some technical reasons. Another category of petitioners is those who have received the goods or services and have valid tax invoices, proof of payment of the value of goods along with the GST component to the respective suppliers, but the respective suppliers had not remitted the GST on the supply made by them to the petitioners. The third category of petitioners are those who are in possession of an invoice but have no clear proof of payment of consideration or tax towards the inward supply and might not have received goods in their possession. The first out of the three categories of the petitioners, who are recipients of the goods supplied to them by the supplier dealers, their case is covered in Circular No.183/15/2022-GST dated 27.12.2022 issued by the Central Board of Indirect Taxes and Customs. 19. It is submitted on behalf of the petitioners that the GSTR-2A is an auto-populated, dynamic, read-only document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is within the power of the State to collect and recover taxes, and this duty cannot be passed on to the recipient dealer, if the supplier dealer does not pay the tax though collected from the recipient dealer. 23. It is further submitted that there could be two possible situations which may arise in the case of claim of ITC by the purchaser dealer: (i) Though the recipient dealer has in his possession all the documentary evidence as provided under Rule 36 to prove the eligibility of the claim of ITC, but supplier dealer has omitted to pay the output tax, and the Government fails to recover the tax from the supplier dealer, in such a situation, though the recipient dealer has paid the tax on inward supplies received from the supplier dealer but the recipient dealer would not be entitled to claim the input tax credit. The recipient dealer has no means to force the supplier to make the payment and therefore, the doctrine of impossibility would be applicable in such a situation; and (ii) where the revenue is able to recover the tax from the supplier dealer along with the interest applicable and penalty under Sections 73 or 74 of the GST Act, however, the recipient dealer would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITC to the bona fide purchaser dealer for default of supplier dealer over whom the purchaser dealer has no control, is an arbitrary and irrational exercise of powers, and such a provision is an infarction of the equality clause enshrined under Article 14 of the Constitution of India. 25. It is further submitted that the claim of ITC is a right of the recipient dealer and not a concession given by the taxing authorities under the statute. The input tax credit under the GST Act is the property of the recipient dealer, and denying the credit for default of the supplier dealer would be violative of Article 300 A of the Constitution of India, which provides that no person shall be deprived of his property, save by the authority of law. 26. The GST regime has been brought in to provide a uniform tax on the supply of goods and services across the country and to avoid cascading effects on such supply. The ITC is the very basis of the GST regime. The tax structure under the GST is heavily dependent on ITC being available to the recipient dealer. The recipient dealer would depend heavily on the credit available to him under the Act for discharging his outward tax liability. If the eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f eligible input tax, as self-assessed , in his return. Section 41 (2) provides that when the supplier fails to pay the tax payable, the input tax availed by the registered persons shall be reversed along with interest. Proviso to Section 41 provides that once the supplier makes the payment of tax, payable to the Government, the registered person can re-avail the same. 29. The only requirement to avail ITC is the payment of tax by the supplier. The language used by the legislation if closely examined, the underlying intention of the legislature is that the ITC under the GST Act is in the nature of right, inasmuch as Section 16 (1) which is the enabling provision guarantees the registered persons to take credit for input tax paid by him on the supply of goods or services or both received by him. The language of Section 16 (1) makes it clear that the input tax credit is a matter of right. This entitlement to ITC follows from complying with the conditions and is subject to the restrictions contained in Section 49 of the Act. Section 49 makes it clear that the ITC, as self-assessed in the return, shall be credited to the electronic credit ledger of the registered person in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he inward supply, cannot be defeated. Input Tax Credit is the core concept of the GST regime as it avoids the cascading effect of taxes and ensures that tax is collected in the State where goods, services, or both are consumed. 31. Filing of returns with late fees and interest cures the defect of late filing. Once a return has been filed with a late fee, by applying the provisions of Section 16 (4) of limitation, the substantial claim of the dealer should not be defeated regarding ITC, which is otherwise admissible to him under the provisions of the Act. Once the returns are accepted with the late fee, the dealer should be eligible for the ITC. Once the delay is regularised, such returns are to be construed to be filed within the due date. Section 47 of the Act provides for the filing of returns with late fees, and if a dealer files the return beyond the due date with late fees, such returns should be accepted without applying the rigour of limitation prescribed under Section 16 (4) of the Act. 32. It is submitted that the provisions of Section 16 (4) of the Act are arbitrary in nature and hence violative of Articles 14 and 19 (1) (g) of the Constitution of India. The assessee cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lexity associated with return filing during the initial years of GST, Technical glitches, frequent amendments, the careful process followed in ascertaining eligible ITC, knowledge level of the taxpayer in understanding the flow of credit through a dynamic return GSTR-2A and other related factors should be considered, and therefore, if the returns have been filed beyond the time prescribed with late fees, the dealers should not be denied of his claim for ITC as reflected in GSTR-2A. 34. Sri. Dr K.P. Pradeep has submitted that Section 16 (4) providing a time limit to claim the ITC by purchasing dealer/recipient dealer is arbitrary and unreasonable. It is settled law that even the provision of a taxing statute or even the taxing statute in its entirety can be tested for its constitutionality in the exercise of the power of judicial review by a Constitutional court. If there is a manifest arbitrariness in the provision itself or the provision is unjust or discriminatory in nature, the said provision can be struck down as being violative of the Constitution. If a taxing statute violates the principle of equality or is discriminately unreasonable and arbitrary, it would be violative of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides for a statutory stipulation of a time limit for filing the return in GSTR -3B in claiming the ITC. Section 44 of the Act provides for filing the annual return for every financial year on or before the 31st day of December following the end of such financial year. However, the time limit prescribed under Section 16 (4) is 30th November, and it is not subject to any change. It also provides a rider that the claim should be made before 30th November or before the date of furnishing the relevant annual return, whichever is earlier. By reading the provision of Sections 39,41,44 and 50, which permit relaxation in furnishing returns, permits filing returns with late fees and payment of tax with interest on the late period. The provision under Section 16 (4) mandating submission of a claim for ITC within a particular time should be read as a directory and not mandatory. 39. In the alternative, Dr Pradeep Kumar submits that by Sections 100 of the Finance Act, 2022, Act 6 of 2022, the due date for furnishing of return under Section 39 in the month of September has been substituted with 30th day of November in Section 16 (4). It is submitted that the said substitution should apply retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ism where the Centre collects tax equivalent to (CGST and SGST). 42. An inter-state supplier in the originating / exporting State uses his CGST / SGST credits for payment of IGST collected from the recipient. The recipient based in the destination State will discharge his output tax liability (CGST+SGST) by claiming credit for the IGST he paid to the inter-state supplier in the originating State. The Centre and originating State have an obligation to transfer the CGST and SGST component utilized by the inter-state supplier to the IGST Account to make it available for the destination State. This obligation of the Central and State Governments is prescribed under Section 53 of the CGST Act which would read as under: Transfer of Input Tax Credit:-On utilisation of input tax credit availed under this Act for payment of tax dues under the Integrated Goods and Services Tax Act in accordance with the provisions of sub-section (5) of section 49, as reflected in the valid return furnished under sub-section (1) of section 39, the amount collected as central tax shall stand reduced by an amount equal to such credit so utilised and the Central Government shall transfer an amount equal to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of self-assessed output tax. The manner of crediting is provided under Section 49 (2) of the Act. 46. Prior to the 01.01.2022 amendment, the eligible credit had to be determined by the taxpayer based on the supplier s GSTR-1 reflected in GSTR-2A and by verifying his books of account and the supplier s GSTR-3B return filed online. To complete this process and avail credit in respect of inward supplies for a financial year, a recipient had a maximum of 18 months to a minimum of 6 months time under Section 16 (4) of the Act as it stood prior to 01.01.2022. For getting the invoice/debit note uploaded by the supplier and tax paid, a maximum of 20 months to a minimum of 8 months after that is available with effect from 01.01.2022. The time limit for availing ITC in GST laws cannot be said to be a restriction. The estimation of budgetary allocation has to be taken by the Central and State Governments every year, and they are required to pass a budget. There cannot be any uncertainty regarding tax collection, budgetary allocation and estimation of the Central and State Governments. Therefore, the time frame makes it a reasonable mechanism and cannot be said to be in violation of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the ITC enables dealers to set off tax paid on purchase. But this is not a right of the dealer. This is a concession provided under the provisions of the Act in order to avoid a cascading effect on the value chain of the goods and services supplied. It is submitted that it would always be open to the rule-making authority to provide for abridgement or curtailment of a concession. In support of the said submission, the learned Special Government Pleader has placed reliance on the judgments in the case of Godrej Boyce Mfg. Co.(P) Ltd. others V. CST others [(1992) 3 SCC 624] and Division Bench judgment of the Bombay High Court in Mahalaxmi Cotton Ginning Pressing Oil Industries v. State of Maharashtra [2012 SCC OnLine Bom 733]. An entitlement to set off is the creation of the statute under the terms and conditions provided by the legislation, which are required to be strictly observed. A registered person cannot claim an entitlement to set off as an absolute right. A dealer would not be entitled to claim set off unless the conditions precedent are met, which are prescribed in the statute. 52. Exemptions, concessions and exceptions are to be treated on par and must be strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealer. 55. The learned Special Government Pleader has placed reliance on the judgment in the case of Astha Enterprises v. The State of Bihar [CWC No. 10395 of 2023] and State of Karnataka v. Ecom Gill Coffee Trading (P) Ltd. [2023 SCC OnLine SC 248] to submit that condition for availing ITC has been specified in Clause (a) to (d) of Section 16 (2) are required to be satisfied together and in isolation for availing the ITC. The burden is always on the purchaser dealer to prove the claim for ITC. There should be credit available in the credit ledger of the purchaser dealer to claim input tax; otherwise, the claim would get frustrated, and the claim of ITC cannot be sustained when the supplier dealer has not paid the tax amount to the Government despite collection from the purchasing dealer. 56. The learned Government Pleader has submitted that there is no force in the arguments of the counsels for the petitioners that Section 16 (2) (c) is in violation of the equality clause as enshrined in Article 14 of the Constitution of India. The concession bestowed under Section 16 (1) is subject to the conditions/restrictions as provided in the Section. The ITC, being a concession/entitleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able universally to all registered persons. The contention that by prescribing a cut-off date for availing the benefit, some of the registered persons may be adversely affected cannot be a ground to challenge the provision as it cannot be said that such a prescription is in violation of Article 14 of the Constitution of India. Discrimination resulting from fortuitous circumstances arising out of the particular situation in which some of the taxpayers find themselves is not hit by Article 14, if the legislation, as such, is of general application and does not single them out for harsh treatment. Advantages or disadvantages to individual assessees are incidental and inevitable and are inherent in every taxing statute. It has to draw a line somewhere and some cases necessarily fall on the other side of the line. In support of the said submission, the learned Special Government Pleader has placed reliance on Khandige Sham Bhat v. AITO [AIR 1963 SC 591] and the State of Bihar and others v. Bihar Pensioners Samaj [(2006) 5 SCC 65]. 59. Heard Ms. Meera V Menon, Dr K P Pradeep, Mr. K P Abdul Azeez, Mr. Aji V Dev (Sr), Mr. Tomson T Emmanuel, Mr. K S Hariharan Nair, Mr. P N Damoodaran, Mr. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act has been enacted by the Legislature with no competence. It is also not the contention of the petitioners that the tax on the supply of goods and services is not for public purposes. 63. The taxing statute can be declared unconstitutional if it infringes the fundamental rights guaranteed under Part III of the Constitution of India including Article 14. However, in view of the inherent complexity of fiscal adjustment of diverse elements, a larger discretion has to be permitted to the Legislature for classification so long as there is no transgression of the fundamental principles underlying the doctrine of classification. The Legislature must enjoy a wide and flexible power to enable the Legislature to adjust its system of taxation in all proper and reasonable ways. The Legislature has much wider elbow room in picking and choosing places, objects, persons, methods and even rates of taxation so long as it is done reasonably. A taxing statute cannot be said to be invalid on the grounds of discrimination merely because other objects could have been taxed but are not taxed by the legislature. Similarly, the mere fact that the tax is more on some goods/persons or categories is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r objects could have been but are not taxed by the legislature. ( Ravi Varma v. Union of India 1969 (3) SCR 827: (AIR 1969 SC 1094).) When a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group the tax cannot be attacked on the ground of its being discriminatory, although due to fortuitous circumstances or a particular situation some included in a class or group may get some advantage over others, provided of course they are not sought out for special treatment: (1963 (3) SCR 809: (AIR 1963 SC 591). Likewise the mere fact that a tax falls more heavily on some in the same group or category is by itself not a ground for its invalidity, for then hardly any tax, for instance, sales tax and excise tax, can escape such a charge. ( Twyford Tea Co. Ltd. v. State of Kerala 1970 (3) SCR 383: (AIR 1970 SC 1133).) 16. Definitions of taxation imply that a legislature can impose a tax for public purposes only. A tax for purposes other than public purposes would constitute taking of property without due process of law within the meaning of the Fourteenth Amendment in the United States. It would be objectionable in this country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no legal existence, and any action taken thereunder will be an infringement of Article 19 (1) (g) of the Constitution and it would amount to a colourable piece of legislation. (5) where assessment proceedings are taken without the authority of law, or where the proceedings are repugnant to rules of natural justice, there is an infringement of the right guaranteed under Article 19 (1) (f) and Article 19 (1) (g) of the Constitution. The majority judgment of the above case sums up the Constitutional limitations on the power of the State legislature to levy taxes or enact legislation if the field is reserved for them under the relevant entries of List II and III of the Seventh Schedule. 69. The power to levy tax is a sovereign power controlled only by the Constitution, and any limitation on that power must be express one. Unless and until the Court finds or arrives at a conclusion that the Constitution itself has expressly prohibited legislation on the subject either absolutely or conditionally, the power of the Central/State to enact legislation within its legislative competence is a plenary power. 70. In the case of State of Karnataka v. M/s. M K Agro Tech Private Limited [(2017) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax others [(1992) 3 SCC 624] , the Supreme Court, while dealing with Rules 41 and 41A of the Bombay Sales Tax Rules 1959, held that the rule-making authority would be empowered to provide for abridgement or curtailment while extending a concession. In paragraph 9 of the said judgment, the Supreme Court held as follows: 9. Sri Bobde appearing for the appellants reiterated the contentions urged before the High Court. He submitted that the deduction of one per cent, in effect, amounts to taxing the raw material purchased outside the State or to taxing the sale of finished goods effected outside the State of Maharashtra. We cannot agree. Indeed, the whole issue can be put in simpler terms. The appellant (manufacturing dealer) purchases his raw material both within the State of Maharashtra and outside the State. Insofar as the purchases made outside the State of Maharashtra are concerned, the tax thereon is paid to other States. The State of Maharashtra gets the tax only in respect of purchases made by the appellant within the State. So far as the sales tax leviable on the sale of the goods manufactured by the appellant is concerned, the State of Maharashtra can levy and collect such ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rule is mandatory and without producing the specific documents, the dealer could not be entitled to claim benefits. In paragraph 13 of the said judgment, the Supreme Court held as follows: 13. Under the Central Sales Tax (Karnataka) Rules, 1957, the dealer is required to submit along with his return the original of the prescribed forms. As could be seen from the rule extracted above, a registered dealer who claims that he has made a sale to another registered dealer is required to attach the original of the declaration forms on the certificate in the prescribed form received by him from the prescribed dealer along with his return filed by him. We have already extracted Section 13 of the Central Sales Tax Act, which deals with the power of the Central Government to make rules, the form and the manner for furnishing declaration under sub-section (8) of Section 8. Sub-section (3) of Section 13 provides that the State Government may make rules not inconsistent with the provisions of the Central Sales Tax Act, 1956 and the rules made under sub-section (1) to carry out the purposes of the Act. In exercise of the powers conferred by sub-sections (3), (4) and (5) of Section 13 of the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court has held that input tax credit is admissible only as per the conditions of the Tamil Nadu Value Added Tax Act 2006. In paragraph 43, the Supreme Court observed as under: 43. Section 19 (11) thus allowed an extended period for input credit which if not claimed in any month can be claimed before the end of the financial year or before the 90 days from the date of purchase whichever is later. The provision of Section 19 (11) is thus an additional benefit given to dealer for claiming input credit in extended period. The use of the word shall make the claim needs no other interpretation. 76. In Union of India others V. VKC Footsteps (India) (P) Limited [(2022) 2 SCC 603], while considering the issue with respect to the refund of additional ITC, the Rule limited the refund of unutilised ITC to input goods alone. Upholding the aforesaid rule, the Supreme Court held in paragraphs 88 and 90 as under: 88. The jurisprudential basis furnishes a depiction of an ideal state of existence of GST legislation within the purview of a modern economy, as a destination-based tax. But there can be no gain saying the fact that fiscal legislation around the world, India being no exception, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speaking, goods and services are taxed at 5%, 12%, 18% and 40%. As on date, there is an absence of uniformity in rates and it is the multiplicity of rates which has given rise to an inverted duty structure. Registered persons with unutilised ITC may conceivably form one class but it is not possible to ignore that this class consists of species of different hues. Given these intrinsic complexities, the legislature has to draw the balance when it decides upon granting a refund of accumulated ITC which has remained unutilised. In doing so, Parliament while enacting sub-section (3) of Section 54 has stipulated that no refund of unutilised ITC shall be allowed other than in the two specific situations envisaged in clauses (i) and (ii) of the first proviso. Whereas clause (i) has dealt with zero-rated supplies made without the payment of tax, clause (ii), which governs domestic supplies, has envisaged a more restricted ambit where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. While the CGST Act defines the expression input in Section 2 (59) by bracketing it with goods other than capital goods, it is true that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement to refund it would be impermissible for the Court to redraw the boundaries or to expand the provision for refund beyond what the legislature has by a proprietorship firm namely, M/s Jain Brothers through its Proprietor Mr. Amit Jain. 77. Thus, from the aforesaid decisions and discussions, the nature of the claim for ITC by the dealer is in the nature of concession or entitlement, which is not an absolute right and is subject to the conditions and restrictions as per the scheme of the GST legislation. This Court, therefore, does not find substance in the submissions of the learned Counsel for the petitioners that Section 16 (1) of the GST Act provides an absolute right to claim Input Tax Credit and conditions in sub-section (2) of Section 16 cannot take away the right conferred under sub-section (1) of Section 16. Issue No. III Whether Section 16 (2) (c) and Section 16 (4) of the CGST/SGST Act infringe the Constitutional provisions and are unsustainable? 78. The Supreme Court in Reserve Bank of India v. Peerless General Finance and Investments Co. Ltd Others [(1987) 1 SCC 424] in paragraph 37 has held that the text and context of a taxing statute cannot be construed in isolati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever. Action appears imperative. 79. The Goods and Services Tax laws came into force in 2017, having the way for One India, One Market, One Tax. It is a destination-based consumption tax with ITC available on payment of tax on supply of goods or services at each stage available in the next stage of value addition, removing cascading effect irrespective of the destination, be it an intra-state or inter-state supply. The dual VAT system with uniform rates, simultaneous levy by the Centre and the States, and a unique IGST model ensures this destination-based tax compliance in all parts of India. The GST system minimises the disadvantages of entirely independent (erstwhile State VAT laws) and completely centralised systems. The flow of ITC, along with the supply chain of registered persons, ensures removing the cascading effect on one hand and the tax collection by a self-assessment method in every tax period on the other hand. It has to happen simultaneously in a financial year. 80. In Willowood Chemicals v Union of India [2018 58 GSTR 310 (Guj)], it has been held that granting tax credit cannot be allowed to linger on indefinitely, for it would impact revenue collection for each fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute right but is an entitlement subject to the conditions and restrictions prescribed under the Statute, the conditions, restrictions and time limit specified by law form the fulcrum on which the grant of ITC and tax collection for each financial year are balanced. The Scheme of the Act also provides that only tax collected and paid to the government could be given as input tax credit. When the Government has not received the tax, a dealer cannot be given an input tax credit. It may be seen that under the various State VAT laws, the twin requirements were provided for granting ITC: (a) it was aimed to remove the cascading effect, and (b) collection of Tax for each financial year. The State legislations had to balance this linear bar. Under the VAT law, the ITC did not cross the originating State. The Central Sales Tax levied on inter-state sale of goods was assigned to the original State. 82. Under the GST regime, the tax collected has to be assigned to the jurisdiction where the consumption takes place. The ITC, therefore, crosses a State during inter-State supplies. Now, the scheme of the Act prescribes the conditions, restrictions, time limit, and the manner for availing the ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutional nor onerous on the taxpayer. 85. The collection of tax by self-assessment and the Recovery Provisions on default are two different arms. The respondents cannot contend that the conditions, restrictions, and time limits for ITC and time-bound tax collection in a financial year can be substituted or replaced with recovery actions against defaulters, the outcome of which is uncertain and not time-bound. 86. Section 16 of the CGST Act and Rules made thereunder provide conditions, restrictions, time limits and manners for availing the Input Tax Credit, which is a self-monitoring and self-policing provision. In order to claim ITC, each registered person has a reason and incentive to request documentation and tax payment compliance from the person behind him in the value-added tax chain to ensure that the ITC chain is not broken. A new provision, Section 16 (2) (aa), stands introduced with effect from 01.01.2022, providing for communication of the matching of the recipient s invoice with suppliers and outward supply via GSTR-2A/2B. With effect from 01.10.2022, Section 38 stands substituted with a provision for auto-generated statement GSTR 2B, indicating eligible and inelig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with eligibility to ITC and OTL. Indeed, that self-assessment and declarations would be any way subject to verification by the tax authorities. The role of tax authorities would come at the time of verification of the declarations and returns submitted/filed by the registered person. 34. Section 16 of the 2017 Act deals with eligibility of the registered person to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. The input tax credit is additionally recorded in the electronic credit ledger of such person under the Act. The electronic credit ledger is defined in Section 2(46) and is referred to in Section 49 (2) of the 2017 Act, which provides for the manner in which ITC may be availed. Section 41 (1) envisages that every registered person shall be entitled to take credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger. 35. As aforesaid, every assessee is under obligation to self-assess the eligible ITC under Section 16 (1)and 16 (2) and credit the same in the electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a whole, clauses (i) and (ii) of the first proviso are restrictions and not mere conditions of eligibility. It is not possible for the Court to restrict the ambit of clause (ii) of the proviso, based on a circular which has been issued by the Ministry of Finance on 31 December 2018. In substance, the argument boils down to an effort to lead this Court to hold that in spite of the language which has been used in clause (ii) of the first proviso (where the credit is accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies), input services must be read into the term inputs . The assessees argue that the Departmental understanding, as reflected in the circular, should be the basis of interpreting a statutory provision. Such an exercise would be impermissible, when its effect is to expand the area of refund contemplated by the first proviso to cover input services in addition to input goods despite statutory language to the contrary. Sub-Section (3) of Section 54 begins, in its main part, with the stipulation that a registered person may claim refund of any 'unutilised ITC at the end of any tax period . Whether we construe the first pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitutional right to being asserted to claim a refund, as there cannot be. Refund is a matter of a statutory prescription. Parliament was within its legislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Parliament has confined the refund in the manner which we have described above. While recognizing an entitlement to refund, it is opened to the legislature to define the circumstances in which refund can be claimed. The proviso to Section 54 (3) is not a condition of eligibility (as the assesses s counsel submitted) but a restriction which must governed the grant of refund under Section 54 (3). we therefore, accept the submission which has been urged by Mr. N. Venkataraman, learned ASG. 90. Thus, the non-obstante clause in the negative sentence in Section 16 (2) restricts the eligibility under Section 16 (1) for entitlement to claim ITC. Section 16 (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the provisions or act mentioned in that clause. Such a clause is usually used in the provision to indicate that the said provision should prevail despite anything to the contrary in the provision mentioned in such non-obstante clause. Hence unless such clear inconsistency is established, overriding effect cannot be given over other provisions. In the present case both Section 16 (2) and (4) are two different restricting provisions, the former providing eligibility conditions and the later imposing time limit. However, both these provisions have no inconsistency between them. In R.S. Raghunath, the Apex Court further observed thus: But the non-obstante clause need not necessarily and always be co-extensive with the operative part so as to have the effect of cutting down the clear terms of an enactment and if the words of the enactment are clear and are capable of a clear interpretation on a plain and grammatical construction of the words the non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used or intended to be used in accordance with the furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. This entitlement of ITC is, however, subject to :- (a) such conditions and restrictions as may be prescribed and, (b) in the manner specified in Section 49. 23. Sub-section (2) of Section 16 is a non obstante clause and clearly states that no registered person shall be entitled to the credit of input tax in respect of any supply of goods or services or both unless he fulfills the requirements and satisfies the existence of other conditions prescribed in Clauses (a) to (d) thereof. 24. Sub-section (3) of Section 16 contemplates yet another circumstance when ITC on tax component cannot be allowed, i.e., where the registered person has claimed depreciation on the tax component of cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961. 25. Lastly comes the offending clause which is under challenge i.e. sub-section (4) of Section 16 of the CGST/BGST Act, which, in no unambiguous terms, provides that a registered person shall not be entitled to take ITC in respect of any invoice or deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o possess, use and dispose of it in accordance with law. In Ramanatha Aiyar's The Law Lexicon, Reprint Edn., 1987, at p. 1031, it is stated that the property is the most comprehensive of all terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have. The term property has a most extensive signification, and, according to its legal definition, consists in free use, enjoyment, and disposition by a person of all his acquisitions, without any control or diminution, save only by the laws of the land. In Dwarkadas Shrinivas case [1950 SCC 833 : 1950 SCR 869 : AIR 1951 SC 41] this Court gave extended meaning to the word property. Mines, minerals and quarries are property attracting Article 300-A. 28. Upon close reading of sub-section (1) of Section 16 of the CGST/ BGST Act, we are of the view that the provision under sub-section (4) of Section 16 is one of the conditions which makes a registered person entitled to take ITC and by no means sub-section (4) can be said to be violative of Article 300-A of the Constitution of India. 29. We are not convinced with the submissions advanced on behalf of the petitioners to read down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conferred by the statute and if the conditions prescribed in the statute are not complied; no benefit flows to the claimant. 12. The contention of double taxation does not impress us especially since the claim is denied only when the supplier who collected tax from the purchaser fails to pay it to the Government. Taxation as has been held is a compulsory extraction made for the purpose of public good, by the welfare State and without the levy being paid to the Government; there can be no claim raised of the liability to tax having been satisfied and hence there is no question of double taxation. 13. The further contention raised by the assessee is also one of the statute having provided measures to recover the collected tax, which the selling dealer fails to pay to the Government. The mere fact that there is a mode of recovery provided under the statute would not absolve the liability of the tax payer to satisfy the entire liability to the Government. The purchasing dealer being the person who claims Input Tax Credit could only claim the Input Tax benefit if the supplier who collected the tax from the purchaser has paid it to the Government and not otherwise. The Government defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government treasury. It has been held that set off would be available where the tax has been deposited in the treasury and to that extent, the entitlement to set-off is created by the statute, in terms of which the set-off is granted under the legislation must be strictly observed. 96. Subsection 48 of the Maharashtra Value Added Tax Act, 2002 would read as under: 48. Set-off, refund, etc.:- (1) The State Government may, by rules, provide that,- (a) in such circumstances and subject to such conditions and restrictions as may be specified in the rules, a set-off or refund of the whole or any part of the tax,- (i) paid under any earlier law in respect of any earlier sales or purchases of goods treated as capital assets on the day immediately preceding the appointed day or of goods which are held in stock on the appointed day by a person who is a dealer liable to pay tax under this Act, be granted to such dealer; or. (ii) paid in respect of any earlier sale or purchase of goods under this Act be granted to the purchasing dealer; or (iii) paid under the Maharashtra Tax on Entry of Motor Vehicles into the Local Areas Act, 1987 (Mah. XLII of 1987) be granted to the dealer purchasing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be deemed to have been received in the Government Treasury for the purposes of this sub-section. (6) Where at any time after the appointed day, a dealer becomes entitled to a refund whether under any earlier law or under this Act, then such refund shall first be applied against the amount payable, if any, under any earlier law or this Act and the balance amount, if any, shall be refunded to the dealer. 97. Paragraph 38 of the judgment of Mahalaxmi Cotton Ginning Pressing (supra) is extracted hereunder: - 38. Section 48 (5) uses the expression actually paid into the Government treasury. The words actually paid must receive their ordinary and natural meaning. A set off under Section 48 (5) would be allowable only to the extent of the tax, if any, that has been actually paid into the treasury in respect of the purchase tax paid on the same goods. The use of the word actually in conjunction with the word paid leaves no manner of doubt about the legislative intent. A set off is available where tax has been deposited in the treasury and to the extent of the tax deposited. Where no tax has been deposited in the treasury, there is no tax actually paid in respect of which a set off can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit petitions, the petitioners who could have got the benefits of these Circulars and could not avail the benefits within the time limit prescribed, may approach the appropriate GST authority within a period of thirty days from today to avail the benefit of the aforesaid Circulars, if the same is/are applicable to their case. The GST authorities will examine the claim of the individual dealer by applying the provisions of the Circulars, and it will grant applicable relief to eligible dealers. 100. Prior to the amendment in Section 39 by the Finance Act 2022, the date for furnishing the return under Section 39 was 30th September. Considering the difficulties in the initial stage of the implementation of the GST regime, its understanding, and compliance, the Legislature effected the amendment and extended the time for filing the return for September to 30th November in each succeeding Financial Year. The amendment is only procedural to ease the difficulties initially faced by the dealers / taxpayers. Therefore, where for the period from 01.07.2017 till 30.11.2022, if a dealer has filed the return after 30th September and the claim for ITC was made before 30th November, the claim for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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