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TMI Blog2024 (12) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... ntive provision contained in sub-section (3) of Section 140 of the CGST Act, 2017, clearly mandates that entitlement to take credit of eligible duties would be available within such time and in such manner, as may be prescribed, subject to conditions as laid down. Rule 117 of the CGST Rules, 2017 requires the registered person entitled to take credit of input tax under Section 140 of the CGST Act, 2017, to submit declaration electronically in Form GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section - the prescription of time limit is not merely a provision of Rule framed by the Rule Making Authority in exercise of rule making power conferred on it under the CGST Act, 2017, but is also a statutory mandate, as contained in sub-section (3) of Section 140 of the CGST Act, 2017, that such claim has to be made within the prescribed time and in such manner, as may be prescribed. Therefore, the Rule Making Authority had no option but to prescribe the time limit for making appropriate declaration c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended for a further period of ninety days. Not only this, even beyond this, if a case is made out, on the recommendation of the GST Council, the period could be further extended. There is no merit in the writ petition and the same is accordingly dismissed. - HON'BLE THE CHIEF JUSTICE MR. MANINDRA MOHAN SHRIVASTAVA And HON'BLE MR. JUSTICE MUNNURI LAXMAN ( THROUGH V. C. ) For the Petitioner : Mr. Sharad Kothari For the Respondent : Mr. Rajvendra Saraswat JUDGMENT REPORTABLE ( PER HON BLE THE CHIEF JUSTICE ) : 1. By way of this writ petition filed under Article 226 of the Constitution of India, the petitioner has claimed that he is entitled to transitional credit of excise duty made through Credit Transfer Document (for short, CTD ) by way of filing TRAN-3 without insisting on submission of TRAN-1 declaration within the time stipulated under Rule 117 of the Central Goods and Services Tax Rules, 2017 (for short, the CGST Rules, 2017 ). Relevant Factual Matrix: 2. The factual background giving rise to the present petition, relevant for decision making in the present case, is that the petitioner is a trader dealing in automobiles, motorbikes and other vehicles and registered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.1 brought into force the system of issuance of CTD by the manufacturer to the dealer, on the strength of which the corresponding dealer was authorised to claim credit of excise duty by way of filing TRAN-3. The said notification did not specify any other actionable on the part of the trader/dealer for availment of transitional credit on the strength of CTD, except to file TRAN-3. Even the CGST Rules, 2017, brought into force on 22.06.2017, did not contain any stipulation as regards co-relation with or simultaneous compliance of notification No.21/2017, dated 30.06.2017 for availment of transitional credit. 6. The petitioner having received three CTDs from the manufacturer- Hero MotoCorp Ltd. on 03.09.2017, filed TRAN-3 on GST portal feeding information of the aforesaid three CTDs for the purpose of claiming benefit of transitional credit of excise duty. However, later on, the petitioner came to know that his claim of carried forward VAT made by way of filing separate TRAN-1 had been processed, but the claim made in TRAN-3 had not been processed. A complaint, therefore, was made, but no head was paid and he was informed vide Memo 20.05.2018 that his complaint is closed. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (6) Global Ceramics Pvt. Ltd Vs. Principal Commissioner of Central Excise Delhi-I, W.P. (C) No. 6706/2016, decided on 24.05.2019; (7) CCE, Pune Vs. Dai Ichi Karkaria Ltd. (1999) 7 SCC 448 ; (8). Dipak Vegetable Oil Industries Ltd. Vs. Union of India 1991 (52) ELT 222 (Guj) ; and (9) Siddharth Enterprises Vs. The Nodal Officer. 2019 (29) GSTL 664. Submissions of the respondents: 9. Per contra, learned counsel for the respondent-Revenue would reply to the submission in opposition to the reliefs sought in the writ petition by submitting that right to claim transitional credit, as provided under sub-section (3) of Section 140 of the CGST Act, 2017, is not absolute, but can be availed upon fulfillment of eligibility conditions prescribed in the statutes and also by submitting specific statutory declaration, as provided in TRAN-1, appended to the CGST Rules, 2017 and that too within the stipulated period. The Rule clearly provides that every registered person entitled to take credit of input tax under Section 140 shall be obliged to apply within stipulated period in form GST GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has power to impose reasonable restrictions, which has been made under law, which has not been challenged in this petition. Relying upon the decision of the Hon ble Supreme Court in the case of Indian Oil Corporation Ltd. Vs. State of Bihar Ors., (TS-347-SC- 2017-VAT), it is submitted that no assessee can claim set off as a matter of right. Further relying upon another decision of the Bombay High Court in the case of JCB India Limited Vs. Union of India Ors., (2018-TIDL-23-HC-Mum-GST), it has been submitted that CENVAT credit has been held to be a mere concession and cannot be claimed as a matter of right dehors the provisions of law as the petitioner did not fulfill the requirement of law in the matter of availing transitional credit. The petitioner is not entitled to the relief, as sought, and the present petition is liable to be dismissed. 11. We have heard learned counsel for the parties and perused the records as also various decisions cited at the Bar. Analysis and conclusion: 12. Before adverting to various submissions, it need to be noticed that the petitioner is not assailing constitutional validity of any of the provisions contained either in Section 140 of the CGST Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re required to pay only VAT/CST, whereas under the GST regime, such traders are required to pay GST at a rate which subsumes not only the VAT component, but also the excise duty component. However, under the then regime of law, credit of only VAT portion was availed by such traders and no credit was taken of the excise duty paid. 14. The Legislature intended to continue the benefit of input tax credit to bridge the transitional phase by providing for transitional credit benefit under Section 140 of the CGST Act, 2017 and to resolve the anomalous situation, under this provision, the petitioner claims to be entitled to the benefit of transitional credit, denial of which has given rise to this petition. 15. Section 140 of the CGST Act, 2017, for ready reference, is extracted herein below:- 140. Transitional arrangements for input tax credit. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit 6 [of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law 2[w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and (v) the supplier of services is not eligible for any abatement under this Act: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed. (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in respect of inputs; and (v) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day. (7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as1 [credit under this Act, within such time and in such manner as may be prescribed, even if] the invoices relating to such services are received on or after, the appointed day. (8) Where a registered person having centralised registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day2 [within such time and in such manner] as may be prescribed: Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1975 (51 of 1975); (iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975); 3[***] (v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); and (viii) the service tax leviable under section 66B of the Finance Act, 1994 (32 of 1994), in respect of inputs and input services received on or after the appointed day. 4[Explanation 3. For removal of doubts, it is hereby clarified that the expression eligible duties and taxes excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under subsection (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975).] 16. The petitioner, admittedly being registered person, who was not liable to be registered under the existing laws just before the appointed day i.e. 01.07.2017, could claim input tax credit for eligible duties in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mon portal and in respect of whom the Council has made a recommendation for such extension.] (2) Every declaration under sub-rule (1) shall-- (a) in the case of a claim under sub-section (2) of section 140, specify separately the following particulars in respect of every item of capital goods as on the appointed day- (i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and (ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day; (b) in the case of a claim under sub-section (3) or the proviso or clause (b) of sub-section (4) or subsection (6) or sub-section (8) of section 140, specify separately the details of stock held on the appointed day; (c) in the case of a claim under sub-section (5) of section 140, furnish the following details, namely: (i) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law; (ii) the description and value of the goods or services; (iii) the quantity in case of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x tax periods during which the scheme is in operation indicating therein, the details of supplies of such goods effected during the tax period:] 2[Provided that the registered persons filing the declaration in FORM GST TRAN-1 in accordance with sub-rule (1A), may submit the statement in FORM GST TRAN-2 by 3[30th April, 2020].] (iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal; (v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person. 18. Rule 117 of the CGST Rules, 2017 requires the registered person entitled to take credit of input tax under Section 140 of the CGST Act, 2017, to submit declaration electronically in Form GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section. Therefore, the prescription of time limit is not merely a provision of Rule framed by the Rule Making Authority in exercise of rule making power conferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stipulated period of ninety days, which is extendable for further ninety days and in exceptional circumstances, on the recommendation of the GST Council, it could be further extended. 22. Learned counsel for the petitioner has asserted that claim of input tax credit in the form of transitional credit, under fulfillment of eligibility conditions, as provided in sub-section (3) of Section 140 of the CGST Act, 2017, become a vested right and, therefore, the same cannot be taken away, nor defeated only on the ground of non-fulfillment of processual provisions. 23. In support of this contention, reliance has been placed on the decisions rendered in the cases of Eicher Motors Ltd. Ors. Vs. UOI (supra); Global Ceramics Pvt. Ltd Vs. Principal Commissioner of Central Excise Delhi-I (supra); CCE, Pune Vs. Dai Ichi Karkaria Ltd. (supra); Dipak Vegetable Oil Indusries Ltd. Vs. Union of India (supra); and Siddharth Enterprises Vs. The Nodal Officer (supra). 24. In the case of Eicher Motors Ltd. Ors. Vs. UOI (supra), by introducing new scheme under the rules, the credit attributable to inputs already used in the manufacture of the final products and the final products which were already clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be read in isolation but have to be understood in the context and in the light of the challenge made. 27. On principles, in at least two decisions, Their Lordships in the Hon ble Supreme Court, have authoritatively laid down that input tax credit facility is a concession, which can be availed only in accordance with the provisions of law and not dehors the same. 28. In the case of Jayam Co. Vs. Assistant Commissioner Anr. AIR 2016 SC 4443 , following principle was propounded while dealing with challenge to the constitutional validity of Section 19(20) of the Tamil Nadu Value Added Tax Act in the matter of claim of input tax credit under the scheme of the Act : - 12. It is a 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 its a concession granted by virtue of Section 19. As a fortiorari 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 V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State of Tamil Nadu refuting the submissions of learned counsel for the appellants contends that Section 19(11) of the Tamil Nadu VAT Act, 2006 contains essential conditions under which Input Tax Credit can be claimed by a dealer, hence, on non-compliance of the conditions the Input Tax Credit has rightly been denied to the appellants. Section 19(11) is a part of the same statutory scheme and does not suffer from any ultravires. Learned Advocate-General submits that judgment of this Court in Jayam and Company v. Assistant Commissioner and another, 2016 (15) SCC 125: (AIR 2016 SC 4443), where validity of Section 19(20) of the T.N. VAT Act, 2006 has been upheld and it has been laid down that whenever concession is given by the statute or notification, the conditions thereof should strictly be complied with in order to avail such concession, is fully applicable in the facts of the present case and all the appeals are liable to be dismissed. 29.2 On the submissions made, the issues arising for consideration were outlined as below:- 13. From the submissions of the learned counsel for the parties and evidence on record following are the issues which arise for consideration in this bat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 purchases of raw material effected outside the State or on sale of manufactured goods effected outside the State of Maharashtra appears to be beside the point and is unacceptable. So is the argument about apportioning the sale-price with reference to the proportion in which raw material was purchased within and outside the State. 33. A Three-Judge Bench in (2005) 2 SCC 129: (AIR 2005 SC 1594), India Agencies (Regd.). Bangalore v. Additional Commissioner of Commercial Taxes, Bangalore had occasion to consider Rule 6(b)(ii) of Central Sales Tax (Karnataka) Rules, 1957, which requires furnishing original Form-C to claim concessional rate of tax under Section 8(1). This Court held that the requirement under the Rule is mandatory and without producing the specified documents, dealers cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), was quoted with approval as below : - 35. The judgment on which learned Advocate General of Tamil Nadu had placed much reliance ie. Jayam and Company v. Assistant Commissioner and Another, (2016) 15 SCC 125: (AIR 2016 SC 4443), is the judgment which is relevant for present case. In the above case, this Court had occasion to interpret provisions of Tamil Nadu Value Added Tax Act, 2016, Section 19(20), Section 3(2) and Section 3(3). Validity of Section 19(20) was under challenge in the said case. This Court after noticing the scheme under Section 19 noticed following aspects in paragraph 11: 11. From the aforesaid scheme of Section 19 following significant aspects emerge: (a) ITC is a form of concession provided by the legislature. 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. 36. This Court further held that it is a trite law that whenever concession is giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Jayam Co. Vs. Assistant Commissioner Anr. (supra). 31. In the case of Jayam Co. Vs. Assistant Commissioner Anr. (supra), it was authoritatively laid down that when a concession is given by the statute, the Legislature has power to make the provision stating the form and the manner in which such concession is to be allowed. There was no right, inherent or otherwise, vested with the dealer to claim the benefit of input tax credit except in accordance with the provisions of law. The objective of such provision imposing restrictions and regulations was also discussed as below:- 13. For the same reasons given above, challenge to constitutional validity of sub-section (20) of Section 19 of VAT Act has to fail. When a concession is given by a statute, the Legislature has power to make the provision stating the form and manner in which such concession is to be allowed. Sub-section (20) seeks to achieve that. There was no right, inherent or otherwise, vested with dealers to claim the benefit of ITC but for Section 19 of the VAT Act. That apart, we find that there were valid and cogent reasons for inserting Section 19(20). Main purport was to protect the Revenue against clandestine tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rs. 12,500/- Sale price after discount ... Rs. 75,000/- Tax payable on sales at 12.5% ... Rs. 9,375/- Excess ITC available (Difference between ITC and Output Tax) ... Rs.3,125/- Rs. 12,500-Rs.9,375 Excess ITC Adjusted ... Rs. 3,125/- 67. As rightly contended by the learned Advocate General, the Input Tax Credit adjusted in the above illustration comes to Rs. 3,125/- in a single transaction and that it would run to several lakhs and crores for a year for a single dealer. The excess Input Tax Credit earned by the petitioners is being adjusted against the outstanding tax due or carried forward to next year or refunded. If this trend is allowed to continue, the concept of VAT that meant for payment of tax on every value addition gets defeated. 68. In order to protect the revenue and with a vie to curb the clandestine transactions resulting in evasion of tax, in respect of second and subsequent sales, Section 19(20)was introduced, where any dealer has sold goods at a price lesser than the price of the goods purchased by him, the amount of Input Tax Credit over and above the output tax of those goods, shall be reversed. 69. Constitutional Validity of fiscal legislation:- When there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory for the Rule Making Authority to prescribe the period of limitation for submitting statutory declaration. As to what should be the period within which such submission should be made and whether there should be a provision for further extension, and if so, in what circumstances and in what matter, was left by the legislature to be provided by the Rule Making Authority. Such a provision in a fiscal statute providing for time limit within which statutory limitation to avail credit is made, is not merely procedural but not only substantive but mandatory also. 34. In the case of ALD Automotive Pvt. Ltd. Vs. Commercial Tax Officer Now Upgraded as the Assistant Commissioner (CT) Ors. (supra), Their Lordships in the Hon ble Supreme Court also reiterated the principles applicable to determine whether a provision is directory or mandatory as below:- 41. Learned Counsel for the appellant has referred to judgment of this Court in Dal Chand v. Municipal Corporation, Bhopal and another, 1984 (2) SCC 486: (AIR 1983 SC 303). This Court in the above case was considering Rule 9(j) of Prevention of Food Adulteration Rules, 1955, which requires supply of copy of the report of the public ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od Laboratory for analysis. Where the effect of noncompliance with the rule was such as to wholly deprive the right of the person to challenge the Public Analyst's report by obtaining the report of the Director of the Central Food Laboratory, there might be just cause for complaint, as prejudice would then be writ large. Where no prejudice was caused there could be no cause for complaint. I am clearly of the view that Rule 9(j) of the Prevention of Food Adulteration Rules was directory and not mandatory 42. This Court in the above case clearly laid down that whether particular provision is mandatory or directory has to be determined on the basis of object of particular provision and design of the statute. The period of 10 days in submitting the report of the public analyst was held to be directory for the reason that on the negligence of those to whom public duties are entrusted no one should suffer. Such interpretation should not be put which may promote the public mischief and cause public inconvenience and defeat the main object of the statute. The interpretation of the Rule 9(j) in the above case was on its own statutory scheme and has no bearing in the present case. We, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transmission of tax regime from Central Excise Act, VAT Act and Service Tax Law to GST regime. All such claims are required to be settled within the stipulated period and it cannot be left at the choice of the claimant to claim benefit at any point of time he chooses. Moreover, the legislative policy clearly appears to avoid raising of stale claims, verification of which itself may be difficult or even impossible with passage of time due to non-maintenance of various records of sale and purchase by dealers beyond reasonable period. If the arguments of the petitioner were to be accepted, a person could claim transitional credit at any time, which could be not only months but years after. We have already held that such a provision is mandatory and cannot be termed as a directory one. Moreover, it is well settled that fiscal laws require strict construction. 37. Even though the validity of provisions contained in Rule 117 of the CGST Rules, 2017, is not under challenge in this petition, we find that the Rule Making Authority, keeping in view that it was a transitional period as a result of introduction of new indirect tax regime, sufficient time has been provided under the law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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