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TMI Blog2025 (2) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the matter of Muskan Enterprises & Anr. vs. State of Punjab & Anr. [2024 (12) TMI 1528 - SUPREME COURT] has interpreted the word 'may' and while dealing with the statute the Negotiable Instrument Act, 1881, has been inter alia pleased to hold that 'Law is well-settled that user of the verbs 'may' and 'shall' in a statute is not a sure index for determining whether such statute is mandatory or directory in character. The legislative intent has to be gathered looking into other provisions of the enactment, which can throw light to guide one towards a proper determination. Although the legislature is often found to use 'may', 'shall' or 'must' interchangeably, ordinarily 'may', having an element of discretion, is directory whereas 'shall' and 'must' are used in the sense of a mandatory provision. Also, while the general impression is that 'may' and 'shall' are intended to have their natural meaning, it is the duty of the court to gather the real intention of the legislature by carefully analysing the entire statute, the section and the phrase/expression under consideration. A provision appearing to be directory in form could be mandatory in substance. The substance, rather th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aying therein for the following reliefs: a. For issuance of an appropriate writ, order or direction, directing upon the Respondents to show cause as to why the refund application of the Petitioner has not been processed which pertains to refund of the pre-deposited amount with the government exchequer in order to maintain the appeal under Section 107 of the Act. b. Consequent upon showing cause, if any, and on being satisfied that the Respondents were obligated to grant refund of the pre-deposit amount and the refund application of the Petitioner could not have been automatically rejected on the ground of being time barred, the Respondents be directed to refund the amount of pre-deposit forthwith along with statutory interest. c. For issuance of an appropriate writ, order or direction, holding and declaring that once the appeal preferred by the assessee is allowed, withholding of the predeposit amount without any reasonable cause would be hit by Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law. d. For issuance of an appropriate writ, order or direction, quashing and setting aside the deficiency m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in [such form and] manner as may be prescribed. (2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of [two years] from the last day of the quarter in which such supply was received. (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant. (7) The proper officer shall issue the order under sub-section (5) within sixty days from the date of receipt of application complete in all respects. (8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to- (a) refund of tax paid on 2[export] of goods or services or both or on inputs or input services used in making such [exports]; (b) refund of unutilised input tax credit under sub-section (3); (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued; (d) refund of tax in pursuance of section 77; (e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or (f) the tax or interest borne by such other class of applicants as the Government may, on the recommend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate of registration granted to him had remained in force, furnished all the returns required under section 39. (14) Notwithstanding anything contained in this section, no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees. [(15) Notwithstanding anything contained in this section, no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods is subjected to export duty.] Explanation.- For the purposes of this section,- (1) "refund" includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under sub-section (3). (2) "relevant date" means- (a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be dealt with: 89. Application for refund of tax, interest, penalty, fees or any other amount.- (1) Any person, except the persons covered under notification issued under section 55 claiming refund of any tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner: Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of Section 49 may be made through the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7, as the case may be: Provided further that in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the - (a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone; (b) supplier of services along with such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or a Special Economic Zone developer; (g) a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports; (h) a statement containing the number and the date of the invoices received and issued during a tax period in a case where the claim pertains to refund of any unutilised input tax credit under sub-section (3) of section 54 where the credit has accumulated on account of the rate of tax on the inputs being higher than the rate of tax on output supplies, other than nilrated or fully exempt supplies; (i) the reference number of the final assessment order and a copy of the said order in a case where the refund arises on account of the finalisation of provisional assessment; (j) a statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter-State supply; (k) a statement showing the details of the amount of claim on account of excess payment of tax; (l) a declaration to the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated supply of services" means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:- Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period; (E)"Adjusted Total Turnover" means the turnover in a State or Union territory, as defined under sub-section (112) of Section 2, excluding the value of exempt supplies other than zerorated supplies, during the relevant period; (F) "Relevant period" means the period for which the claim has been filed. (5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:- Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC Adjusted T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made: "…As per direction dated 17.12.2024 of this Hon'ble Court, the proper authority has visited the portal and tried to issue the refund, but same was became unsuccessful as a Deficiency Memo has been issued and no further process can be performed in the portal for initiating the refund." 15. In the aforesaid background, we will deal with the issue of limitation under Section 54, if it is mandatory or directory. 16. Article 265 of the Constitution of India provides for - "265. Taxes not to be imposed save by authority of law No tax shall be levied or collected except by authority of law." 17. There is no dispute to the effect that once refund is by way of statutory exercise, the same cannot be retained neither by the State, nor by the Centre, that too by taking aid of a provision which on the face of it is directory, inasmuch as, the language couched in Section 54 is "may make an application before the expiry of 2 years from the relevant date". The word "relevant date" has been defined in Explanation 2 of Section 54, which thus reads as follows: (2)"relevant date" means- (a) in the case of goods exported out of India where a refund of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other case, the date of payment of tax. What is relevant in the aforesaid Explanation is Explanation 2(d) and it is this explanation which probably is haunting the minds of the Officer of the State. 18. The word 'may' has been interpreted by the Hon'ble Apex Court in numerous cases and the Hon'ble Apex Court has opined that the word 'may' as would appear in different statutes, is normally directory in nature and not mandatory. 19. Recently, the Hon'ble Apex Court in the matter of Muskan Enterprises & Anr. vs. State of Punjab & Anr. reported in 2024 SCC Online SC 4107 has interpreted the word 'may' and while dealing with the statute the Negotiable Instrument Act, 1881, has been inter alia pleased to hold as under: 24. Law is well-settled that user of the verbs 'may' and 'shall' in a statute is not a sure index for determining whether such statute is mandatory or directory in character. The legislative intent has to be gathered looking into other provisions of the enactment, which can throw light to guide one towards a proper determination. Although the legislature is often found to use 'may', 'shall' or 'must' interchangeably, ordinarily 'may', having an element of discreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guilty. Sub-section (1) of Section 143-A provides for passing a drastic order for payment of interim compensation against the accused in a complaint under Section 138, even before any adjudication is made on the guilt of the accused. The power can be exercised at the threshold even before the evidence is recorded. If the word "may" is interpreted as "shall", it will have drastic consequences as in every complaint under Section 138, the accused will have to pay interim compensation up to 20% of the cheque amount. Such an interpretation will be unjust and contrary to the well-settled concept of fairness and justice. If such an interpretation is made, the provision may expose itself to the vice of manifest arbitrariness. The provision can be held to be violative of Article 14 of the Constitution. In a sense, sub-section (1) of Section 143-A provides for penalising an accused even before his guilt is established. 19. Considering the drastic consequences of exercising the power under Section 143-A and that also before the finding of the guilt is recorded in the trial, the word "may" used in the provision cannot be construed as "shall". The provision will have to be held as directory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation Act, 1963, provides for 3 years limitation period for filing a Money Suit and if section 54 and the word 'may' is given effect to as 'mandatory', then in that event an assessee is otherwise also barred from filing a Money Suit, which cannot be the intent of the Act. 24. When the Constitution of India restricts levy of any tax without authority of law, the retention of the same on the ground of statutory restriction, which is in conflict with the Limitation Act, appears to be being misread by the authorities of the GST Department. 25. Under the circumstances, we have every reason to follow in what has been held by the Hon'ble Apex Court (Supra), as also, the orders passed by the Madras High Court in the matter of Lenovo India Pvt. Ltd. (Supra). 26. Having regard to the above discussions, it is held that the action of the respondents in rejecting the refund application considering it as time barred has no legs to stand in law and accordingly, the rejection order by way of Deficiency Memo dated 06.11.2024, is hereby, quashed and set-aside. Consequently, the concerned respondent is directed to process the refund application of the petitioner, which exercise shall be complete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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