2018 (10) TMI 261 – GUJARAT HIGH COURT – 2018 (19) G. S. T. L. 228 (Guj.) – Constitutional Validity of second proviso to Section 140 [1] of the Gujarat Goods and Services Tax Act, 2017 – vires of Rule 117 of the Central Goods and Services Tax Rules, 2017 and Rule 117 of the Gujarat Goods and Service Tax Rules, 2017 – transitional credit – migration to GST Regime – carry forward of CENVAT credit in the electronic credit ledger, available as on 30th June 2017 in terms of Section 140 [3] of the Central Goods and Services Tax Act, 2017 – carry forward of eligible credit of State tax ie., the Value Added Tax available as on 30th June 2017 – time limit to make declaration of available tax credits.
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Case of the petitioners is that in terms of Rule 117 of the CGST Rules, the petitioners tried to upload the declaration in TRAN1 on the official portal on 27.12.2017, however, due to technical glitches in the portal, the petitioners could not upload the declaration – The petitioners, theref
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just saying that it is arbitrary or unreasonable.
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Vires of second proviso to Section 140 [1] of the GGST Act – Held that:- As per the main provision, credit would be available on the amount of Value Added Tax and Entry Tax carried forward in the return. As per the further proviso or the second proviso, such credit to that extent would not be transferred when necessary declarations are not furnished by the dealer. The proviso thereafter however ensures that as and when declarations are filed, the amount equivalent to credit specified in the second schedule would be refunded to the dealer. We do not find any major change in the effect of late production of the forms by a dealer in the present statutory provisions; as compared to the earlier position, nor the statutory provisions deny the benefit of such credit, even where necessary declarations are furnished. Thus, no existing or vested right can be said to have been taken away – We do not think Section 140 [c] is a charging provis
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fined to subsection [3]. This plenary prescription of time limit within which necessary declarations must be made is, in our opinion, neither without authority nor unreasonable.
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Merely because the rule in question prescribes a time frame for making a declaration, such provision cannot necessarily be held to be directory in nature and must depend on the context of the statutory scheme.
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In the economic matters of such vast scale, the wider considerations of the State exchequer, while interpreting a statutory provisions cannot be kept out of purview. Quite apart from independently finding that the time limit provisions contained in subrule (1) of Rule 117 of the CGST Rules is not ultra vires the Act or the powers of the rule making authority, interpreting such powers as merely directory would give rise to unending claims of transfer of credit of tax on inputs and such other claims from old to the new regime. Under the new GST laws, the existing tax structure was being replac
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dvocate with Mr. NIPUN SINGHVI; Mr. VISHAL J DAVE; Mr. PRATEEK GATTANI & Ms. HIRAL U MEHTA, Advocates for the PETITIONER Mr. KAMAL TRIVEDI, Advocate General with Mr. PRANAV TRIVEDI, AGP for the RESPONDENT(s) No. 4, 5 Mr. NIRZAR S DESAI, Advocate for the RESPONDENT(s) No. 3,4 NOTICE SERVED(4) for the RESPONDENT(s) No. 1,2 ORAL JUDGMENT (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) The petitioners have challenged constitutionality of second proviso to Section 140 [1] of the Gujarat Goods and Services Tax Act, 2017 [ GGST Act for short]. The petitioners have also challenged the vires of Rule 117 of the Central Goods and Services Tax Rules, 2017 [ CGST Rules for short] and Rule 117 of the Gujarat Goods and Service Tax Rules, 2017 [ GGST Rules for short]. The petitioners have prayed that the respondents be directed to allow the petitioners to carry forward CENVAT credit in the electronic credit ledger, available as on 30th June 2017 in terms of Section 140 [3] of the Central Goods and Ser
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ramed statutes for such purpose include transitional provisions, enabling dealers to carry forward tax credits available to them as on 30th June 2017. Section 140 of the CGST Act lays down conditions for carry forward of such tax credit. Section 164 of the CGST Act is a rule making provision empowering the Government to frame the rules for the purpose of carrying out provisions of the Act. In exercise of such powers, the Central Government has framed CGST Rules. Rule 117 contained therein pertains to carry forward of tax credits under the existing law. Subrule [1] thereof envisages that every registered person entitled to take credit of input tax under Section 140, shall submit a declaration electronically in Form GST Tran1 within ninety days of the appointed day. This time limit was extended from time to time. The final extension was granted upto 27.12.2017, beyond which the respondents did not accept any further declarations. 2.2 Likewise, Section 140 of the GGST Act also e
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al declarations. 3. In this background, broadly stated, the petitioners grievances are as under : [i] On account of technical glitches in the Government portal, despite efforts made by the petitioners for filing the declaration electronically, the same could not be done within extended time for no fault of the petitioners. Thus, the tax credit available in the accounts as on 30th June 2017 would be lost for ever, since in absence of such declaration within the time envisaged, tax credit would not be transferred to the GST regime; [ii] Second proviso to Section 140 [1] of the CGST Act is unconstitutional. This proviso limits the right of a dealer to claim carry forward of the tax credit in relation to interState sales as well as branch transfers or export sales, unless necessary declarations in FormsC, F & H are produced. [iii] Rules 117 of the CGST Rules and GGST Rules which prescribe the time for making a declaration of available tax credits as on 30th June 2017 are ultr
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t. Our attention was also drawn to Section 100 of the GVAT Act which pertains to Repeal and Savings . Subsection [2A] was inserted in Section 100 of the GVAT Act by the Gujarat Value Added Tax [Amendment] Act, 2017 which inter alia provides that nothing done in the amendment of the GVAT Act shall affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act prior to the coming into force of the said amendment. On this basis, it was argued that the tax credit at the disposal of the petitioners as on 30th June 2017 is in the nature of accrued or vested right which could not be taken away by putting restrictions in enjoyment thereof, as was done through the second proviso to Section 140 [1] of the GGST Act. In this context, reliance was placed on the following judgments : [a] In case of Eicher Motors Limited v. Union of India., reported in 1999 [106] ELT 3 [SC] in which the Supreme Court, in the context of MODVAT credit, had observed as under : 6. W
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ELT 353 [SC], in which the Supreme Court referring to the decision in case of Eicher Motors Limited [Supra] had observed as under : 17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or if utilized, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisabl
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ommissioner of Sales Tax & Ors., AIR 1985 SC 1041 and in case of Mathuram Agrawal vs. State of Madhya Pradesh, [1999] 8 SCC 667. 4.2 It was further contended that there was no allegation of the Department that there has been any default in payment of tax by the petitioners. Obtaining necessary forms from the purchasers and exporters often take a long time and only on this count, the assessee would suffer higher tax; as if the sales were made intra-State. 4.3 Our attention was also drawn to a decision of Allahabad High Court in the case of Yamaha Motor Escorts Limited v. State of U.P & Ors., reported in [2011] 38 VST 115 in which the Division Bench had observed that non production of form C or D would not make interState transaction illegal or void. It would only result in denying the manufacturer, the benefit of reduced rate of tax. 4.4 In this context, reliance was placed on the decision of Division Bench of this Court in the case of Indusur Global Limited v. Union of Ind
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contained in the parent Act pertaining to transfer of unutilized tax credits did not envisage any time limit for making a declaration for such purpose. Such time limit cannot be introduced through the rules unless specific powers for such purpose have been granted. Neither Section 140 of the parent Act nor the rule making powers envisage any authority in the delegated legislation to impose such condition. 4.7 In the alternative, it was contended that such time limit should be construed as directory and not mandatory. Any procedural provision which is framed for implementing the substantive provisions should ordinarily be directory in nature. By insisting on rigid time frame for making declaration, procedural provision is being given primary over substantive provision thereby a vested right is sought to be taken away merely because due to genuine reasons, declaration could not be made within time. 4.8 In the context of this contention, counsel relied on decision of the Supreme Cour
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0 Reliance was also placed on the decision of Supreme Court in the case of Mangalore Chemicals & Fertilizers Limited v. Deputy Commissioner, reported in 1991 [55] ELT 437 [SC] in which it was observed that while interpreting condition for exemption, a distinction had to be made between the procedural condition of a technical nature and a substantive condition. For the same purpose, reference was also made to the decision of the Supreme Court in case of Commissioner of Customs & Excise, Madras v. Home Ashok Leyland Limited, 2007 [2010] ELT 178 [SC]. In this context, reliance was placed on a decision of Supreme Court in case of State of Himachal Pradesh & Ors. vs. Gujarat Ambuja Cement Limited & Anr., [2005] 142 STC 1 [SC]. 5. On the other hand, learned Advocate General led the arguments on behalf of the respondents. In the context of challenge to the second proviso to Section 140 [1] of the GGST Act, he submitted that there is no lack of competence in the State legislatu
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ced; even during the course of assessment, the benefit of concessional rate of tax would be available. 5.1 With respect to challenge to the time limit provided under Rules 117 of the CGST and GGST Rules, it was contended that the said rules were framed in exercise of rule making powers and were in consonance with the scheme of Section 140 of the Act. Right to enjoy tax credit is a kind of concession. Such concession can always be made subject to conditions. Initial time limit of 90 days was extended from time to time. All dealers across the country got time upto 27th December 2017 ie., nearly six months to manage their affairs and make necessary declarations. When the entire tax structure was being changed in order to bring uniformity, simplicity and common tax rates across the country, certain transitional difficulties are bound to surface. It was for such purpose that the migrating dealers were granted the benefit of left over tax credits. Interpreting the time limit provision as mer
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n 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. 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 of 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 VAT Act, it is not permissible for the dealers to argue that the price as indicated in the tax invoice should not have been taken into consideration but the net purchase price after discount is to be the basis. If we were dealing
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he rules that the assessee was entitled to a set off. It is really a concession and an indulgence. 5.4 In case of Osram Surya [P] Limited v. Commissioner of Central Excise, Indore, reported in [2002] 9 SCC 20, in which, the Supreme Court considered the challenge to the substituted second proviso to Rule 57 [4] of the MODVAT Rules which provided that the manufacturer shall not take credit after six months from the date of issuance of any documents specified in the first proviso to the said subrule. Relying on decision of the Supreme Court in the case of Eicher Motors Limited v. Union of India [Supra] and Collector of Central Excise, Pune v. Dai Ichi Karkaria Limited [Supra], it was argued that this provision took away the existing rights. Rejecting such contention, it was observed that the plain reading of the said provision shows that it applies to those cases where the manufacturer is seeking to take the credit after introduction of the rules, and the cases where the manufacturer
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he Court considered whether section was inconsistent with the charging section and whether the same was directory and not mandatory. While upholding the validity of the section, it was further held that the legislature consciously wanted to set up the time frame for availment of the input tax credit. Such conditions therefore must be strictly complied with. 5.6 In case of JCB India Limited v. Union of India., reported in [2018] 53 GSTR 197, in which Division Bench of the Bombay High Court had upheld vires of Clause (iv) of subsection [3] of Section 140 of the CGST Act imposing a condition on the first stage dealers to avail tax credit, that such credit should be in relation to invoice which is dated not earlier then 12 months preceding the appointed day. We may, however, record that in case of Filco Trade Centre Private Limited vs. Union of India [SCA No. 18433 of 2017 with SCA 20185/2017 :: decided on 5th September 2018], the Gujarat High Court has taken a different view. 5.7 In
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of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension. 5.9 It is stated that corresponding amendment is made in sub-rule [4], wherein below Clause (b) in subclauses (iii), the following proviso is inserted : 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 30th April 2019. 6. Before examining rival contentions, we may recall that the Government of India has amended Rule 117 of the CGST Rules by inserting subrule [1A] which provides that notwithstanding anything contained in subrule [1], the Commissioner may on recommendation of the Council, extend the date of submitting declaration electronically in FORM GST TRAN1 by a further period not beyond 31st March 2019, in respect of registered persons w
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well settled that there is a presumption of constitutionality of a statute. In case of State of Jammu & Kashmir vs. Triloki Nath Khosa & Ors., reported in AIR 1974 SC 1, the Constitution Bench of the Supreme Court upheld the legislation classifying Assistant Engineers into Degreeholders and Diploma holders for the purpose of promotion. It was observed that there is a presumption of constitutionality of a statute and the burden is on one who canvasses that certain statute is unconstitutional to set out facts necessary to sustain the plea of discrimination and to adduce cogent and convincing evidence to prove those facts. 8. It is equally well settled that the presumption of constitutionality would touch even the subordinate legislation. However, the grounds on which a statute framed by the Parliament or the State legislature are limited, as compared to the subordinate legislation. While a legislation framed by the subordinate legislature can also be questioned on the ground
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ounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14. The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14. 9. In recent judgment in case of Navtej Singh Johar & Ors. vs. Union of India, [W.P (Cri.) No. 76 of 2016], the Constitution Bench of the Supreme Court struck down
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the CGST Act pertains to transitional provisions. Section 139 contained in the said chapter envisages migration of registration of the persons who were registered under the existing laws. Section 140 pertains to transitional arrangements for input tax credits. Relevant portion of which reads as under : 140. (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 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 in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately pre
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s 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: 140. (10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed. 9. Section 164 of the CGST Act pertains to power of the Government to make rules. We would refer to this provision at an appropriate stage. In exercise of such rule making powers, the Central Government framed CGST Rules. Chapter 14 of the CGST Rules contains transitional provisions. Rule 117 contained in the said Chapter pertains to tax or duty credit carried forward under any existing law or on goods held in stock on the ap
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edit. (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 Value Added Tax, and Entry Tax, if any, 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 in such manner as may be prescribed. Provided that the registered person shall not be allowed to take credit in the following circumstances, namely : [i] where the said amount of credit is not admissible as input tax credit under this Act, or [ii] where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or [iii] where the said amount credit relates to goods sold under notification no. [GHN51 GST2001 S.49 [355] TH, dated the 31st December 2001, [GHN24] VAT 20123/S.40 [1](8)TH, dated the 11th October 2013 and any other notifications
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contain Transitional Provisions . Subrule [1] thereof reads as under : 117. Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day : (1) Every registered person entitled to take credit or input tax under Section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit to which he is entitled under the provisions of the said section: Provided that the Commissioner may, on the recommendation of the Council, extend the period of ninety days by a further period not exceeding ninety days. Provided further that in the case of a claim under Section (1) of Section 140, the application shall specify separately (i) the value of claim under Section 3, sub section (30 of the section 5 Section 6 and 6A and sub section (8) of section 8 of the Central Sales Tax Act, 1956 made by the applicant
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owed. A further proviso which is referred to as the second proviso and which is under challenge provides that so much of the said credit; as is attributable to any claim relating to Section 3, sub-Section (3) of Section 5, Section 6, Section 6A or subsection (8) of Section 8 of the Central Sales Tax, 1956 which is not substantiated in the manner and within the period prescribed in Rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957 shall not be eligible to be credited to the electronic credit ledger. In the simple terms, this further proviso provides that whenever the dealer has not furnished necessary forms supporting the interState sales, branch transfers or export sales, the credit related to such sales would not be available. The proviso, following this further proviso, however provides that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law, when the said claims are substantiated in the manner presc
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on with the erstwhile position obtaining under the earlier statute ie., the Central Sales Tax Act, 1956 [to be hereinafter referred to as, the CST Act, 1956 ]. Section 8 of the CST Act, 1956 pertains to rates of tax on sales in the course of interState trade or commerce. Subsection [1] of Section 8 provides that every dealer, who in the course of interState trade or commerce, sells to a registered dealer, goods of the description referred to in subsection (3), would be liable to pay tax, which shall be two per cent of his turnover, or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sale tax law of that State; whichever is lower. Subsection [4] of Section 8, however, provides that the provisions of subsection [1] shall not apply to any sale in the course of interState trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner, a declaration duly fil
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oviso to subrule (7) provides that if the prescribed authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, that authority may allow such declaration or certificate to be furnished within such further time as that authority may permit. Thus, combined reading of the provisions contained in the CST Act, 1956 and the Registration and Turnover Rules of 1957 which held the field during the earlier regime would show that the requirement of issuing necessary declarations in the prescribed forms establishing interState sales and other similar transactions inviting reduced tax, existed even then. As noted, subsection [1] of Section 8 of the CST Act, 1956 envisaged tax at a reduced rate on the interState sales. Subsection [4] of Section 8 of the CST Act, however, provided that subsec. [1] shall not apply to any sale in the course of interState trade or commerc
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was noted that in the said case, the assessee had furnished the declaration before the order of assessment was made by the Sales Tax Officer. It was, therefore, held that the benefit of such declaration had to be given to the assessee. In the case of Yamaha Motor Escorts Limited v. State of Uttar Pradesh & Ors., [Supra], the High Court held that non production of FormC or D would not make the interState transaction illegal or void. It would only result in denying the manufacturer the benefit of reduced rate of tax. Thus, even in the erstwhile statutory provisions, the benefit of reduced rate of tax on interState sales, etc., was not taken away permanently for the failure of the dealer to produced necessary forms in the prescribed manner. The same was nevertheless delayed, till such forms and declarations were produced. The combined reading of subsection (1) of Section 7 and subsection (4) of Section 8 of the CST Act, 1956 and interpretation given to such p
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ations are furnished. Thus, no existing or vested right can be said to have been taken away. We do not think Section 140 [c] is a charging provision or that for want of mechanism for computing such charge, the provision itself would fail. The provision is in the nature of enabling the dealers to take credit of existing taxes paid by them but not utilized for discharging their tax liabilities. It contains conditions subject to which the benefit can be enjoyed. 18. This brings us to the petitioners challenge to rule 117 of the CGST Rules and GGST Rules. The statutory provisions being pari materia in both the Act and the Rules, in so far as this challenge is concerned, we may refer to provisions contained in the CGST Act. 19. As noted, under subsection [1] of Section 140 of the CGST Act, a registered person, other than one who had opted for composition of tax would be entitled to take credit of the amount of CENVAT credit carried forward in the return relating to the period ending wi
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In his contention, therefore, the rules that the subordinate legislature framed could not have prescribed a time limit for making necessary declarations; as referred to under subsection [3] of Section 140. Rule 117 of the CGST Rules pertains to taxes or duty credit carried forward under any existing law or on goods held in stock on the appointed day. Subrule (1) of Rule 117 provides that every registered person entitled to take credit of the input tax under Section 140, shall within ninety days of the appointed day, submit a declaration electronically in the prescribed format, duly signed, on the common portal specifying separately the amount of input tax credit to which he is entitled under the provisions of the said section. Proviso to subrule [1] envisages extension of period for making the said declaration on the recommendations of the Council. We have noted that such time limit was extended from time to time and finally upto 27th December 2017. A limited extension
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benefit of tax credit in terms of Section 140 of the CGST Act. We are conscious that subsections [1] and [3] of Section 140 of the CGST Act use somewhat different phraseology. Under subsection [1] the legislature has provided that the benefit of credit in the electronic credit ledger would be available to a registered person in such manner; as may be prescribed. In contrast, subsection [3] of Section 140 grants facility of credit in electronic ledger of the specified duties to the specified class of persons; subject to conditions laid down under clauses (i) to (v) of the said subsection. It is only in the proviso below clause (v) of subsection [3] that the legislature has 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
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e by rules. (3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on which the provisions of this Act comes into force. (4) Any rules made under subsection (1) of subsection (2) may provide that a contravention thereof shall be liable to a penalty not exceeding ten thousand rupees. 23. Under subsection [1] of Section 164 of the CGST Act, thus, the Government on recommendations of the Council, by notification, could make rules for carrying out the provisions of the Act . This rule making power is thus couched in the widest possible manner empowering the Government to make the rules for carrying out the provisions of the Act. Subsection [2] to Section 164 is equally widely worded, when it provides that, without prejudice to the generality of the provisions of subsection (1), the Government may make rules for all or any of the matters which by this Act
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ection 140 of the Act envisages certain benefits to be carried forward during the regime change. As is wellsettled, the reduced rate of duty or concession in payment of duty are in the nature of an exemption and is always open for the legislature to grant as well as to withdraw such exemption. As noted in case of Jayam & Company [Supra], the Supreme Court had observed that input tax credit is a form of concession provided by the legislature and can be made available subject to conditions. Likewise, in the case of Reliance Industries Limited [Supra], it was held and observed that how much tax credit has to be given and under what circumstances is a domain of the legislature. In case of Godrej & Boyce Mfg. Co. Pvt. Limited [Supra], the Supreme Court had upheld a rule which restricts availment of MODVAT credit to six months from the date of issuance of the documents specified in the proviso. The contention that such amendment would take away an existing right was rejected. 26
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ffect of the powers conferred to subordinate legislature under subsections [1] and [2] of Section 164 of the CGST Act would convince us that the prescription of time limit under subrule [1] of Rule 117 of the CGST Rules is not ultra vires the Act. Likewise, such prescription of time limit cannot be stated to be either unreasonable or arbitrary. When the entire tax structure of the country is being shifted from earlier framework to a new one, there has to be a degree of finality on claims, credits, transfers of such credits and all issues related thereto. The petitioners cannot argue that without any reference to the time limit, such credits should be allowed to be transferred during the process of migration. Any such view would hamper the effective implementation of the new tax structure and would also lead to endless disputes and litigations. As noted in case of USA Agencies [Supra], the Supreme Court had upheld the vires of a statutory provision contained in the Tamil Nadu
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timates and budgetary allocations and in turn, revenue deficit. 28. In this context, we may refer to the Constitution Bench decision of the Supreme Court in the case of Mafatlal Industries Limited & Ors. vs. Union of India & Ors., reported in [1997] 5 SCC 536. In such judgment, various issues concerning the refund applications under the Central Excise and Customs and other taxing statutes came up for consideration before the NineJudge Bench of the Supreme Court. Before adverting to the majority opinion expressed by B.P Jeevan Reddy, J., we may note a short precursor to this judgment. In case of Sales Tax Officer, Banaras & Ors. vs. Kanhaiya Lal Mukundlal Saraf, [AIR 1959 SC 135], the Constitution Bench of the Supreme Court considered the term mistake used in Section 72 of the Contract Act, 1872 in the context of payment of tax. It was held and observed that true principle is that if one party under mistake – whether of fact or law, passed to another party money which i
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ars of collection on the ground that some other party had challenged the levy before Court and succeeded therein. In case of Tilokchand Motichand v. H.B Munshi, CST, reported in [1969] 1 SCC 110, the Constitution Bench of the Supreme Court, however, expressed somewhat different view. It was a case in which the Sales Tax Officer had forfeited a sum of ₹ 26,563/= of the petitioner, who thereupon had filed a writ petition before the High Court challenging such order. The petition was dismissed on 28th November 1958. The appeal was dismissed by Division Bench of the High Court on 7th July 1959. Later on, by a judgment dated 2nd December 1963, the Gujarat High Court held that the relevant provision of the Bombay Sales Tax Act under which the amount was collected was valid. The Supreme Court, however, by judgment dated 29th March 1967 struck down the provision as being infringement of Article 19 [1] of the Constitution of India. The petitioner thereupon filed a petition directly before
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rom the petitioner/plaintiff – whether before the commencement of the Central Excise and Customs Laws [Amendment] Act, 1991 or thereafter – by misinterpreting or misapplying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tarrif Act or by misinterpreting or misapplying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 – and of this Court under Article 32 – cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their juri
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e and after the 1991 [Amendment] Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excise and Sale Act or the Customs Act, as the case may be. It is necessary to emphasize in this behalf that Act provides a complete mechanism for correcting any errors whether or fact or law and that not only an appeal is provided to a Tribunal – which is not a departmental organ – but to this Court, which is a civil court. [ii] Where, however, a refund is claimed on the ground that the provisions of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of
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governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview. [iii] xx xx xx [iv] It is not open to any person to make a refund claim on the basis of a decision of a court or tribunal rendered in the case of another person. He cannot also claim that the decision of the Court/Tribunal in another person s case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final in his case, he cannot
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ne the burden of the said duty. [vi] xx xx xx xx [vii] While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitionerplaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of larger claims, it may well result in financial chaos in the administration of the affairs of the State. [viii] The decision of this Court in STO v. Kanhaiya Lal Mukundlal Saraf [Supra] must be held to have been wrongly decided in so far as it lays down or is understood to have laid down proportions contrary to the propositions enunciated in (i) and (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiya Lal [Supra] have also b
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reme Court in Trilokchand Motichand [Supra] was affirmed. It was emphatically stated that it was not open to any person to make refund claim on the basis of a decision of the Court or Tribunal rendered in case of another person. Such a person cannot claim that the decision of the Court or Tribunal in another person s case has led him to discover a mistake of law under which he had paid the tax. In this context, it was observed that any proposition to the contrary not only results in substantial prejudice to the public interest, but is offensive to several well established principles of law. It also leads to grave public mischief. In this context, it was also observed that while examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims would not be an irrelevant consideration. In case of large claims, the same may result in financial chaos in the administration of the affairs of the State. The decision in the case
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erefore, had to be within the prescribed time. Doing away with the time limit for making declarations could give rise to multiple largescale claims trickling in for years together, after the new tax structure is put in place. This would besides making the task of matching of the credits impractical if not impossible, also impact the revenue collection estimates. It is in this context that the Supreme Court in the case of Mafatlal Industries Limited (Supra), after rejecting the contention that a person can move proceedings for recovery of tax paid upon success of some other person before the Tribunal or Court in getting such tax collection declared illegal, was further influenced by the fact that any such situation could lead to utter chaos, if the claims are large. Under the circumstances, we do not find any substance in the petitioners challenge to rule 117 (1) of the CGST Rules as well as GGST Rules. 33. The contention of the counsel for the petitioners that the saving clause in
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Ichi Karkaria [Supra], essentially, the conclusion of the Supreme Court, was that the MODVAT credit in the account of a manufacturer is in the nature of duty already paid and which cannot be taken away by retrospective rules. 36. Reference to a decision of the Supreme Court in the case of CIT v. B.S Srinivasa Setty [Supra] is of no avail. The ratio of the said decision can be seen as holding that there cannot be taxing provision without mechanism having been provided by the statute. We do not see Section 140 (1) of the GGST Act is a charging provision. It, in fact, enables a registered person who has not opted for composition of tax to take credit in his electronic credit ledger, the credit of the amount of value added tax and entry tax in relation to the period ending immediately preceding the appointed day. This section further provides for conditions; subject to which, the same could be claimed. 37. The decision of Supreme Court in the cases of : (a) Sambhaji & Ors. vs. Gangabha
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ing such time limit would have a potential to lead to utter economic chaos. 39. In case of State of Mysore & Ors. v. Mallick Hashim & Co. [1974] 3 SCC 251, it was the High Court which had struck down the rule framed by the Government providing the time limit for filing the refund application on the ground that the section which granted the benefit of refund did not envisage any such time limit that would be prescribed under the rules. The Supreme Court, however, did not proceed on this logic. The Court held that it was not necessary to go into this question, since subrules (2) and (3) of Rule 39A of the Mysore Sales Tax Rules, 1957 were wholly unreasonable, and therefore, cannot be sustained. Subrule (3) of Rule 39A provides that before a person is entitled to refund, he must have to make the refund application within the time before which he should have submitted his Salestax return. It was observed that in many States, the dealers have to submit quarterly
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Rule 6 of the Central Sales Tax (Kerala) Rules, besides making other provisions, prescribes time limit for making declarations. Such rule was examined in light of rule making power contained in Section 13 (4) of the CST Act, clause (e) of which provided that the State Government may make rules for the purpose of the authority from whom, the conditions subject to which and the fees subject to payment of which any from declaration prescribed under sub Section (4) of Section 8 may be obtained, the manner in which the form shall be kept in custody and records relating thereto maintained. In this context, it was observed that the phrase, in the prescribed manner occurring in Section 8 (4) of the Act does not take into timeelement. While concluding that the time limit prescribed in Rule 6 (1) was ultra vires, and therefore, assessee was not bound to furnish declarations in Form C before 16th February 1961 into said case, the duty of the assessee was to furnish declaration within a
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