Willowood Chemicals Pvt. Ltd. Versus Union Of India
GST
2018 (10) TMI 261 – GUJARAT HIGH COURT – 2018 (19) G. S. T. L. 228 (Guj.)
GUJARAT HIGH COURT – HC
Dated:- 19-9-2018
R/SPECIAL CIVIL APPLICATION No. 4252 of 2018
GST
Mr. AKIL KURESHI AND Mr. B.N. KARIA JJ.
Appearance :
Mr. VINAY SHRAFF, Sr Advocate 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] a
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ompany. The petitioner no. 1 is registered under the CGST as well as GGST Acts. Previously, the petitioner no. 1Company was registered under the Gujarat Value Added Tax Act, 2003 [“GVAT” for short]. With the advent of GST regime with effect from 1st July 2017, the company had to migrate to the new tax structure. The newly framed 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 Sect
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, the petitioners could not upload the declaration. Similar difficulties were experienced by dealers across the country. The petitioners, therefore, approached the concerned authorities on 28.12.2017 and submitted physical declaration in the proper format. The authorities, however, conveyed that they have no power to accept physical 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 c
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ould not be available, though the sales may have been made in the course of interState sell, by way of branch transfer, or for exports. In this context, our attention was drawn to the provisions of GVAT Act; and in particular, Section 11 thereof, which pertains to tax credit which a registered dealer could avail under the said Act. 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 enj
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y have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 1631995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods.”
[b] In case of Collector of Central Excise, Pune v. Dai Ichi Karkaria Limited, reported in 1999 [112] 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 il
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such computation, the charging provision would fail. In this respect, reliance was placed on the decision of Supreme Court in case of Commissioner of Income Tax, Bangalore vs. B.C Srinivasa Setty, reported in 128 ITR 294. For the same purpose, reliance was also placed on the decision of the Supreme Court in case of Govind Saran Ganga Saran vs. Commissioner 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
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perty without due recourse to law.
4.6 In the context of time limit provided in Rule 117 of the GGST Rules and CGST Rules, counsel vehemently contended that the said provision is ultra vires the Act and is also arbitrary and unreasonable, and therefore, ultra vires Article 14 of the Constitution of India. It was contended that the provisions 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.
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he Supreme Court in case of Salem Advocate Bar Association v. Union of India, reported AIR 2003 SC 189 and holding that time limit of ninety days provided in Rule 1 of Order VIII of CPC is directory in nature, it was observed that the procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice.
4.10 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.
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arlier statutory scheme. Our attention was drawn to the provisions of the Central Sales Tax Act and the rules framed thereunder to highlight that in the earlier tax structure also, in absence of such forms, the dealer would suffer tax on the sale; as if it was an intraState sale. As and when such forms are produced; 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 enti
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enge, the Court observed as under:
“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.
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 in
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umstances is the domain of the legislature and the courts are not to linker with the same. The Court noted with approval, the observations in the case of Godrej & Boyce Mfg. Company Prvt. Limited vs. Commissioner of Sales Tax & Ors., reported in [1992] 3 SCC 624 to the effect that it is only by virtue of the 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 w
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for consideration. Section 19 pertains to input tax credit in respect of any transaction of taxable purchases in any month and provides that the dealer shall make a claim before the end of financial year or before ninety days from the date of purchase; whichever is later. In the context of this challenge, the 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
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September 2018, which reads as under :
“[1A] Notwithstanding anything contained in subrule [1], the Commissioner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN1 by a further period not beyond 31st March 2019, in respect 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 inse
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f the statutory provisions does not survive. We would, therefore, address such issues raised by the petitioners.
7. Before taking up challenge to the vires of different statutory provisions, we may broadly state the powers of constitutional courts to annual a statute framed by the Union or the State legislature. It is 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 presum
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9 SCC 1, Rohinton Fali Nariman, J., expressed a view in the following terms :
“101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspaper v. Union of India, [1985] 1 SCC 641, stated that it was settled law that subordinate legislation can be challenged on any of the grounds 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 arb
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nd these principles, we may take closer look at the relevant provisions. As is well known, the GST statutes were activated w.e.f 1st July 2017. These statutes envisage uniform tax structure and subsume range of existing taxes such as Excise duty, Central Sales Tax and the Value Added Tax. Chapter 20 of 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 regis
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le duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:
(i) such inputs or goods are used or intended 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:
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 th
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mmon portal.”
10. The GGST Act also contains Chapter 20 pertaining to “Transitional Provisions”. Section 139 contained therein pertains to migration of existing taxpayers. Section 140 pertains to “transitional arrangements for input tax credit”. Relevant portion of which reads as under :
“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 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
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tantiated in the manner prescribed in rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957.”
11. Section 164 of the GGST Act gives rule making power to the Government, to which we would advert to at an appropriate stage.
In exercise of such powers, the State Government framed the GGST Rules. Rule 117 contained in the Rules, 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 day
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e 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 the manner as may be prescribed. First proviso to subsection [1] of Section 140 lays down circumstances under which such credit shall not be allowed. 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
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manner under rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957 [hereinafter to be referred to as, “the Registration & Turnover Rules”] are furnished, the credit equivalent to reduced tax would not be available, but as and when prescribed forms are furnished, the amount would be refunded to the dealer.
14. We may compare this position 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
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be in FormF. This rule, thus, prescribes the forms in which necessary declarations of interState sales would be made. Subrule (7) of Rule 12 provides that declaration in FormC or FormF shall be furnished to the prescribed authority within three months after the end of the period to which the declaration or the certificate relates. Proviso 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
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ns 8 and 13 of the Central Sales Tax Act, 1956 and the Registration and Turnover Rules of 1957, it was held that the assessee was not bound to furnish declaration in FormC before 16th February 1961; in the said case. In absence of any such timelimit, it was the duty of assessee to furnish declaration in FormC within a reasonable time, and it 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,
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ed, 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 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
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of credit under subsections [3], [4] and [6] shall be calculated in such manner as may be prescribed. Counsel for the petitioners had compared the language used by the legislature in subsections [1] and [3] of Section 140 to argue that the expression “in such manner as may be prescribed” used in subsection [1] was missing in subsection [3].
20. 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 specifyin
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brule [1A] of Rule 117, the same could be extended maximum upto 31st March 2019. As per the petitioners, this prescription of time limit per se is ultra vires the provisions of the Act and the Constitution of India.
21. In essence, subrule [1] of Rule 117 lays down a timelimit for making declaration only upon making of which, a person could take 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
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he recommendations of the Council, by notification, make rules for carrying out the provisions of this Act.
(2) 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 are required to be, or may be, prescribed or in respect of which provisions are to be or may be made 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
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dit of input tax under Section 140. Subrule [1] of Rule 117 thus applies to all cases of credits which may be claimed by a registered person under section 140 of the Act and is not confined 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.
25. Section 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 g
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ndations of the Council. Subsection [2] of Section 164 further provides that without prejudice to the generality of the provisions of subsection [1], the Government could also make rules for all, or any of the matters, which by this Act are required to be or may be prescribed or in respect of which, provisions are to be or may be made by the rules. Combined effect 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
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rom slightly different angle. Granting tax credit is an integral part of computation and collection of tax. Tax collection is an important element of budgetary allocations and estimation of the Union and the States. Such consideration of tax credits at such large scale cannot be allowed to linger on indefinitely which would have a direct effect on the tax collection, estimates 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, Ba
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e assessee but merely expended it in ordinary course of business of the State will make no difference to the position under Section 72 of the Contract Act.
29. With the aid of this judgment in the case of reKanhaiya Lal Mukundlal Saraf [Supra], often times, the parties would bring a proceeding before the Court of law for refund of tax after a number of years 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 Rs. 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 Dec
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for consideration before the 9Judge Bench in the case of Mafatlal Industries Limited & Ors., [Supra]. Mr. Justice B.P Jeevan Reddy speaking for the majority, summarized the conclusions in para 108 of the judgment. Portions relevant for our purpose, read as under :
“108. [i] Where a refund of tax/duty is claimed on the ground that it has been collected from 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
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with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are selfcontained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before 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 t
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irtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying clause (c) of subsection [1] of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be 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
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es 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes like Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitionerplaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne 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
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se and Customs laws for seeking refund of excess duty were held to be sacrosanct and were seen as constituting law within the meaning of Article 265 of the Constitution. Consequently, the tax collected, retained or not refunded in accordance with such provisions would be seen as collected, retained and not refunded under the authority of law. The view expressed by the Supreme 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 publi
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e 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 replaced by the new set of statutes, through an exercise which was unprecedented in the Indian context. The claims of carry forward of the existing duties and credits during the period of migration, therefore, 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
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egislative intent of restricting or limiting enjoyment of the existing rules, or in other wise to make continuous enjoyment of the rights, subject to certain safe guards and conditions.
34. Before closing, we would refer to some of the judgments relied upon by counsel for the parties and which we felt must be explained.
35. In the case of Eicher Motors Ltd [Supra] and Dai 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
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le interpreting a condition precedent for exemption, there would be distinction to be made between a procedural condition of a technical nature and a substantive condition. We have given elaborate reasons that the time limit provision for making declarations in the present case is of considerable importance and cannot be seen merely as a technical requirement. Removing 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 Ta
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823, rule 6 of the Central Sales Tax (Kerala) Rules 1957 came up for consideration, particularly in the context of subsection (4) of Section 8 of the CST Act, which as we have noted earlier, imposes the requirement of a dealer who has sold the goods in course of interState sale or Commerce, to furnish necessary declarations in prescribed manner. 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 phra
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