RSPL Ltd Versus Union of India
GST
2018 (10) TMI 1521 – GUJARAT HIGH COURT – 2018 (19) G. S. T. L. 430 (Guj.) , [2019] 61 G S.T.R. 20 (Guj)
GUJARAT HIGH COURT – HC
Dated:- 16-10-2018
R\/Special Civil Application No. 22056 of 2017
GST
Mr. Justice Akil Kureshi And Mr. Justice B.N. Karia
\nFor the Petitioner(s) : Mr Anand Nainawati(5970)
\nFor the Respondent(s) : Mr Nirzar S Desai (2117), Mr Sudhir M Mehta (2058) And Notice Served(4)
\nORAL JUDGMENT
\n(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
\n1. Petitioner has prayed for a declaration that the action of the respondents in not allowing the credit of excise duty paid on capital goods which were in transit as on 01.07.2017 is violative of Article 14 and 19(1)(g) of the Constitution of India. The petitioner's consequential prayer is that the respondents be directed to allow such credit to the petitioner.
\n2. This challenge of the petitioner arises in following background.
\n3. Petitioner is a company registered under the<\/p>\n
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Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n .07.2017, such facility enabling the manufacturers to take credit of the duties paid on inputs as well as capital goods continued with certain modifications. CGST Act also contains transitional provisions as per which, unutilized CENVAT credit could be brought over to the GST regime. Such facility of migration would be available both in relation to inputs as well as capital goods. The statute also makes provisions to enable the assessee to avail the credit of duty paid on inputs which were in transit as on 01.07.2017. However, when it comes to the question of taking credit of the duty paid on the capital goods in transit and received on or after 01.07.2017, no facility is provided to enable the assessee to claim credit of the excise duty paid on such capital goods. This is where the grievance of the petitioner arises. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n provision also enables the assessee to take credit of the excise duty paid on inputs in transit. An artificial distinction is made only with respect to the capital goods in transit which is discriminatory and arbitrary. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ufacturer in his factory for payment of duty of excise leviable on its final product subject to conditions contained therein. Term capital goods defined in the definition below subrule (1). Subrule (2) of rule 57Q provided that notwithstanding anything contained in subrule (1), no credit of the specified duty paid on capital goods shall be allowed if such duty has been paid on such capital goods before first day of March 1994. Thus, this rule for the first time granted the facility of utilizing the specified duty paid on capital goods used by the manufacturer in the factory discharging its duty liability but restricted the application thereof to the duty which was paid on such capital goods after 01.03.1994. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s of the goods of output services. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tory provisions make a few things clear. Facility to avail credit on excise duty paid on capital goods used by the manufacturer in his factory for discharging duty liability on the finished products was made available under rule 57Q of the Central Excise Rules, 1945 with effect from 01.03.1994. This continued even under the CENVAT credit Rules, 2004, subject to conditions. As per clause, subrule (2) of rule 4 of the CENVAT credit Rules, 2004, would be restricted to a maximum of 50% of the duty paid on such capital goods in the financial year in which the capital goods were received in the factory of the manufacturer. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n f the CGST Rules makes detailed provision for working out such restriction on eligibility of input tax credit on capital goods to which subsections (1) or (2) of section 17 would apply. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n urther period not exceeding thirty days on sufficient cause being shown. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n registered person to claim credit of the duty paid prior to the appointed day on the inputs even though the inputs may be received after the appointed day. This section consciously does not provide any such facility in relation to the capital goods in transit. This demarcation itself would not be artificial, arbitrary or in any manner, discriminatory. The capital goods and inputs used in manufacturing process have always been treated differently and distinct treatment have been given under the earlier statutes. If the legislature therefore was of the opinion that in relation to capital goods in transit, duty paid before the appointed date cannot be claimed as a credit in the GST regime, we do not find that the distinction is in any manner artificial or arbitrary. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n clined to keep the issues of migration of tax credits and pending claims open for indefinite period of time. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n be measured by abstract symmetry” that exact wisdom and nice adoption of remedy are not always possible and that “judgment is largely a prophecy based on meagre and uninterpreted experience”. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Reig Refining Company 94 Lawyers Edition 381 be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate a<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 20) of the Tamilnadu Value Added Tax Act, 2006, made following observations: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ue Added Tax Act, 2006, the special provision provides that in case of any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before the end of the financial year or before 90 days from the date of purchase whichever is later. This provision thus provided time limit for a dealer to claim tax credit in respect of transaction of taxable purchase. This provision was attacked on the ground that it laid down restrictions on enjoyment of input tax credit which the main provision granting such facility does not envisage. It was also argued that in any case the time limit provision should be seen as directory and not mandatory. The Supreme Court repelled the challenge observing inter alia that the conditions under which the concessions and the benefits is given is always to be strictly construed. If it is accepted that there is no time period for claiming input tax credit as contained in section 19(11), the <\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" RSPL Ltd Versus Union of IndiaGST2018 (10) TMI 1521 – GUJARAT HIGH COURT – 2018 (19) G. S. T. L. 430 (Guj.) , [2019] 61 G S.T.R. 20 (Guj)GUJARAT HIGH COURT – HCDated:- 16-10-2018R\/Special Civil Application No. 22056 of 2017 GSTMr. Justice Akil Kureshi And Mr. Justice B.N. Karia For the Petitioner(s) : Mr Anand … Continue reading “RSPL Ltd Versus Union of India”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14716","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/14716","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14716"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/14716\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n5. Shri Nainawati appearing for the petitioner, drew our attention to the relevant statutory provisions. His main focus was on section 140 of the CGST Act and particular<\/p>\n
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\n II. It was contended that the classification between capital goods and inputs was an artificial demarcation. In order to be reasonable, such classification must have rational relation with the objects sought to be achieved.
\n III. Reference was made to the decision in case of Shayara Bano v. Union of India and others (MINISTRY OF WOMEN AND CHILD DEVELOPMENT SECRETARY AND OTHERS) reported in (2017) 9 SCC 1, in which the Supreme Court propounded that a statute can also be struck down on the ground that the same is manifestly arbitrary.
\n IV. Decision of Supreme Court in case of D.S. Nakara and Others v. Union of India reported in (1983) 1 SCC 305 was cited to contend that if a provision is found to be discriminatory, it is not necessary that the Court must strike down <\/p>\n
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\n8. CENVAT credit Rules, 2004, also granted similar benefits. Term “capital goods” was defined in rule 2A. Rule 3 of the CENVAT credit Rules, 2004, pertains to CENVAT credit. Subrule (1) of rule 3 provided that a manufacturer or producer of final products or a provider of output se<\/p>\n
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\n9. Section 2(19) of the CGST Act defines the term “capital goods” as to mean the goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business. Term 'input' is defined in section 2(59) as to mean any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of a business. Section 2(62) defines the term 'input tax' in relation to a registered person as to mean the Central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and would include several taxes specified in clauses (a) to (e) contained therein. Term 'input tax credit' is defined under section 2(63) as to mean the credit of input tax.
\n10. Section 16 of the CGST Act pertains to eligibility and conditions for taking input tax credit. S<\/p>\n
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\nLikewise, subsection (2) of section 17 provides that where the goods or services or both are used by the registered person partially for affecting taxable supplies including zero rated supplies and partially for exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero rated supplies.
\n12. Rule 43 of the Central Goods and Service Tax Rules, 2017 ('CGST Rules' for short) provides the manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases. This rule provides a formula restricting the input tax credit in respect of capital goods which attracts subsection (1) and subsection (2) of section 17 being partially used for the purpose of business and partially for other purposes or partially used for affecting taxab<\/p>\n
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\n (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:
\n PROVIDED that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.
\n Explanation: For the purposes of this subsection, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the exi<\/p>\n
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\nRemaining 50% could be availed in any financial year subsequent to such year.
\n15. In a different format in the GST regime also this facility is continued. As correctly pointed out by the counsel for the petitioner, the CGST Act does not make a distinction between duty paid on capital goods or inputs for the purpose of granting credits thereof. Subsection (1) of section 1<\/p>\n
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\n16. However, when it comes to the transition from the central excise to GST regime, the legislature has made slightly different provisions for credit on inputs and capital goods. In this context, section 140 of the CGST Act assumes significance. Subsection (1) of section 140 enables a registered person other than a person who has opted for payment of tax on composition basis to carry forward CENVAT credit of eligible duties in relation to the period ending with the day immediately preceding the appointed day under the existing law in such manner as may be prescribed. Subsection (2) of section 140 provides that the registered person other than one opting to pay tax on composition basis shall be entitled to take in his electronic credit ledger credit of unavailed CENVAT credit in respect of capital goods<\/p>\n
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\n17. Very clearly thus subsection (5) of section 140 allows a registered person, credit of eligible duties and tax in respect of inputs or input services which were received on or after the appointed day but on which the tax was paid earlier. In absence of any matching provisions pertaining to capital goods, in a situation where the duty had been paid on purchase of goods prior to the appointed day but the goods were received on or after the appointed day, there would be no possibility of availing credit on such tax under the GST regime.
\n18. It can thus be seen that to this limited extent, the CGST Act has made a distinction between the capital goods and inputs. The question is, is this demarcation unlawful? As noted, the fulcrum of the petitioner's argument was that this makes an artificial distinction between capital goods and inputs which has no rational relation to the purpose sought to be achieved. The s<\/p>\n
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\n20. Article 14 as is wellknown, prohibits class legislation but not reasonable classification. To bring in the element of discrimination in terms of Article 14 of the Constitution, the onus would be on the petitioner to estab<\/p>\n
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\n21. In case of R.K.Garg v. Union of India and others reported in (1981) 4 SCC 675 the constitution bench of the Supreme Court held that every legislation particularly in economic matters is essentially empiric and it is based on experimentation. It was further held and observed as under:
\n “7. Now while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the courts as rules of guidance in discharge of its constitutional function of judicial review. The first rule is that there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accepted, that<\/p>\n
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\n “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 with any other aspect de hors the issue of ITC as per section 19 of the VAT Act, possibly the arguments of Mr. Bagaria would have assumed some relevance. But, keeping in v<\/p>\n
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