C/SCA/2409/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 2409 of 2019 DOWNTOWN AUTO PVT. LTD Versus UNION OF INDIA Appearance: for Petitioner(s) No. 2 UCHIT N SHETH(7336) for Petitioner(s) No. 1 MR PY DIVYESHVAR(2482) for Respondent(s) No. 2 NOTICE UNSERVED(8) for Respondent(s) No. 1 CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 19/02/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. By this petition under Article 226 of Constitution of India, petitioners have prayed for following reliefs : A. This Hon ble Court may be pleased to issue writ of mandamus or writ in nature of mandamus or any other appropriate writ, order or direction quashing and setting aside impugned notice dated 18.12.2018 (annexed at Annexure A) issued by learned Respondent No.2; B. This Hon ble Court may be pleased to hold and declare that transitional input tax credit is admissible to Petitioners under Section 140(3) of GST Act on basis of copy of excise invoices of manufacturer in respect of such goods even though vehicles were not directly purchased by Petitioners from manufacturer and excise Page 1 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER invoices are in name of vendors of Petitioners; C. Pending notice, admission and final hearing of this petition, this Hon ble Court may be pleased to restrain learned Respondents from making coercive recovery qua transitional input tax credit claimed by Petitioners in Form GST TRAN 1; D. Ex parte ad interim relief in terms of prayer C may kindly be granted; E. Such further relief(s) as deemed fit in facts and circumstances of case may kindly be granted in interest of justice for which act of kindness your petitioners shall forever pray. 2. petitioner No.1 is Pvt. Ltd. Company incorporated under provisions of Companies Act, 1956 and has filed through its director i.e. petitioner No.2. petitioners are authorised dealers of Honda Cars India Pvt. Ltd. petitioners also purchased vehicles directly from manufacturer as well as through other authorized dealers. As petitioners are not engaged in manufacturing activity, petitioners were not covered under provisions of Central Excise Act, 1944 though vehicles purchased by petitioners have borne excise duty paid by manufacturer. 2.1. It is case of petitioners that when Central Goods and Service Tax Act, 2017 (for short, CGST Act, 2007 ) was implemented w.e.f. 1st July 2017, it subsumed Central Excise as well as Value Added Tax. petitioners were having cars Page 2 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER and spare parts in stock as on 30th June 2017 out of which, some cars were purchased directly from manufacturer while remaining were purchased from other authorized distributers, who had in turn purchased them from manufacturers. 2.2. According to petitioners, petitioners were liable to pay goods and service tax under CGST Act, 2017 on supply of goods, which was with petitioners in stock as on 30th June 2017. 2.3. petitioners were required to pay tax by way of GST on goods on which manufacturer had already paid excise duty in order to mitigate eventuality of double taxation in so far as goods in stock as on 30th June 2017 were lying with registered person under GST regime. Section 140 (3) of CGST Act, 2017 provided for transitional credit and accordingly person is entitled to credit of duty in respect of inputs held in stock or contained in finish or semi-finish goods provided that that person has in his possession invoice or other prescribed duty paying documents. Even in case of trader who does not have invoice or other prescribed duty paying documents in his possession, Proviso to Section 140(3) of CGST Act, 2017 enables him to take deemed credit as prescribed in Rules framed under CGST Page 3 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER Act, 2017. 2.4. petitioners, therefore, claimed credit of transitional credit by filing prescribed Form-GST-TRAN-1 with regard to Excise Duty paid by manufacturers on vehicles and spare parts held in stock by petitioners as on 30th June 2017. 2.5. It appears that petitioners received notice dated 15th June 2018 from Superintendent of CGST & Central Excise (Respondent No.2) requiring documents for verification of transitional credit claimed by petitioners. petitioners thereafter, submitted documents on 29th June 2018. It is also furnished further documents pursuant to notices dated 10.09.2018 and 04.10.2018 along with reply dated 08.10.2018. petitioners were orally informed by respondent-authority that documents supplied by petitioners were sufficient in so far as vehicle purchased from manufacturer were concerned, but, in so far as purchases made by petitioners from other dealers are concerned, excise invoices or credit transfer documents are required in name of petitioners. 2.6. respondent No.2 was also issued Notice dated 18.12.2018 calling upon petitioners to provide credit transfer Page 4 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER documents or vouchers from dealers from whom petitioners purchased vehicle with regard to Rs.13,67,893/- and with regard to spare parts for credit claimed by petitioners amounting to Rs.2,52,329/-. 2.7. petitioners by letter dated 25th January 2019, submitted that it was not possible to get excise invoice or duty paying documents in name of petitioners with regard to vehicle purchased from dealers. petitioners however, pointed out that excise invoice showing payment of excise duty of goods in stock of petitioners as on 30th June 2017 issued in name of vendor of petitioners were already submitted, wherein chassis number of vehicles are also mentioned. petitioners therefore, being aggrieved by notice dated 18.12.2018 has filed this petition with aforesaid prayers. 3. On 06.02.2019, this Court passed following order : 1. Mr. Uchit Sheth, learned advocate for petitioner has invited attention of court to provisions of section 140 of Central Goods and Services Tax Act, 2017 and more particularly sub-section (3) thereof, which inter alia provides that registered dealer as described therein, first stage dealer or second stage dealer or registered importer or depot of manufacturer, shall be entitled to take credit of eligible duties in respect of inputs held in stock on appointed day, subject to conditions enumerated thereunder. It was submitted that all five conditions enumerated under sub-section (3) of section 140 of Act are satisfied by petitioner. Referring to clause (iii) of sub- Page 5 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER section (3) of section 140 of Act, it was submitted that same provides that said registered person should be in possession of invoice or other prescribed documents evidencing payment of duty under existing law in respect of such inputs. It was submitted that in facts of present case, no documents have been prescribed under Central Goods and Services Tax Rules; under circumstances, when petitioner has produced documents evidencing payment of duty, he is entitled to credit in respect thereof. 2. Having regard to submissions advanced by learned advocate for petitioner, Issue Notice returnable on 27th February, 2019. By way of ad-interim relief, respondents are restrained from making any coercive recovery against petitioner in connection with subject matter of this petition. Direct Service is permitted qua respondent No.2 only. 4. Mr. Uchit N. Sheth, learned advocate for petitioners submitted that as per provisions of Section 140 (3) of CGST Act, 2017, petitioners are entitled to get credit of excise duty paid on vehicles stock of petitioners. petitioners have submitted all documents in their possession to claim such credit and insistence on part of respondents to provide documents to show documents for payment of excise duty in name of petitioners, which is not possible in case of vehicle purchased from dealers. 4.1. Mr. Sheth, learned advocate of petitioners submitted that respondent authorities are relying upon Notification No.21/2017 dated 30th June 2017 issued under Rule 15(2) of Page 6 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER CENVAT Credit Rules, 2017 providing to obtain Credit Transfer Documents (CTD), but it is not possible for petitioners to obtain such CTD as no such procedure for documents is prescribed by Section 140(3) of CGST Act, 2017. It was submitted that as petitioners were not registered under Excise law and they were not aware about such procedure of obtaining CTD from dealer or manufacturer relating to goods held in stock as on 30th June 2017, requirement of Section 140(3) of CGST Act is duly complied with. 4.2. It was further submitted that petitioners are not bound by CENVAT Credit Rule 2017 or Notification No. 21/2017 for claiming transitional credit as per provisions of Section 140(3) of CGST Act, 2017 as petitioners have fulfilled all conditions contained in Section 140(3) of CGST Act, 2017 and as such petitioners are entitled to get transitional credit claimed by it, in respect of excise duty paid on vehicles purchased from dealers by petitioners prior to 30th June 2017. 4.3. Learned advocate for petitioners submitted that excise duty is not paid by petitioners on such vehicles which were purchased from other dealer(s) as it is mandatory on part Page 7 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER of manufacturer to pay excise duty prior to sale of goods as per provisions of Central Excise Act, 1944. It was, therefore, submitted that in such circumstances, if petitioners are not granted transitional credit, it would amount to double taxation, which is contrary to intent and purpose of Section 140(3) of CGST Act., 2017 4.4. Mr. Sheth further submitted that interpretation as canvassed by respondent-authority is contrary to object and purpose of transitional credit provision, which is meant to avoid double taxation in case where goods contained in stock have already borne tax under earlier tax regime. 4.5. Learned advocate for petitioners therefore, prayed that respondents be directed to grant transitional credit as claimed by petitioners. 5. On other hand, Mr. P.Y. Divyeshwar, learned advocate for respondents vehemently opposed petition and relying upon averments made in Affidavit-in-Reply filed on behalf of respondents, it was contended that petition is not maintainable, as petitioners have challenged notice requiring petitioners to submit details only and verification Page 8 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER with regard to claim made by petitioners for transitional credit is still pending by Adjudicating Authority. It was submitted that verification is required only with regard to credit of Rs. 13,67,893/- claimed by petitioners on basis of invoices issued by dealers on which value added tax was paid. It was submitted that there is no dispute on admissibility of credit in respect of Rs. 38,55,020/- where invoice issued by manufacturers in name of petitioners are available. 5.1. Learned advocate for respondents submitted that Rule 15 of CENVAT Credit Rules, 2017, which have come into effect from 30th June 2019 provides for transitional provisions and Notification No.21/2017 dated 30th June 2017 issued under Sub- Rule 2 of Rule 15 of CENVAT Credit Rules, 2017 prescribes procedure to claim transitional credit in respect of stock lying with trader on 30th June 2017. 5.2. It was, therefore, submitted that petitioners are liable to follow prescribed procedure as per Notification No.21/2017 and avail transitional credit only if such procedure of getting CTD from manufacturer is followed. 5.3. Learned advocate for respondents relied upon Page 9 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER following two decisions of Supreme Court in support of his submissions : (i) Supreme Court in case of J.K. Housing Board and Anr. v. Kunwar Sanjay Krishan Kaul and Ors. reported in (2011) 10, SCC 714, held as under : 21------- It is settled law that when any statutory provision provides particular manner for doing particular act, said thing or act must be done in accordance with manner prescribed therefor in act and also Hon ble Apex Court in matter of state through P.S. (Police Station), Lodhi Colony, New Delhi Vs. Sanjeev Nanda reported in (2012) (8) of SCC 450 again ruled that it is settled Principal of law that if something is required to be done in particular manner then that has to be done only in that way or not, at all . (ii) Reliance was placed on decision of Supreme Court in case of Indian Aluminium Company Limited v. Thane Municipal Corporation reported in 1991 (55) E.L.T. 454 (S.C.), wherein Supreme Court has held that non-observance of even procedural condition cannot be condoned because it is likely to facilitate commission of fraud and introduce administrative inconveniences: In Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer, Calcutta and Ors. [1965] 3 SCR 626 "There is Page 10 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER understandable reason for stringency of provisions. object of Section 5(2) (a) (ii) of Act and rules made thereunder is self-evident. While they are obviously intended to give exemption to dealer in respect of sales to registered dealers' of specified classes of goods, it seeks also to prevent fraud and collusion in attempt to evade tax. In nature of things, in view of innumerable transactions that may be entered into between dealers, it will well-nigh be impossible for taxing authorities to ascertain in each case whether dealer has sold specified goods to another for purposes mentioned in section. Therefore, presumably to achieve two-fold object, namely, prevention of fraud and facilitating administrative efficiency, exemption given is made subject to condition that person claiming exemption shall furnish declaration form in manner prescribed under section. liberal construction suggested will facilitate commission of fraud and introduce administrative inconveniences, both of which provisions of said clause seek to avoid." 5.4. Relying upon aforesaid decisions, it was submitted that petitioners are required to follow prescribed procedure of getting CTD in his name from manufacturer so as to avail transitional credit, failing which, petitioners are not entitled to transitional credit. It was therefore submitted that respondent- authorities have rightly initiated inquiry against petitioners Page 11 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER as per Rule 121 of CGST Rules, 2017. It was therefore, prayed that petition is required to be dismissed being devoid of any merits. 6. Having heard learned advocates for respective parties and having gone through materials on record, it appears that petitioners were having vehicles and spare parts in stock as on 30th June 2017. petitioners, therefore, claimed transitional credit in view of provisions of Section 140(3) of CGST Act, 2017, which reads as under : Section 140. Transitional arrangements for input tax credit. *** (3) registered person, who was not liable to be registered under existing law, or who was engaged in manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of benefit of notification No. 26/2012Service Tax, dated 20th June, 2012 or first stage dealer or second stage dealer or registered importer or depot of manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi- finished or finished goods held in stock on appointed day subject to following conditions, namely:- (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) said registered person is eligible for input tax credit on such inputs under this Act; Page 12 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER (iii) said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding appointed day; and (v) supplier of services is not eligible for any abatement under this Act: Provided that where registered person, other than manufacturer or supplier of services, is not in possession of invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that said taxable person shall pass on benefit of such credit by way of reduced prices to recipient, be allowed to take credit at such rate and in such manner as may be prescribed. 7. On perusal of aforesaid provisions, it is clear that they nowhere provide for petitioners to submit any CTD to claim transitional credit. 8. As far as reliance placed on behalf of respondents on CENVAT Credit Rules, 2017 and Notification No.21/2017 is concerned, it is true that Notification No.21/2017 issued under Sub-Rule 2 of Rule 15 of CENVAT Credit Rules, 2017 prescribes procedure to avail transitional credit of CENVAT by dealer or trader, who was not registered under Central Excise Law. Rule 15 of CENVAT Credit Rules reads thus : RULE 15. Transitional Provisions. (1) person Page 13 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER registered under Central Goods and Services Tax Act, 2017 (12 of 2017) shall transfer entire CENVAT credit available under CENVAT Credit Rules, 2004 relating to period ending with day immediately preceding 1st day of July, 2017 in his electronic credit ledger as per Chapter XX of Central Goods and Services Tax Act, 2017 (12 of 2017) and rules made thereunder, and any CENVAT credit which is not eligible for such transfer shall not be retained as CENVAT credit unless eligible under these rules. (2)(a) Notwithstanding anything contained in these rules, person registered under Central Goods and Services Tax Act, 2017 (12 of 2017), who was not required to register under Excise Act shall be deemed to be in possession of document evidencing payment of duty, if manufacturer of specified goods on which duty of Central Excise was leviable has issued credit transfer document to him, in relation to such specified goods held in stock by him on 1st of July, 2017, for which he was not in possession of invoice evidencing payment of duty. (b) credit transfer document under clause (a) shall be issued by manufacturer of specified goods subject to such conditions, procedures and safeguards as may be notified by Central Government. Explanation. - Specified goods for purpose of sub-rule (2) shall mean such goods which have value more than rupees twenty five thousand per piece and bear brand name of manufacturer or principal manufacturer and are identifiable by distinct number such as chassis or engine number of car. 9. On perusal of aforesaid Rule 15 and more particularly explanation thereto, it appears that Specified goods for sub- rule (2) would mean such goods which have value more than rupees twenty five thousand per piece and bear brand name of manufacturer or principal manufacturer and are identifiable by distinct number such as chassis or engine number of car. Page 14 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER 9.1. Sub-Rule 2 provides that person registered under Central Goods and Services Tax Act, 2017, who was not required to register under Excise Act shall be deemed to be in possession of document evidencing payment of duty, if manufacturer of specified goods on which duty of Central Excise was leviable has issued credit transfer document (CTD) to him, in relation to such specified goods held in stock by him on 1st of July, 2017. 10. In facts of case, petitioners are not having CTD, but have produced on record copies of invoice received from dealers along with copies of invoice issued by manufacturer of cars or spare parts (as applicable) in name of dealers showing payment of excise duty along with Chassis Number of cars (in case of cars). 11. Therefore, even though petitioners are not having CTD respondent-authorities can very well verify payment of excise duty on cars purchased by petitioners from dealers and on spare parts on basis of documents submitted by petitioners. 12. In such circumstances, respondents are required to Page 15 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER consider documents furnished by petitioners in support of claim of transitional credit with regard to cars and spare parts lying in stock of petitioners as on 30th June 2017 like invoices bearing name of petitioners issued by dealer and invoices issued by manufacturers in name of dealer with details such as Chassis Number of car in case of cars. If respondents are satisfied on basis of such documents that excise duty has been paid by manufacturer, excise duty paid should be allowed as transitional credit in hands of petitioners. 13. For foregoing reasons, petition is disposed of with following directions to meet ends of justice. 13.1. respondents are directed to verify claim made by petitioners for transitional credit on basis of said documents submitted by them in respect of cars and spare parts that whether excise duty is already paid by manufacturer. If respondent-authority is satisfied on basis of aforesaid verification, transitional credit claimed by petitioners under Section 140(3) of CGST Act is to be allowed, otherwise claim of petitioners would fail. Page 16 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 C/SCA/2409/2019 ORDER 13.2 Such exercise shall be carried within period of three months from date of receipt of writ of this order. 14. In view of aforesaid directions, petition is disposed of with no order as to costs. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) KUMAR ALOK Page 17 of 17 Downloaded on : Fri Jun 18 11:05:41 IST 2021 Downtown Auto Pvt. Ltd. v. Union of India