P.R. Mani Electronics v. Union of India / The Goods and Service Tax Council / The Principal Chief Commissioner of GST & Central Excise / The Assistant Commissioner of GST & Central Excise
[Citation -2020-LL-0713-47]

Citation 2020-LL-0713-47
Appellant Name P.R. Mani Electronics
Respondent Name Union of India / The Goods and Service Tax Council / The Principal Chief Commissioner of GST & Central Excise / The Assistant Commissioner of GST & Central Excise
Court HIGH COURT OF MADRAS
Relevant Act CGST
Date of Order 13/07/2020
Judgment View Judgment
Keyword Tags goods and services tax • prescribed time limit • export oriented unit • input tax credit • supply of goods • reasonable time • works contract • non-compliance • purchase price • cenvat credit • carry forward • tax payable • due date


W.P.No.8890 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS DAT E D : 13.07.2020 CORAM Hon'ble Mr. A.P.SAHI, CHIEF JUSTICE and Hon'ble Mr. Justice SENTHILKUMAR RAMAMOORTHY Writ Petition No.8890 of 2020 and WMP.No.10803 of 2020 M/s.P.R.Mani Electronics Rep. by its Proprietor, P.Rajamani, S/o.Perumal Naidu, No.32, Sannathi Street, Thiruvannamalai District. ... Petitioner Vs 1.Union of India Rep. by Secretary, Ministry of Finance, No.136-A, North Block, New Delhi. 2.The Goods and Service Tax Council, Rep. through its Chairman, Goods and Services Tax Secretariat, 5th Floor, Tower V, Jeevan Bharathi Buildings, Janpath Road, Cannaught Place, New Delhi. http://www.judis.nic.in 1 of 30 W.P.No.8890 of 2020 3.The Principal Chief Commissioner of GST & Central Excise, 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 4.The Assistant Commissioner of GST & Central Excise, Tiruvannamalai- I Assessment circle, Commercial Tax Buildings, Collectorate Campus, Tiruvannamalai. ... Respondents PRAYER : Petition filed under Article 226 of Constitution of India, praying to issue writ of declaration to declare that Rule 117 of Central Goods and Service Tax(CGST) Rules is ultra vires and unconstitutional in so far as petitioner consent and also to direct Respondents authorities to permit Petitioner to file Form GST Trans 1 either electronically or manually to claim transitional input tax credit of Rs.4,70,008/- accrued and vested with Petitioner and grant such other relief. For Petitioner : Mr.R.Rajarajan For Respondents : Mr.R.Sankaranarayanan Additional Solicitor General for R1 & R2 Assisted by Mr.K.Venkatasamy Babu Mr.Mohammed Shaffiq Spl.GP(T) for R3 and R4 http://www.judis.nic.in 2 of 30 W.P.No.8890 of 2020 ORDER SENTHILKUMAR RAMAMOORTHY.J., validity of Rule 117 of Central Goods and Service Tax Rules, 2017 (the CGST Rules) is under challenge in this writ petition on grounds that it is ultra vires Section 140 of Central Goods and Services Tax Act, 2017 (the CGST Act) and infringes Articles 14 and 300A of Constitution, and Petitioner further prays that Respondents should be directed to permit Petitioner to file Form GST TRANS 1 either electronically or manually to claim transitional input tax credit of Rs.4,70,008/-. 2. Petitioner is proprietary concern involved in retail trade of mobile phones, electrical, electronic, and other items. Earlier, Petitioner was registered as dealer under Tamil Nadu Value Added Tax Act, 2006 (the TNVAT Act) and, upon coming into force of CGST Act, Integrated Goods and Services Tax Act, 2017 (the IGST Act) and State Goods and Services Act, 2017 (the SGST Act) (two or more of which are referred to as GST laws) on 01.07.2017, Petitioner obtained registrations under GST laws. When CGST and SGST Acts http://www.judis.nic.in 3 of 30 W.P.No.8890 of 2020 were introduced, as transitional measure, carry forward of credit for taxes paid on inputs under previously existing indirect tax laws, which may be referred to as transitional ITC (Transitional ITC), was enabled by making provision in respect thereof. In terms thereof, according to Petitioner, he is entitled to avail Transitional ITC of Rs.4,62,496/- under head of CGST and Rs.7,512/- under head of SGST under respective GST laws. 3. Section 140 of CGST Act deals with Transitional ITC under CGST Act. said Section 140, inter alia, reads as under: 140. Transitional arrangements for input tax credit- (1) registered person, other than person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, amount of CENVAT credit carried forward in return relating to period ending with day immediately preceding appointed day, furnished by him under existing law within such time and in such manner as may be prescribed(emphasis added): Provided that registered person shall not be allowed to take credit in following circumstances, namely: http://www.judis.nic.in 4 of 30 W.P.No.8890 of 2020 (i) where said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all returns required under existing law for period of six months immediately preceding appointed date; or (iii)where said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by Government. (2) registered person, other than person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of unavailed CENVAT credit in respect of capital goods, not carried forward in return, furnished under existing law by him, for period ending with day immediately preceding appointed day in such manner as may be prescribed: Provided that registered person shall not be allowed to take credit unless said credit was admissible as CENVAT credit under existing law and is also admissible as input tax credit under this Act. Explanation. For purposes of this sub-section, expression unavailed CENVAT credit means amount that remains after subtracting amount of CENVAT credit already availed in respect of capital goods by taxable person under existing law. http://www.judis.nic.in 5 of 30 W.P.No.8890 of 2020 (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. 26/2012 Service 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; (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: http://www.judis.nic.in 6 of 30 W.P.No.8890 of 2020 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.... 4. Thus, Section 140 stipulates that registered person is required to submit return, within such time, and in such manner as may be prescribed for purposes of availing Transitional ITC. words within such time were not originally part of Section 140(1) and were introduced by Finance Act, 2020 under Notification No.43/2020 dated 16.05.2020 with retrospective effect from July 1, 2017. Section 164 of CGST Act empowers Government, on recommendations of GST Council, to frame rules for implementing provisions of Act. Section 164, in relevant part, is as under: 164. Power of Central Government to frame rules-(1) Government may, on recommendations of Council, by http://www.judis.nic.in 7 of 30 W.P.No.8890 of 2020 notification, make rules for carrying out provisions of this Act. (2) Without prejudice to generality of provisions of sub- section (1), Government may make rules for all or any of matters which by this Act are required to be, or may be, prescribed, or in respect of which provisions are to or may be made by rules. (3) power to make rules conferred by this section shall include power to give retrospective effect to rules or any of them from date not earlier than date on which provisions of this Act come into force.... Pursuant to Section 164, CGST Rules were framed and procedure relating to availing of Transitional ITC was prescribed by Rule 117 thereof. Rule 117 reads as under: CGST Rule 117: Tax or Duty Credit Carried Forward under any Existing Law or on Goods Held in Stock on Appointed Day (Chapter-XIV: Transitional Provisions) (1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of appointed day, submit declaration electronically in FORM GST TRAN-1, duly signed, on common portal specifying therein, separately, amount of http://www.judis.nic.in 8 of 30 W.P.No.8890 of 2020 input tax credit to which he is entitled under provisions of said section: Provided that Commissioner may, on recommendations of Council, extend period of ninety days by further period not exceeding ninety days. Provided further that where inputs have been received from Export Oriented Unit or unit located in Electronic Hardware Technology Park, credit shall be allowed to extent as provided in sub-rule (7) of rule 3 of CENVAT Credit Rules, 2004. (1A) Notwithstanding anything contained in sub-rule (1), Commissioner may, on recommendations of Council, extend date for submitting declaration electronically in FORM GST TRAN-1 by further period not beyond 31st March, 2020, in respect of registered persons who could not submit said declaration by due date on account of technical difficulties on common portal and in respect of whom Council has made recommendation for such extension. (2) Every declaration under sub-rule (1) shall- (a) in case of claim under sub-section (2) of section 140, specify separately following particulars in respect of every item of capital goods as on appointed day- (i) amount of tax or duty availed or utilized by way of input tax credit under each of existing laws till appointed day; and (ii) amount of tax or duty yet to be availed or utilized by way of input tax credit under each of existing laws till appointed day; http://www.judis.nic.in 9 of 30 W.P.No.8890 of 2020 (b) in case of claim under sub-section (3) or clause (b) of sub- section (4) or sub-section (6) or sub-section (8) of section 140, specify separately details of stock held on appointed day; (c) in case of claim under sub-section (5) of section 140, furnish following details, namely: (i) name of supplier, serial number and date of issue of invoice by supplier or any document on basis of which credit of input tax was admissible under existing law; (ii) description and value of goods or services; (iii) quantity in case of goods and unit or unit quantity code thereof; (iv) amount of eligible taxes and duties or, as case may be, value added tax [or entry tax] charged by supplier in respect of goods or services; and (v) date on which receipt of goods or services is entered in books of account of recipient. (3) amount of credit specified in application in FORM GST TRAN-1 shall be credited to electronic credit ledger of applicant maintained in FORM GST PMT-2 on common portal. (4) (a) (i) registered person who was not registered under existing law shall, in accordance with proviso to sub-section (3) of section 140, be allowed to avail of input tax credit on goods (on which duty of central excise or, as case may be, additional duties of customs under sub-section (1) of section 3 of Customs Tariff Act, 1975, is leviable) held in stock on appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty. http://www.judis.nic.in 10 of 30 W.P.No.8890 of 2020 (4) (a) (ii) input tax credit referred to in sub-clause (i) shall be allowed at rate of sixty per cent. on such goods which attract central tax at rate of nine per cent. or more and forty per cent. for other goods of central tax applicable on supply of such goods after appointed date and shall be credited after central tax payable on such supply has been paid: Provided that where integrated tax is paid on such goods, amount of credit shall be allowed at rate of thirty per cent. and twenty per cent. respectively of said tax; (4) (a) (iii) scheme shall be available for six tax periods from appointed date. (4) (b) credit of central tax shall be availed subject to satisfying following conditions, namely:- (4) (b) (i) such goods were not unconditionally exempt from whole of duty of excise specified in First Schedule to Central Excise Tariff Act, 1985 or were not nil rated in said Schedule; (4) (b) (ii) document for procurement of such goods is available with registered person; (4) (b) (iii) registered person availing of this scheme and having furnished details of stock held by him in accordance with provisions of clause (b) of sub-rule (2), submits statement in FORM GST TRAN 2 by 31st March 2018, or within such period as extended by Commissioner, on recommendations of Council, for each of six tax periods during which scheme is in operation indicating therein, details of supplies of such goods effected during tax period; http://www.judis.nic.in 11 of 30 W.P.No.8890 of 2020 Provided that registered persons filing declaration in FORM GST TRAN-1 in accordance with sub-rule (1A), may submit statement in FORM GST TRAN-2 by 30th April, 2020. (4) (b) (iv) amount of credit allowed shall be credited to electronic credit ledger of applicant maintained in FORM GST PMT-2 on common portal; and (4) (b)(v) stock of goods on which credit is availed is so stored that it can be easily identified by registered person. 5. As is evident on perusal of Rule 117(1), registered person is required to submit declaration, electronically, in Form GST TRAN-1 on common portal within 90 days or, if applicable, extended period not exceeding 180 days from appointed date in order to make claim for Transitional ITC. Upon recognizing that there were technical difficulties on common portal, last date for submitting Form GST TRAN-1 was extended and fixed as 27.12.2017. According to Petitioner, on that date, Petitioner's consultant could not enter common portal and upload form. No evidence of logging-into common portal is provided and, therefore, veracity of above statement cannot be tested. However, Petitioner approached Sales Tax Collection Inspector, in person, on 29.12.2017, and submitted hard copy of Form GST TRAN-1 and also received acknowledgment. In spite of repeated follow up with http://www.judis.nic.in 12 of 30 W.P.No.8890 of 2020 Respondents, thereafter, Petitioner states that there was no response with regard to entitlement of Petitioner to Transitional ITC. Meanwhile, Rule 117 was amended with effect from 10.09.2018 by inserting Sub-Rule 1-A, whereby Commissioner was permitted, subject to recommendation of GST Council, to extend date for submitting declaration electronically by further period up to 31.03.2020. 6. According to Petitioner, ITC is in nature of Petitioner's property and, therefore, Petitioner cannot be deprived of its property merely because requisite form could not be submitted within prescribed time limit. prescription of such time limit in Rule 117 is ultra vires Section 140 and violates Article 14 and 300-A of Constitution of India in as much as it deprives Petitioner of its property by way of ITC. At minimum, said Rule 117 should be read as directory or permissive provision and not as mandatory or peremptory provision. present writ petition was filed in these facts and circumstances. 7. We heard Mr.R.Rajaraman, learned counsel for Petitioner; Mr.R.Sankaranarayanan, learned Additional Solicitor General for Respondents 1 and 2; and Mr.Mohamed Shaffiq, learned Special http://www.judis.nic.in 13 of 30 W.P.No.8890 of 2020 Government Pleader(Taxes) for Respondents 3 and 4. 8. principal contention of learned counsel for Petitioner was that Rule 117 of CGST Rules does not impose mandatory obligation on registered persons, such as Petitioner, to file Form GST TRAN-1 within prescribed period. As corollary, person does not lose right to ITC upon default in submitting declaration in time. Although constitutional challenge is made in writ petition, learned counsel conceded that such constitutional challenge was not being pressed. Nonetheless, learned counsel submitted that Rule 117 is ultra vires Section 140 of CGST Act and, at minimum, is liable to be construed as directory provision in so far as it specifies time limit for submission of declaration in Form GST TRAN-1. In support of this contention, learned counsel pointed out that tax authorities were fully cognizant of fact that registered persons were unable to submit on line declaration within prescribed period on account of technical glitches. This is evident from fact that time limit was subsequently extended by inserting Sub Rule 1-A in Rule 117 whereby Commissioner was permitted, subject to recommendation of GST Council, to extend http://www.judis.nic.in 14 of 30 W.P.No.8890 of 2020 date for submitting declaration electronically by further period up to 31.03.2020. learned counsel contended that said provision itself states that it is introduced so as to enable submission of declaration by persons who could not submit same within previously prescribed time limit on account of technical difficulties in common portal. As per learned counsel, this clearly indicates that provision is intended to be directory and not mandatory notwithstanding use of word "shall" in Rule 117(1). In order to further buttress his submissions, learned counsel relied upon judgment of Division Bench of Delhi High Court in Micromax Informatics Ltd. v. Union of India, WP(C) No.196 of 2019 (Micromax Informatics), wherein Rule 117 was construed as directory and not mandatory. 9. On contrary, learned Additional Solicitor General submitted that ITC is in nature of concession granted to registered persons and, therefore any conditions, including time limits, subject to which such concessions are granted should be enforced strictly. In other words, concessions cannot be availed of unless conditions relating thereto are fully complied with. http://www.judis.nic.in 15 of 30 W.P.No.8890 of 2020 10. learned Special Government Pleader(T) also contended that ITC is concession and not vested right. In support of this proposition, he referred to and relied upon judgment of Hon'ble Supreme Court in Jayam and Company v. Assistant Commissioner and another, (2016) 15 SCC 125 (Jayam), wherein it was held categorically, in context of TNVAT Act, that ITC is concession. In Jayam, he pointed out that Supreme Court further held that conditions subject to which such concession is granted should be strictly complied with in order to avail such concession. He also pointed out that this principle was reaffirmed in recent judgment of Hon'ble Supreme Court in ALD Automotive Private Limited v. Commercial Tax Officer, now upgraded as Assistant Commissioner(ct) and others, (2019) 13 SCC 225 (ALD Automotive). In this judgment, Hon'ble Supreme Court reiterated that ITC is concession, which can only be availed of by beneficiary as per terms and conditions specified in statute. More importantly, he pointed that Supreme Court held in ALD Automotive that time limit for filing tax return under Section 19(11) of TNVAT Act was mandatory because it used word "shall". By analogy, he contended that http://www.judis.nic.in 16 of 30 W.P.No.8890 of 2020 time limit in Rule 117 should also be construed as mandatory. With regard to judgment of Division Bench of Delhi High Court, he pointed out that operation of said judgment was stayed by Supreme Court and that there was judgment of Division Bench of Bombay High Court to contrary. 11. We considered submissions of learned counsel for respective parties and examined records. 12. statutory and constitutional challenge, in this case, is on basis that Rule 117 of CGST Rules is ultra vires Section 140 of CGST Act and Article 14 and 300-A of Constitution. At time of arguments, learned counsel for Petitioner did not pursue constitutional challenge. As regards contention that Rule 117 is ultra vires Section 140 of CGST Act, on examining Rule 117 of CGST Rules and Section 140 of CGST Act, we find that Section 140 stipulates that registered person making claim for input tax credit should furnish return, within such time, and in such manner as may be prescribed. As stated earlier, rule making power is contained in Section 164, which is couched in wide terms, and enables Government to frame rules to give effect to provisions of Act and, in particular, to make rules for http://www.judis.nic.in 17 of 30 W.P.No.8890 of 2020 matters that are required to be prescribed by CGST Act. Interestingly, power to frame rules with retrospective effect is also conferred subject to limitation that it should not pre-date date of entry into force of CGST Act. Pursuant thereto, Rule 117 was framed whereby time limit was fixed for submitting on line Form GST TRAN -1. By Finance Act of 2020, words within such time were introduced in Section 140, with retrospective effect from 01.07.2020, thereby conferring expressly power to prescribe time limits in Section 140 even without relying entirely on generic Section 164. In this statutory context, we find ample reason to conclude that Rule 117 of CGST Rules is intra vires Section 140 of CGST Act but none to conclude otherwise. 13. learned counsel for Petitioner contended that ITC is property of registered person, such as Petitioner, and that consequently Rule 117 should not be construed in such manner as to divest person of property. question as to nature of ITC was considered by Hon'ble Supreme Court in Jayam (cited supra), albeit in context of TNVAT Act, wherein Hon'ble Supreme Court categorically concluded that ITC is form of concession provided by legislature and http://www.judis.nic.in 18 of 30 W.P.No.8890 of 2020 that it can only be availed of by satisfying prescribed conditions. Paragraphs 11 and 12 of said judgment are significant and read as follows: 11. From aforesaid scheme of Section 19 following significant aspects emerge: (a) ITC is form of concession provided by 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 most important condition is that in order to enable dealer to claim ITC it has to produce original tax invoice, completed in all respect, evidencing amount of input tax. 12. It is trite law that whenever concession is given by statute or notification, etc. conditions thereof are to be strictly complied with in order to avail such concession. Thus, it is not right of dealers to get benefit of ITC but it is concession granted by virtue of Section 19. As fortiori, conditions specified in Section 10 must be fulfilled. In that hue, we find that Section 10 makes original tax invoice relevant for purpose of claiming tax. Therefore, under scheme of VAT Act, it is not permissible for dealers to argue that price as indicated in tax invoice should not have been taken into consideration but net purchase price after discount is to be basis. If we were dealing with any other aspect dehors issue of ITC as per Section 19 of VAT Act, possibly arguments of Mr Bagaria would have assumed some relevance. But, keeping in view scope of issue, such plea is not admissible having http://www.judis.nic.in 19 of 30 W.P.No.8890 of 2020 regard to plain language of sections of VAT Act, read along with other provisions of said Act as referred to above. 14. judgment in ALD Automotive (cited supra) dealt with question whether time limit in Section 19(11) of TNVAT is mandatory or directory. Paragraph 45 thereof is as under: 45. This Court in above case clearly laid down that whether particular provision is mandatory or directory has to be determined on basis of object of particular provision and design of statute. period of 10 days in submitting report of public analyst was held to be directory for reason that on negligence of those to whom public duties are entrusted no one should suffer. Such interpretation should not be put which may promote public mischief and cause public inconvenience and defeat main object of statute. interpretation of Rule 9(j) in above case was on its own statutory scheme and has no bearing in present case. We, thus, are of view that time period as provided in Section 19(11) is mandatory. said Section 19(11) also pertains to time limit for claiming ITC and uses word "shall". After examining language of Section 19(11) and context, including object and design of statute, Hon'ble http://www.judis.nic.in 20 of 30 W.P.No.8890 of 2020 Supreme Court concluded that time limit specified in Section 19(11) is mandatory. 15. validity and mandatory or directory nature of Section 140 of CGST Act and Rule 117 of CGST Rules were considered in several High Court judgments and we propose to discuss them briefly before drawing definitive conclusions. In Blue Bird Pune Pvt. Ltd. v. Union of India [2019 SC Online Del 9250](Blue Bird), Division Bench of Delhi High Court directed tax authorities to open on line portal so as to enable electronic filing of Form GST TRAN-1 or accept manually filed form. said decision was based on earlier judgments of Delhi High Court wherein it was observed that GST system is in trial and error phase . subsequent judgment of Division Bench of Delhi High Court in SKH Sheet Metals Components v. Union of India [2020 SCC online Del 650] (SKH Sheet Metals) examined concept of ITC and observed that uninterrupted and seamless chain of ITC is heart and soul of GST so as to avoid cascading of taxes. In said judgment, mandatory or directory nature of Rule 117 was considered and Court concluded that it is directory both on basis that CGST Act does not specify consequences of not complying with time limit and because http://www.judis.nic.in 21 of 30 W.P.No.8890 of 2020 construing it as mandatory would prejudice assessee. In drawing this conclusion, Court relied on judgment of Delhi High Court in Brand Equity Treaties Ltd. v. Union of India [(2020) Taxmann.com 415] (Brand Equity Treaties) and Micromax Informatics (cited supra), wherein Court held that CENVAT credit had accrued and vested in assessee and is, consequently, property of assessee. By order dated 19.06.2020 in SLP Nos 7425-7428 of 2020, Hon'ble Supreme Court granted stay of operation of judgment in Brand Equity Treaties. At this juncture, it is pertinent to point out that Brand Treaty Equities was decided prior to amendment to Section 140 of CGST Act whereby words "within such time" were introduced. On other hand, SKH Sheet Metals Components was decided after amendment; nonetheless, Delhi High Court concluded that amendment settles question as to power to frame rules fixing time limit for filing declaration but does not fix time limit for transitioning credit. 16. By contrast, Division Bench of Bombay High Court interpreted Rule 117 of CGST Rules in Nelco Limited v. Union of India [2020 SCC Online Bom 437] (Nelco) as intra vires Section 140 and as imposing reasonable time limit for availing of ITC. Nelco was decided http://www.judis.nic.in 22 of 30 W.P.No.8890 of 2020 before Section 140 was amended. Even so, Court concluded that Section 164 of CGST Act is wide enough to enable framing of rules fixing time limit to claim Transitional ITC. In addition, Court concluded that ITC is concession which is required to be availed of within prescribed time, failing which it would lapse. Gujarat High Court also considered this question in Willowood Chemicals Ltd. v. Union of India [2014 (306) ELT 551](Willowood). In Willowood, Gujarat High Court concluded that Transitional ITC is concession and that Rule 117 is intra vires Section 140 of CGST Act. 17. Section 140 of CGST Act read with Rule 117 of CGST Rules enables registered person to carry forward accumulated ITC under erstwhile tax legislations and claim same under CGST Act. In effect, it is transitional provision as is evident both from Section 140 and Rule 117. In light of judgment of Supreme Court in Jayam, contention of learned counsel for Petitioner to effect that ITC is property of Petitioner cannot be countenanced and ITC has to be construed as concession. In addition, it is evident that ITC cannot be availed of without complying with conditions prescribed in relation thereto. Prior to amendment to Section 140 of CGST Act, power http://www.judis.nic.in 23 of 30 W.P.No.8890 of 2020 to frame rules fixing time limit was arguably not traceable to unamended Section 140 of CGST Act, which contained words "in such manner as may be prescribed", because such words have been construed by Supreme Court in cases such as Sales Tax Officer Ponkuppam v. K.I. Abraham [(1967) 3 SCR 518] as not conferring power to prescribe time limit. Nevertheless, in our view, it was and continues to be traceable to Section 164, which is widely worded and imposes no fetters on rule making powers except that such rules should be for purpose of giving effect to provisions of CGST Act. fortiori, upon amendment of Section 140 by introducing words "within such time", power to frame rules fixing time limits to avail Transitional ITC is settled conclusively. In SKH Sheet Metals, Delhi High Court concluded, in paragraph 26, that statute had not fixed time limit for transitioning credit by also referring to repeated extensions of time. Given fact that power to prescribe time limit is expressly incorporated in Section 140, which deals with Transitional ITC, and Rule 117 fixes such time limit, we are unable to subscribe to this view. fact that such time limit may be extended under circumstances specified in Rule 117, including Rule 117A, does not lead to sequitur that there is no time http://www.judis.nic.in 24 of 30 W.P.No.8890 of 2020 limit for transitioning credit. In this context, reference may be made to Section 16(4) of CGST Act which provides as follows: "Section 16(4): registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after due date of furnishing of return under Section 39 for month of September following end of financial year to which such invoice or debit note pertains or furnishing of relevant annual return, whichever is earlier." above provision is indicative of legislative intent to impose time limits for availing ITC. Besides, Section 19(3)(d) of TNVAT Act itself imposed time limit for availing ITC and further provided that it would lapse upon expiry of such time limit. In our view, keeping above statutory backdrop in mind, in context of Transitional ITC, case for time limit is compelling and disregarding time limit and permitting party to avail Transitional ITC, in perpetuity, would render provision unworkable. In this regard, we concur with conclusion of Bombay High Court in Nelco that both ITC and Transitional ITC cannot be availed of except within stipulated time limit. Such time limits may, however, http://www.judis.nic.in 25 of 30 W.P.No.8890 of 2020 be extended through statutory intervention. As stated earlier, in SKH Sheet Metals, Delhi High Court observed that ITC is heart and soul of GST legislations in as much as such legislations are designed to prevent cascading of taxes. There can be no quarrel with this conceptual position; however, it is not logical corollary thereof that time limits for availing ITC and, in particular, Transitional ITC, are inimical to object and purpose of statute. 18. In judgments such as Union of India v. A.K. Pandey [(2009) 10 SCC 552] and Bachhan Devi v. Nagar Nigam [(2008) 12 SCC 372], Supreme Court held that use of words such as "shall" or "may" are not conclusive or determinative of mandatory or permissive nature of provision. In C. Bright v. District Collector, [2019 SCC Online Mad 2460], after considering number of judgments of Supreme Court, Division Bench of this Court captured relevant factors to determine whether provision is directory or mandatory, illustratively, in paragraph 20. In summary, those factors are: use of peremptory or negative language, which raises rebuttable presumption that provision is mandatory; object and purpose of statute and provision concerned; stipulation or otherwise of consequences of non- http://www.judis.nic.in 26 of 30 W.P.No.8890 of 2020 compliance; whether substantive rights are affected by non-compliance; whether time limits are in relation to exercise of rights or availing of concessions; or whether they relate to performance of statutory duties. In this case, peremptory word "shall" is used. relevant rule deals with time limit for availing Transitional ITC by carrying it forward from credit balance under tax legislations which have been repealed and replaced by CGST Act. Thus, object and purpose of Section 140 clearly warrants necessity to be finite. ITC has been held to be concession and not vested right. In effect, it is time limit relating to availing of concession or benefit. If construed as mandatory, substantive rights of assessees would be impacted; equally, if construed as directory, it would adversely impact Government's revenue interest, including predictability thereof. On weighing all relevant factors, which may be not be conclusive in isolation, in balance, we conclude that time limit is mandatory and not directory. 19.We also note that Rule 117 specifies that return in Form GST TRAN 1 is required to be filed electronically on common portal. This requirement is not satisfied by handing over form in person to Sales Tax Collection Inspector, Tiruvannamalai. Consequently, in our view, http://www.judis.nic.in 27 of 30 W.P.No.8890 of 2020 Petitioner has completely failed to make out case to direct Respondents to permit Petitioner to file Form GST TRAN -1 and claim Transitional ITC of Rs.4,70,008/-. Needless to say, if any dispensations are granted by tax authorities with regard to availing of Transitional ITC, whether by filing Form GST TRAN-1 or otherwise, and to which Petitioner may be entitled, this order will not preclude Petitioner from making claim for Transitional ITC. 15. In result, writ petition is dismissed. Consequently, connected miscellaneous petition is closed. No costs. (A.P.S.,CJ,) (S.K.R.,J,) 13.07.2020 Index :Yes Internet :Yes rrg To 1.The Secretary, Union of India Ministry of Finance, No.136-A, North Block, New Delhi. http://www.judis.nic.in 28 of 30 W.P.No.8890 of 2020 2.The Chairman, Goods and Service Tax Council, Goods and Services Tax Secretariat, 5th Floor, Tower V, Jeevan Bharathi Buildings, Janpath Road, Cannaught Place, New Delhi. 3.The Principal Chief Commissioner of GST & Central Excise, 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 4.The Assistant Commissioner of GST & Central Excise, Tiruvannamalai- I Assessment circle, Commercial Tax Buildings, Collectorate Campus, Tiruvannamalai. http://www.judis.nic.in 29 of 30 W.P.No.8890 of 2020 CHIEF JUSTICE and SENTHILKUMAR RAMAMOORTHY.J., rrg Pre-Delivery Order in W.P.No.8890 of 2020 13.07.2020 http://www.judis.nic.in 30 of 30 P.R. Mani Electronics v. Union of India / Goods and Service Tax Council / Principal Chief Commissioner of GST & Central Excise / Assistant Commissioner of GST & Central Excise
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