2020 (11) TMI 78 - HC - VAT and Sales Tax

Court denies timely compensation petition under GST Act, 2017, citing directory provision.

G. Sundarrajan Versus Union of India, State of Tamil Nadu

The court dismissed the writ petition seeking timely compensation under the Goods and Services Tax [Compensation to States] Act, 2017, emphasizing that ... GST Compensation - primordial submission made by the learned counsel for the petitioner is that in the light of Sub-section [1] of Section 7, the compensation payable under the Act to any State during the transition period, is mandatory and as such, the 1st respondent is under obligation to pay the compensation to the State of Tamil Nadu without any loss of time, especially, in the light of the onset and thick spread of COVID- 19 pandemic virus - HELD THAT:- The Goods and Services Tax [Compensation to States] Act, 2017, does not deal and speak about the consequences of non-compliance of the time line stipulated under Subsection [2] of Section 7 of the said Act and therefore, it can be construed only as directory and not mandatory. It is not as if the 1st respondent is not going to compensate the States, in the light of the above cited provisions and whatever difficulties faced by the Government of Tamil Nadu in lieu of the economic melt down due to COVID-19 pandemic virus, may have equal application to the Union of India also. This Court is of the considered view that positive direction sought for by the petitioner cannot be granted - Petition dismissed. Issues Involved:1. Obligation of the 1st respondent under Section 7 of the Goods and Services Tax [Compensation to States] Act, 2017.2. Interpretation of the words 'shall' and 'may' in statutory provisions.3. Consequences of non-compliance with the time frame stipulated under Section 7(2) of the Goods and Services Tax [Compensation to States] Act, 2017.Detailed Analysis:1. Obligation of the 1st Respondent under Section 7 of the Goods and Services Tax [Compensation to States] Act, 2017:The petitioner, a Graduate in Engineering and Managing Trustee of a Public Trust, argued that under Section 7 of the Goods and Services Tax [Compensation to States] Act, 2017, the 1st respondent is obligated to provide timely and speedy disbursal of compensation to the State of Tamil Nadu. The petitioner highlighted a Press Release dated 31.08.2020, which included a D.O. Letter from the Chief Minister of Tamil Nadu to the Prime Minister of India, outlining the financial difficulties faced by the state due to the COVID-19 pandemic and requesting the central government to raise funds as a loan to ensure full GST compensation to the states for the year 2020-21.The court noted the petitioner's argument that Section 7(1) of the Act mandates compensation to states during the transition period and that the 1st respondent must comply with this provision without delay, especially given the economic impact of the COVID-19 pandemic on Tamil Nadu.2. Interpretation of the Words 'Shall' and 'May' in Statutory Provisions:The court examined the interpretation of the words 'shall' and 'may' by referring to several precedents, including the Supreme Court judgments in Bachahan Devi and Another V. Nagar Nigam, Gorakhpur and Another, and Sharif-ud-Din V. Abdul Gani Lone. The court emphasized that the interpretation of these words depends on the legislative intent, the context, and the purpose of the statute. The court cited the principle that the word 'shall' is not always mandatory and that its interpretation can vary based on the statute's objectives and the consequences of non-compliance.The court also referred to the judgment in Bhavnagar University v. Palitana Sugar Mill [P] Ltd and Others, which discussed the importance of considering the subject-matter, the purpose of the provisions, and the overall scheme of the Act to determine whether a provision is mandatory or directory.3. Consequences of Non-Compliance with the Time Frame Stipulated under Section 7(2) of the Goods and Services Tax [Compensation to States] Act, 2017:The court noted that Section 7(2) of the Act stipulates that compensation should be provisionally calculated and released every two months and finally calculated at the end of the financial year. However, the Act does not specify the consequences of non-compliance with this timeline. Citing the judgment in Hyundai Motors Vs. Union of India, the court observed that when a statute does not indicate the consequences of non-compliance, the provision is generally considered directory rather than mandatory.The court concluded that the mere use of the word 'shall' in Section 7(1) does not make the provision mandatory. The absence of specified consequences for non-compliance in the Act suggests that the provision is directory. The court acknowledged the financial difficulties faced by Tamil Nadu due to the pandemic but noted that these challenges also apply to the Union of India.Conclusion:The court dismissed the writ petition, stating that the positive direction sought by the petitioner could not be granted. The court expressed hope that the 1st respondent would consider the difficulties faced by the states, particularly Tamil Nadu, as mentioned in the Press Release dated 31.08.2020. The petition was dismissed with no costs.