TaxTMI 
TaxTMI 
2019 (9) TMI 319
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....l Application No. 5758 of 2019 is treated as the lead matter. By this writapplication under Article 226 of the Constitution of India, the writ-applicant, a partnership firm, has prayed for the following reliefs : "(a) Your Lordships may be pleased to issue writ of mandamus and/or any other appropriate writ(s) to allow filing of declaration in form GST Tran-1 and GST Tran-2, to enable it to claim transitional credit of eligible duties in respect of inputs held in stock on the appointed day in terms of Section 140(3) of the Central Goods and Services Tax Act, 2017; (b) Your Lordships may be pleased to issue writ of declaration and/or any other appropriate writ(s) for declaration of the due date contemplated under Rule 117 of the CGST Rules to claim the transitional credit as being procedural in nature and thus merely directory and not a mandatory provision; (c) Your Lordships may be pleased to grant ad-interim relief with respect to prayer under Para (a) and Para (b) above; (d) Your Lordships may be pleased to award costs of and incidental to this application be paid by the respondents; (e) Your Lordships may be pleased to issue order(s), ....
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....te specified, i. e. 27th December 2017, on account of the technical difficulties, they had to physically lodge their claim of transitional credit on stock in the form GST TRAN-1 and GST TRAN-2 respectively with their Jurisdictional Officer. 10. The learned counsel submitted that his clients also met the Jurisdictional Officer time to time and also addressed various letters to the Nodal Officer and the Jurisdictional Officer for being allowed to file on-line form GST TRAN-1 and GST TRAN-2 respectively in terms of the decision of the Goods and Services Council and the Circular No. 39/13/2018-GST dated 3rd April 2018. 11. The learned counsel pointed out that his clients also requested that they be allowed to file the above referred forms in terms of the Notification No. 48/2018-C. T. dated 10th September 2018 read with Order No. 01/2019-GST dated 31st January 2019 which extended the period for submitting declaration in the form GST TRAN-1 till 31st March 2019 for all those tax payers who could not submit the said declaration by the due date on account of the technical difficulties on the common portal. 12. The learned counsel submitted that the Jurisdictional Officer of his c....
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.... opposed all the writ-applications. Mr. Joshi submitted that none of the grievances redressed by the writ-applicants are tenable in law. At the same time, Mr. Joshi fairly submitted that the Jurisdictional Officer, Bharuch, did bring to the notice of the Nodal Officer about the various problems and difficulties faced by the tax payers. Mr. Joshi submitted that the role of the Nodal Officer is to collect all such complaint and grievances of the tax payers across the State and forward them to the GSTM and the GSTM, upon verification, would further forward the grievances to the IT Redressal Grievance Committee. Mr. Joshi submitted that in the case on hand the Nodal Officer had acted promptly and had also forwarded the grievances of the tax payers to the GSTM. Mr. Joshi placed strong reliance on the following averments made in the affidavit-in-reply filed on behalf of the respondents. "8. It is respectfully submitted that the petitioner has annexed various articles from various websites such as business standard, financial express which are of the year 2017. In light of the same it is respectfully submitted that, these articles are secondary evidence in nature under the Indian....
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.... no merit in the writ-applications, those be rejected. 20. Having heard the learned counsel appearing for the parties and having gone through the materials on record, we would like to address ourselves on the following aspects : (1)Section 140(3) of the CGST Act provides for a substantive right which cannot be curtailed or defeated on account of the procedural lapses. (2) The entitlement of the credit of carry forward of the eligible duties is a vested right. (3) The rights accrued under the existing law have been saved by the CGST Act. (4) The right to carry forward the CENVAT credit is a constitutional right. (5) It is arbitrary, irrational and unreasonable to discriminate in terms of the time limit to allow the availment of the input tax credit with respect to the purchase of the goods and services made in the pre-GST regime and post-GST regime and the same could be termed as violative of Article 14 of the Constitution of India. (6) The doctrine of legitimate expectation also could be said to be violated. (7)By not allowing the right to carry forward the CENVAT credit for not being able to file the form GST TRAN-1....
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....rt commitments. The provision is a beneficial one. Clauses (4) and (7), no doubt, on their plain wording present certain constructional difficulties and the view sought to be put across by Shri Subba Rao for the appellants, on the plain language of Clause (7), is not without possibilities. However, the basis of a harmonious construction which commended itself to the High Court in other similar cases appears to us to advance and promote the objects of the policy in paragraph 185(4) and is, at all events, not an unreasonable view to take of the matter. In so me of these cases this Court has declined to interfere with this interpretation by rejecting petitions for special leave. Acceptance of the interpretation suggested by Shri Subba Rao would, in our opinion, unduly restrict the scope of the beneficial provision and, in many instances which would otherwise fall within the beneficial scope of the policy in para 185(4), take away with one hand what the policy gives with the other. We think we should accept the submissions of Shri Harish Salve which is consistent with the view taken of the matter by the High Court in other cases and hold that the conditions in para 185(4) of the policy....
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....mandatory nature must be justified by the purpose intended to be served. The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive , mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve. In Kedarnath's case itself this Court pointed but that the stringency of the provisions and the mandatory character imparted to them were matters of important policy. The Court observed: ". . . The object of Section 5(2)(a)(ii) of the Act and the rules made thereunder is self-evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the s....
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....f State of Mysore and Ors. v. Mallick Hashim & Co. , reported in AlR 1972 SC 1449, has held that no conditions could be imposed which destroy the right to a refund which is otherwise absolute. The conditions authorised are conditions which regulate the refund and not conditions which result in the extinguishment of the right to a refund which the Legislature has created under the proviso. We may quote the relevant paragraph 20 of the judgment thus : "As mentioned earlier the petitioner in the two Writ Petitions are dealers in hides and skins whereas the petitioner in the Sales Tax Revision Petition before the High Court is a dealer in copra and coconuts. It is not disputed that hides and skins as well as copra and coconuts are declared goods under Section 14 of the Central Sales Tax Act, 1956. It is also not disputed that at the time of purchase of those goods the dealers in question had paid the purchase tax. Further it is admitted that these goods were sold in the course of inter-State sale transactions. It is not denied that the petitioners had a right to apply for refund of the taxes paid by them but the objection raised by the State is those refund applications were n....
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.... of the manufacture of the specified final product to claim the Modvat credit for the duty paid on the inputs subsequent to the date of the receipt of those inputs. We may quote the relevant paragraphs 3 and 4 of the judgment thus : "3. The above discussion indicates that the right to claim MODVAT credit existed only in Rule 57A. Even Rule 57E says so. There can be no doubt that right from its inception the right to claim MODVAT credit is under Rule 57A. Rule 57A recognizes the right of the manufacturer to claim credit. Rule 57E recognizes not only the right of the manufacturer to claim credit but also the extent to which credit could be claimed for the duty paid on inputs. Therefore, Rule 57A is a substantive provision. However, the procedure of adjustment finds place in Rule 57E. Rule 57E is procedural provision. It deals with adjustments in duty credit. The object behind enacting Rules 57A, 57E and 57G is to avoid duty on duty whereby the price of the final product is loaded. Therefore, Rule 57A recognizes the right of the manufacturer to take credit for the specified duty paid on the inputs, whereas Rule 57E deals with adjustment in the duty credit, such adjustment mea....
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....paragraph 6. 11, the said objective was prevented or diluted by the Appendix. As already stated, the Appendix is meant for effectuating the rights contained in the policy and not to frustrate the operation of the substantive right. The Appendix should be meant only for reaching the objective and definitely should not be meant for defeating a person from getting the fruits of the substantive right provided in the policy. A procedure should not run contrary to the substantive right in the policy. In the case on hand, it is only a procedural amendment and not a policy amendment. When the policy gives a right to the petitioner for claiming refund of taxes, it cannot be prevented by making an amendment in the procedure. The petitioner can be prevented only if the policy is amended prohibiting refund of tax for the purchases made from an 100% EOU. The procedure was to be prescribed by an authority in implementing the policy and must be in consonance with the policy. If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be held to be bad in law. " (7) This Hi....
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....eived in the factory under the cover of an invoice, issued under rule 52A, an AR-1, or triplicate copy of a Bill of Entry, a certificate issued by an Appraiser of Customs posted in Foreign Post Office or any other document as may be prescribed by the Central Government by notification in the Official Gazette in this behalf evidencing the payment of duty on such inputs. " The subject notification has been issued in exercise of powers conferred by the first proviso to rule 57G of the Rules which provides for prescription of any other document evidencing the payment of duty on such inputs as may be prescribed by the Central Government by notification in the Official Gazette. Thus, from the language employed in the provision, it is apparent that the Central Government is empowered to prescribe any other document in addition to the documents prescribed under the said rule evidencing the payment of duty on such inputs. However, the said power is limited to prescribing any other document in addition to the documents prescribed and does not extend to prescribing a time limit within which credit has to be taken. In other words, once such documents are prescribed, there is ....
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.... within which the credit taken is to be availed, in effect and substance the said notification provides for lapsing of the credit that has already accrued in favour of the petitioner. In this regard it may be noted that the petition pertains to credit taken in the year 1994. At the relevant time there was no provision in the Act empowering the Central Government to frame rules providing for lapsing of credit of duty. Clause (xxviii) of sub-section (2) of section 37 of the Act, which empowers the Central Government to frame rules providing for lapsing of credit has been inserted with retrospective effect from 16th March, 1995. Hence, the said provision would not be applicable to the facts of the present case. In the circumstances, apart from the fact that rule 57G of the Act does not empower the Central Government to prescribe a time limit for taking credit, at the relevant time the Central Government was not empowered to frame a rule providing for lapsing of the credit taken. Hence, the present case would be squarely covered by the decisions of the Supreme Court in the case of Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd , (supra) and in the case of Eicher Motors Ltd....
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....gment thus : "10. Therefore, in the case of Baroda Rayon Corporation Limited Vs. Union of India, 2014 (306) ELT 551 (Guj), the Gujarat High Court has considered question identical in nature as is posed before us. In the case of Baroda Rayon Corporation Limited also, the benefit of MODVAT credit was denied to the assessee only because of an entry made in RG-23 A Part I & Part II, showing a date beyond six months. In the said case, the principle of law governing grant of MODVAT credit; the requirement of Rules 57A and 57G; the law laid down in the case of Eicher Motors Limited (supra) and Dai Ichi Karkaria Limited (supra) have all been considered and it has been held by the Gujarat High Court in the aforesaid case has held that merely because the entry of date made in Part II is beyond six months, the benefit of MODVAT credit cannot be denied when from all other material available, including the entry made in Part I, it is found that the benefit can be granted to the assessee. 11. We are in full agreement with the principle laid down by the Gujarat High Court wherein also under similar circumstances, identical action has been quashed and MODVAT credit extended. We a....
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....ld that the provision of Rule 57-G of the Rules was not mandatory and that it was only a procedural provision and if there was a procedural lapse, it could not mean that Modvat credit could not be availed. The same principle is applicable in the instant case. 9. We find that Modvat credit is basically a duty collecting procedure which allows relief to a manufacture on the duty element borne by him in respect of the inputs used by him. The object behind Rule 57-T of the Rules in the instant case is utilization of credit allowed towards such inputs which was being exclusively used for erection of a shed and was not exclusively used for production of a final product. Sub-clause (6) of Rule 57-T indicates as to when a Modvat credit could be availed, namely, that if the capital goods are received in the factory premises of the manufacturer under cover of a document specified under Rule 57-G evidencing the payment of duty on such capital goods. 10. In the instant case, it is not disputed that the goods were received in the factory premises and was consumed for the purpose of erection of shades for boiler houses, etc. It is also not disputed that the goods so received sh....
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....uote the relevant paragraphs 11 and 12 of the judgment thus : "11. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in Judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. Justice is the goal of jurisprudence, processual, as much as substantive. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the time being by or for the court in which the case is pending, and if, by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode. A procedural law should not ordinarily be construed as mandatory, the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. 12. Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. A Procedural prescription is the han....
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....wever, when such provision makes no distinction between a willful defaulter and the rest, we must view its reasonableness in the background of an ordinary assessee who would be hit and targeted by such a provision. As held by the Supreme Court in the case of Eicher Motors Ltd (supra) an assessee would be entitled to take credit of input already used by the manufacturer in the final product. In the said case, the Supreme Court was dealing with rule 57F which was introduced in the Central Excise Rules, 1944 under which credit lying unutilized in the Modvat credit account of an assessee on 16th March 1995 would lapse. Such provision was questioned. The Supreme Court held that since excess credit could not have been utilized for payment of the excise duty on any other product, the unutilised credit was getting accumulated. For the utilization of the credit, all vestitive facts or necessary incidents thereto had taken place prior to 16. 3. 1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory of the manufacturer of the final product and the final product which had been cleared from the factory was sought to be ....
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....herefore, this condition has retrospective operation and takes away an existing right. This by itself may not be sufficient to hold the provision as ultra vires or unconstitutional. However, in addition to these findings, we also find that no just reasonable or plausible reason is shown for making such retrospective provision taking away the vested rights. Had the statutory provision given a time limit from the appointed day for utilization of such credit, the issue would stand on an entirely different footing. Such a provision could be seen as a sunset clause permitting the dealers to manage their affairs for which reasonable time frame is provided. The present condition however without any basis limits the scope of a dealer to enjoy existing tax credits in relation to purchases made prior to one year from the appointed day. No such restriction existed in the prior regime. Merely the stated grounds in the affidavit in reply that the provision is introduced since physical identification of goods is necessary so as to ensure that the first stage dealers do not take any undue advantage of such benefit and also to accommodate the administrative convenience would not be suffic....
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....h retrospective effect in relation to goods which were purchased prior to one year from the appointed day. This retrospectivity given to the provision has no rational or reasonable basis for imposition of the condition. The reasons cited in limiting the exercise of rights have no co-relation with the advent of GST regime. Same factors, parameters and considerations of "in order to co-relate the goods or administrative convenience" prevailed even under the Central Excise Act and the CENVAT Credit Rules when no such restriction was imposed on enjoyment of CENVAT credit in relation to goods purchased prior to one year. 31. In the conclusion we hold that though the impugned provision does not make hostile discrimination between similarly situated persons, the same does impose a burden with retrospective effect without any justification. " 25. The Supreme Court, in the case of Eicher Motors Ltd. v. Union of India, reported in 1999 (106) E. L. T. 3 (S. C. ), has recognized the provision for facility of credit as a vested right and has held that the facility of credit is as good as tax paid till the tax is adjusted on future goods. We may quote the relevant paragraphs 5 and 6 ....
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....16-3- 1995 or utilisation of the finished products prior to 16-3- 1995. Thus the assessee became entitled to take the credit of the input instantaneously once the input is received in the factory on the basis of the existing scheme. Now by application of Rule 57F(4A) credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3- 1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate, that the scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect, submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had....
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....hereafter 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 illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 18. It is, therefore, that in the case of Eicher Motors Ltd. v. Union of India (1999) 106 ELT 3 : (1999 AIR SCW 563 : AIR 1999 SC 892) this Court said that a credit under the MODVAT scheme was "as good as ta....
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.... v. Tata Iron and Steel Co. and Ors. , reported in AIR 2001 SC 3134 that, "the process of construction combines both literal and purposive approaches. In other words, the legislative intention, i. e. the true or legal meaning of an enactment, is derived by considering the meaning of the words used in the enactment in light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. We may quote the relevant paragraph 14 of the judgment thus : "14. Dr. A. M. Singhvi, the learned senior counsel, appearing for the assessee-respondent in S. L. P. (Civil) No. 13106/96 and S. L. P. (Civil) No. 15442-15443/98 contended that the intention of the Parliament in enacting the Validation Act was only to save the State Governments from refunding the monies already collected under Statutes declared void ab initio by the Courts and it never intended to confer a right on the State to make any fresh levy or collection in respect of the cess and taxes, which could be collected up to 4-4-91, as contended by Mr. Dwivedi, appearing for the State of Bihar. According to Dr. Singhvi, when this Court in Orissa Cement's case, fo....
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....e perusal of the Validation Act in Jaora Sugar Mills case and the Validation Act in the present case would unequivocally indicate that in the case in hand, the Parliament never intended to confer a right on the States to collect and impose any levy subsequent to 4-4-91 and on the other hand merely allowed the State to retain the collection already made. According to Dr. Singhvi in Kannadasan's case, this Court drew wrong analogy from Gangopadhyaya's case and held that the provisions therein were identical to the provisions in the Validation Act, which was under consideration. Dr. Singhvi further urged that this Court in Kannadasan's case, has not appreciated the fact that Parliament deliberately and consciously omitted to incorporate a saving clause in the Validation Act. Dr. Singhvi urged that by the Validation Act life was infused into void State Statutes only up to 4-4-91 and consequently, the levies which may have accrued prior to 4-4-91 could not be permitted to be collected after 4-4-91. With reference to Article 265 of the Constitution, the learned counsel urged that the Constitution of India imposes a limitation on the taxing power of the State in so far as it p....
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....tatute - to see what was the evil which it was sought to remedy. " It is now well settled that in order to interpret a law one must understand the background and the purpose for which the law was enacted. And in this context as indicated earlier if one has bothered to understand the common phrase used in the Bhoodan Movement as 'Bhoomihin Kissan' which has been translated into English to mean 'landless persons' there would have been no difficulty but apart from it even as contended by learned counsel that it was clearly indicated by S. 15 that the allotments could only be made in accordance with the scheme of Bhoodan Yagna. In order to understand the scheme of Bhoodan and the movement of Shri Vinoba Bhave, it would be worthwhile to quote from 'Vinoba And His Mission' by Suresh Ram printed with an introduction by Shri Jaya Prakash Narain and foreword by Dr. S. Radhakrishnan. In this work, statement of annual Sarvodaya Conference at Sevapuri has been quoted as under : "The fundamental principle of the Bhoodan Yagna movement is that all children of the soil have an equal right over the Mother Earth, in the same way as those born of a mother ha....
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....hich is evolved by the courts is not para-phrase of Article 14 nor is it the objective and end of that Article. Wherever there is arbitrariness in the State action, whether it be of the legislature or of the executive or of an "authority" under Article 12, Article 14 immediately springs into action and strikes down such State action. In fact, the concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and is a golden thread which runs through the whole of the fabric of the Constitution. We may quote the relevant paragraphs 16 and 17 of the judgment thus : "16. If the Society is an "authority" and therefore "State" within the meaning of Article 12, it must follow that it is subject to the constitutional obligation under Article 14. The true scope and ambit of Article 14 has been the subject matter of numerous decisions and it is not necessary to make any detailed reference to them. It is sufficient to state that the content and reach of Article 14 must not be confused with the doctrine of classification. Unfortunately, in the early stages of the evolution of our constitutional law, Article 14 came to be identified with the doctrine of class....
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....R 1978 SC 597), where this Court again speaking through one of us (Bhagwati, J. ) observed :- "Now the question immediately arises as to what is the requirement of Art. 14: what is the content and reach of the great equalising principle enunciated in this article, There can be no doubt that it is a founding faith of the Constitution. It is indeed the pillar on which rests securely the foundation of our democratic republic. And, therefore, it must not be subjected to a narrow, pedantic or lexicographic approach. No attempt should be made to truncate its all-embracing scope and meaning for, to do so would be to violate its activist magnitude. Equality is a dynamic concept with many aspects and dimensions and it cannot be imprisoned within traditional and doctrinaire limits. . . . . . . . . . Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non-arbitrariness pervades Article 14 like a brooding omnipresence. " This was again reiterated by this Court in International Airport Authority's case ( ....
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....s Court in Bannari Amman Sugars Ltd. v. Commercial Tax Officer, 2005 (1) SCC 625. It was observed in paras 8 and 9: "8. A person may have a 'legitimate expectation' of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that 'legitimate expectation' gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. T....
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.... "34. By no stretch of imagination, the restriction imposed under sub-rule (3A) of Rule 8 to the extend it requires a defaulter irrespective of its extent, nature and reason for the default to pay the excise duty without availing Cenvat credit to his account can be stated to be a reasonable restriction. It leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties. This is quite apart from being wholly reasonable, being irrational and arbitrary and therefore, violative of Article 14 of the Constitution. It prevents him from availing credit of duty already paid by him. It also is a serious affront to his right to carry on his trade or business guaranteed under Article 19(1)(g) of the Constitution. On both the counts, therefore, that portion of sub-rule (3A) of rule must fail. " 40. The liability to pay GST on sale of stock carried forward from the previous tax regime without corresponding input tax credit would lead to double taxation on the same subject matter and, therefore, it is arbitrary and irrational. 41. C. B. E. & C. Flyer No. 20, dated 1....