TaxTMI 
TaxTMI 
2020 (3) TMI 448
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.... AC to SC IV W.P.(T) No. 134 of 2016, 1101 of 2016, 1227 of 2016, 1228 of 2016, 1243 of 2016, 1318 of 2016, 1965 of 2016, 2053 of 2017, 2130 of 2017, 2134 of 2017, 2136 of 2017, 2641 of 2017, 2642 of 2017, 2660 of 2017, 2661 of 2017, 267 of 2016, 2739 of 2017, 2740 of 2017, 2743 of 2017, 2754 of 2017, 2759 of 2017, 2935 of 2017, 2977 of 2017, 2980 of 2017, 298 of 2017, 3008 of 2017, 3084 of 2017, 3085 of 2017, 3086 of 2017, 3087 of 2017, 3089 of 2017, 3093 of 2017, 3094 of 2017, 3100 of 2017, 3129 of 2017, 3159 of 2017, 3307 of 2017, 3310 of 2017, 3323 of 2017, 3389 of 2017, 3391 of 2017, 3536 of 2017, 3576 of 2017, 3643 of 2017, 3659 of 2017, 3755 of 2017, 3948 of 2016, 3950 of 2017, 3983 of 2017, 4013 of 2018, 4020 of 2018, 4132 of 2017, 4133 of 2017, 4149 of 2017, 4150 of 2017, 4203 of 2017, 424 of 2016, 425 of 2016, 4264 of 2016, 4265 of 2016, 4268 of 2016, 4269 of 2016, 428 of 2016, 4288 of 2016, 429 of 2016, 4292 of 2016, 4294 of 2017, 4312 of 2017, 435 of 2017, 436 of 2017, 4401 of 2016, 4402 of 2016, 455 of 2017, 4684 of 2017, 471 of 2017, 4820 of 2016, 5064 of 2019, 5119 of 2017, 577 of 2016, 5948 of 2017, 6165 of 2016, 6537 of 2016, 6551 of 2019, 6739 of 2016, 7317 of ....
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....amila Steel Pvt. Ltd., M/s Eefco Metals & Powers Private Limited, Utkal Automobiles Private Limited, M/s. JSL Iron & Steel Private Limited, M/s Zenith Forge Private Limited, M/s. Kross Manufactures (I) Pvt. Ltd., M/s Hindalco Industries Limited, M/s Auto Profile Ltd. (Unit-III), Jost India Autocomponent Private Limited, Ms/ Roshni Trading Company, M/s. Steel Strips Wheel Ltd., M/s. G.C. Leasing & Trading Company Pvt. Ltd., M/s Amit Enterprises, M/s. Shiv Shakti Sales, M/s. Shree Ganesh Enterprises, M/s Arpee Energy Minerals Pvt. Ltd., M/s Gyan Enterprises (Trading Division), M/s Dhanrashi Vitrade Pvt. Ltd., M/s Black Pearl Steel & Minerals Pvt. Ltd., M/s Ruhi Enterprises (Trading Division), M/s Mal Metalliks Pvt. Ltd., M/s Multitech Auto Pvt. Ltd., M/s Auto Profiles Limited, M/s Divine Alloys & Power Co. Limited. Versus The State of Jharkhand, Commissioner of Commercial Taxes, Joint Commissioner of Commercial Taxes (Administration), Deputy Commissioner of Commercial Taxes, Assistant Commissioner of Commercial Taxes, M/s. Ramkrishna Forgings Limited, The Commercial Taxes Officer, Secretary-cum- Commissioner, Commercial Taxes Department JUDGMENT Per Deepak Roshan, J:- All th....
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....Provided that the Input Tax Credit on purchases when sold in course of inter State trade or commerce shall be allowed only to the extent of the Central Sales Tax payable under the Central Sales Tax Act, 1956 (74 of 1956). The aforesaid amendments were initially given retrospective effect with effect from 01.04.2015. (ii) Amendment No.2 In Section-18 of the JVAT Act, a new clause was inserted vide same gazette notification dated 23.09.2015 which reads as under:- f) In the existing sub-section (8), after the clause (xvii), a new clause (xviii), shall be added in the following manner:- (xviii) 'In respect of goods consumed or burnt up in course of manufacturing process and are not transferred into or existent in the finished product whether as goods or in any other form' The said amendment was also initially given retrospective effect with effect from 01.04.2015. (iii) Amendment No. 3 Vide notification dated 08.02.2016, Proviso inserted in Clause-(ii) and (iii) of sub-section(4) of Section-18 which was inserted vide notification dated 23.09.2015 was substituted in the following manner:- Amendment in sub-section(4) of Section-18 The existing proviso ....
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....s of A and C are as mentioned in sub-clause(ii) of sub-rule(5) of Rule 26. Provided where CST payable on such inter-state sales falling under sub-section (1) of Section 8 exceeds the proportionate input tax credit calculated on inter-state sales falling under sub-section (1) of Section 8 of the Central sales Tax, 1956, then the input tax credit shall be allowed only to the extent of proportionate input tax credit on sale under sub-section (1) of Section-8 of C.S.T. Act 1956 (b) For the purpose of calculating proportionate input Tax credit on inter-state sales falling under sub-section (2) of Section 8, the amount not eligible for Input Tax Credit shall be calculated/computed by applying the under mentioned formula- A x (Multiply) CST sale under Section 8(2) C Where the values of A and C are as mentioned in sub-clause(ii) of sub-rule(5) of Rule 26. Provided further that the input tax credit shall not be available for adjustment, as computed under sub-rule 11A, and shall be deductible from the eligible input tax credit as calculated under the sub-rules 26(5) to rule sub-26(11) as applicable". 4. Initially from amongst the batch of writ applications under consider....
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....Mr. Atanu Banjerjee, learned Senior Standing Counsel-III advanced arguments in all the writ petitions. 7. During initial arguments, learned counsels for the petitioners have contended that proviso inserted under clause(ii) and (iii) of sub-section-4 of Section-18 of the JVAT Act, vide amendment contained in notification dated 23.09.2015 and the substituted proviso inserted vide amendment contained in notification dated 8.2.2016 are ultra-vires Article 14 of the Constitution of India. However, during the course of arguments, challenge to the validity of the said proviso was not pressed and arguments were confined to the retrospective effect given to the proviso inserted in clause (ii) and (iii) of sub-section-4 of Section-18 of the JVAT Act, vide Amending Act contained in notification dated 08.02.2016. Even otherwise it is well settled that although the taxing statute can be challenged on the ground on infringement of Article 14 but in deciding whether the law challenged is discriminatory, it has to be borne in mind that in matters of taxation the Legislature pauses the large freedom in the matter of classification and wide discretion can be exercised in selecting persons who wil....
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....gible for ITC. While referring to the provisions of Section- 18(4)(iii) of the JVAT Act, 2005, it has been submitted that it is an admitted fact that raw materials used in the manufacture of goods was eligible for ITC. It has been submitted that a consumable which is burnt up or consumed in the manufacturing process is also species of raw materials. On the strength of the above, it has been contended that by virtue of amendment carried out under Section- 18(8) of the JVAT Act, benefit of ITC is sought to be denied on specified kind of raw materials which can be termed as "consumables" which are burnt up or consumed in the manufacturing process. It has been contended that such clarification amounts to sub-categorizing the goods of the same genus by allowing ITC on a part of raw materials while denying ITC on such raw materials which are in the nature of consumables. 11. The learned counsels for the petitioners have further assailed the amendment carried out under the JVAT Rules, by virtue of notification dated 17.2.2017 contending that by said notification the machinery provisions have been given retrospective effect i.e. w.e.f. 1.4.2015. It has been contended that Section-94 of ....
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.... Assistant Commissioner and Anr, reported in (2016) 15 SCC 125 (relevant paragraphs 2, 6, 16 to 19); (5) Union of India & Ors Vs N.S. Rathnam & Sons, reported in (2015) 10 SCC 681, relevant paragraph 1, 12, 13 to 21. 14. Mr. Ajit Kumar, learned Advocate General and Mr. Atanu Banerjee, learned Sr. Standing Counsel-III have opposed the prayer made in the writ applications and have contended that the impugned amendments made under the JVAT Act, are well within the legislative competence of the State Government and the said amendments are required to be upheld by this Hon'ble Court. 15. It has been submitted by learned counsels for the respondents that pursuant to a meeting of the Committee of the Secretaries/ Commissioner of the Commercial Taxes Department held on 13.2.2012, it was agreed to make provisions for ITC retention on all inter-State sales in the light of the decision of the Government of India not to grant any compensation against revenue loss on account of Central Sales Tax for the period 2011-12 onwards. It has been submitted that pursuant to the minutes of the said meeting, proviso was inserted in clause(ii) and (iii) of sub- Section (4) of Section 18 of t....
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....ttress the said contention the learned Advocate General has relied upon the decision of the Hon'ble Supreme Court in the case of Jayam and Company Vs Assistant Commissioner and Anr, reported in (2016) 15 SCC 125 to contend that ITC is in the nature of concession. 18. Further reliance has been placed to the decision of Hon'ble Supreme Court in the case of "Satnam Overseas (Export) Vs. State of Haryana and Anr, reported in (2003) 1 SCC 561 to contend inter-alia that if the competence of the Legislature is well established, then it is also well established that the Legislature can legislate retrospectively. 19. With regard to the challenge made to the amended provisions of Section- 18(8) of the JVAT Act, it has been submitted that the State Legislature in its wisdom has denied ITC on such goods which are burnt up in the course of manufacturing process and not transferred or existent in the finished product. It has been submitted that ITC is in the nature of concession and it is well within the legislative competence of the State Government to withdraw such concession by restricting availability of ITC on certain goods. It has been submitted that withdrawal of exemption is a matt....
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....ormula contained under Rule- 26(5) of the JVAT Rules, which reads as under:- Rule- 26. Computation of Input Tax Credit:- ... 5 (i) Where any VAT dealer buys and sells the goods in the same form, the input tax credit can be claimed fully in respect of all the taxable goods purchased for every tax period excluding the tax paid on the purchase of any goods mentioned in sub-section(8) of Section-18. Such VAT dealer is required to make a declaration in Annexure-A of Form JVAT 200 for every tax period along with tax return. (ii) Where any common inputs like packing material are used commonly for sales of taxable and exempt goods (goods in Schedule-I), the VAT dealer shall repay Input Tax related to exempt element of common inputs after making adjustment in the Annual Return by filing Annexure-B of Form JVAT 204 by applying a formula. The eligible Input Tax Credit for this sub-rule as well as for other transactions in this Rule shall be calculated/computed, by applying the under mentioned formula, i.e.- A x B [ 'A' multiplied by 'B' and divided by 'C"] C Where--- (A) Is the total amount of input tax paid at each tax rate for the tax period; ....
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....:- (I) Whether the amendments made to the provision of Section 18(4)(ii) and Section 18(4)(iii) of the JVAT Act vide amendment notification dated 8.2.2016, to the extent proviso has been inserted by providing, interalia, that ITC shall be available only in respect of tax paid on CST sales under section 8(1) of the CST Act, and the balance ITC shall be forfeited is wholly arbitrary, confiscatory in nature being violative of Article 14 of the Constitution of India; (II) Whether the retrospective effect granted with effect from 23.09.2015 to the substituted proviso inserted to clause(ii) and (iii) of sub- Section 4 of Section 18 of the JVAT Act, vide Amending Act dated 8.2.2016 has an effect of interfering with the vested right already accrued in favour of writ petitioners in respect of purchase and sales made between the period 23.09.2015 to 07.02.2016, and, is liable to be struck down as being violative of Articles 14 and 19(1)(g) of the Constitution of India; (III) Whether Amendment carried out in sub-section 8 of Section 18 of the JVAT Act, wherein a new clause (xviii) has been inserted after existing clause (xvii) of the aforesaid section, is ultra-vires and violative of....
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....es Tax payable under the CST Act and hence, the substituted proviso which provided for forfeiture of balance ITC was only a consequential action and was, thus, clarificatory in nature. 28. We have given our anxious consideration to the aforesaid submissions and we are of the opinion that proviso which has been inserted vide amending Act dated 8.2.2016 cannot be said to be clarificatory in nature, as, it for the first time provides for forfeiture of ITC by providing inter-alia that ITC on goods purchased when sold in course of inter-state trade and commerce, shall be allowed only to the extent of CST payable under section 8(1) of the CST Act, 1956 and "balance input tax shall not be available for adjustment from any tax, penalty or interest payable". 29. Looking into the scheme of JVAT Act, particularly provision of Section- 17 read with the provision of Section 52(3) of the JVAT Act, it would transpire that under the provision of the JVAT Act, Section-17 (3) provided for carrying forward of the amount of ITC which remained unadjusted to the next tax period. Further, section 52(3) inserted vide notification dated 19.09.2014 specifically provided, inter-alia, that where excess ....
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....) which provided for computation of eligible ITC also did not provide for any confiscation of remaining ITC. The same can be understood by the following illustrations in respect of a trading dealer. Total purchases made Rs. 10,000/- Total Input Tax paid @ 5% Rs. 500/- (A) Total Sales u/s 8(1) Rs. 15,000/- (B) Total inter State Sales Rs. 15,000/- (C) Total CST paid Rs. 300/- Eligible ITC as per formula under Rule 26(5) of the JVAT Rules, 2006 A x B i.e. 500 x15000 C 15,000/- Rs. 500/- ITC which was permitted to be adjusted= Rs. 500-300(CST liability). Balance - Rs. 200/- was permitted to be carried forward for the next financial year. 31. By insertion of substituted proviso for the first time under the JVAT Act, a provision has been inserted for forfeiture of the amount of Rs. 200/- which is not available for adjustment from the amount of any tax , penalty or interest payable. Thus, the said amendment has an effect of curtailing the vested right which has accrued upon the dealer and cannot be said to be merely clarificatory in nature. The....
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.... Court rejected the contention to the challenge made to the amendments carried out under the Act restricting benefits of ITC. The Hon'ble Supreme Court while upholding the vires of sub-section 20 of Section- 19 of the Tamil Nadu Value Added Tax Act, 2006, was pleased to set aside and struck down the said amendment to the extent it was given retrospective effect. Paragraph-19 of the said judgment reads as under:- "19. When we keep in mind the aforesaid parameters laid down by this Court in testing the validity of retrospective operation of fiscal laws, we find that the amendment in question fails to meet these tests. The High Court has primarily gone by the fact that there was no unforeseen or unforeseeable financial burden imposed for the past period. This is not correct. Moreover, as can be seen, sub-section (20) of Section 19 is altogether new provision introduced for determining the input tax in a specified situation i.e. where goods are sold at a lesser price than the purchase price of goods. The manner of calculation of ITC was entirely different before this amendment. In the example, which has been given in the earlier part of the judgment, "dealer" was entitled to I....
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....he same genus. It has been submitted that the Hon'ble Supreme Court in catena of decisions have held that taxing statutes are not beyond the pale of challenge under Article 14 of the Constitution of India and on the strength of the above, it has been contended that classification sought to be made by the State Government by denying ITC on consumables which are also raw materials, is not based on intelligent differentia and is not a reasonable classification. Extensive reliance has been placed on the judgment of the Hon'ble Supreme Court rendered in the case of "Union of India and Ors Vs N.S. Rathnam & Sons(Supra)". 36. We have carefully perused the amendment carried out under subsection- 8 of section-18 of the JVAT Act and we are of the opinion that said amendment is not violative of Article 14 of the Constitution of India as it is based on reasonable classification and intelligible differentia. The Hon'ble Supreme Court in catena of decisions including the decision relied upon by the writ petitioners in the case of Union of India and Ors Vs N.S.Rathnam & Sons (Supra) have held that justiciability of particular tax enactment can be decided on the touchstone of Article 14 of the ....
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....he availability of ITC on such raw materials which are consumed or burnt up and not found existent in the finished product. Thus, specified class of raw materials has been excluded for being eligible for claiming benefit of ITC. The aforesaid decision being in the nature of policy decision, wherein reasonable classification has been made between two kinds of raw material, that is , raw materials found existent in the finished product and raw materials consumed or burnt up and not being found in the finished product, the same cannot be said to be unreasonable classification attracting the vice of Article 14 of the Constitution of India. Thus, the challenge to the amended provisions contained under section- 18(8)(xviii) fails having no merit. Question No.IV. 39. One of the main questions for adjudication in the instant writ application is the competence of the delegate i.e. the State Government to frame Rules prescribing machinery provision with retrospective effect. In order to determine the aforesaid question, it would be proper to quote the provision of Section-94 of the JVAT Act, which reads as under:- "94. Power to make Rules - (1) Without prejudice to any power t....
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....to our discussion are culled out. These are obviously relatable to the present set of cases and are not intended to lay down the law for all cases of retrospective operation of statutes or subordinate legislation. The relevant principles are: (i) The Central Government or the State Government (or any other authority) cannot make a subordinate legislation having retrospective effect unless the parent statute, expressly or by necessary implication, authorises it to do so. [Hukam Chand Vs. Union of India and Mahabir Vegetable Oils (P) Ltd Vs. State of Haryana] 53 (ii) Delegated legislation is ordinarily prospective in nature and a right or a liability created for the first time cannot be retrospective effect [Panchi Devi V. State of Rajasthan] (iii) As regards a subordinate legislation concerning a fiscal statute, it would not be proper to hold that in the absence of an express provision a delegated authority can impose a tax or a fee. There is no scope or any room for intendment in respect of a compulsory exaction from a citizen [Ahmedabad Urban Dev. Authority Vs. Sharadkumar Jayanti Kumar Pasawalla and State of Rajasthan V Basant Agrotech (India) Ltd] T....
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....e question under consideration except for us to make the observation that the State Government should have been more careful in giving effect to the resolution and should not have relied upon its delegated power which did not carry with it the power to make retrospective rules. The second ground pressed before us by learned counsel for the appellant is that the rules had to be placed on the table of and approved by the legislature. This was sufficient indication, in his submission, for us to infer that retrospective in the rule-making power was implicit. We cannot agree. The mere fact that the rules framed had to be placed on the table of the legislature was not enough, in the absence of a wider power in the section, to enable the State Government to make retrospective rules. The whole purpose of laying on the table of the legislature the rules framed by the State Government is different and the effect of any one of the three alternative modes of so placing the rules has been explained by this Court in Hukam Chand V. Union of India, Mr. Justice Khanna speaking for the Bench observed: (SCC p 606, para- 13). The fact that the rules framed under the Act have to be laid before....
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....in catena of decisions have already held that in absence of machinery provision, it would not be open to the Assessing Authority to arbitrarily assess to tax the assessee. 46. In the case of "Heinz India Private Limited and Anr Vs. State of Uttar Pradesh and Ors, reported in (2012) 5 SCC 443", the Hon'ble Supreme Court has dealt in detail the importance of the machinery provision for assessment of taxes and fees recoverable under a taxing statute. In the said judgment the Hon'ble Supreme Court while relying upon several earlier decisions of the Apex Court has held that if the Act is silent as to the machinery and procedure to be followed in making the assessment and, leaves it to the Executive to evolve the requisite machinery and procedure, then the whole thing, from beginning to end, is treated as of a purely administrative character. It has been held that an imposition of tax which is in the absence of a prescribed machinery and the prescribed procedure would partake of the character of a purely administrative affair and can be challenged as contravening Article 19(1)(f) of the Constitution of India. The said judgment of the Hon'ble Supreme Court in the case of "Heinz India P....
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....ed to in passing without noticing any of the key paragraphs set out hereinabove in our judgment. Also, we find that the judgment in G.D. Builders went on to quote from the judgment in Mahim Patramn (P) Ltd v. Union of India, to arrive at the proposition that even when rules are not framed for computation of tax, tax would be leviable' "30. We are afraid that the Delhi High Court in G.D. Builders case completely misread the judgment in Mahim Patram Case. This judgment concerned itself with works contracts being taxed under the Central Sales Tax Act. What was argued in that case was that in the absence of any rule under the provisions of the Central Act, the determination of sale price would be left to the whims and fancies of the assessing authority. This argument was repelled by this Court after setting out Section 2(g) and 2(ja), which define "sale" and "works contract.........................." "32. In the aforesaid judgment in G.D. Builders case, it was found that Section 9(2) of the Central Sales Tax Act conferred powers on officers of the various States to utilise the machinery provisions of the States' sales tax statute for purpose of levy and assessment of ....
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....inciple of law that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in Article 14, this Court found that the enactment in question was violative of Article 14 of the Constitution for inequality was writ large on the Act and inherent in the very provisions under the taxing section thereof. Having said so, this Court also noticed that the Act was silent as to the machinery and the procedure to be followed in making the assessment. It was left to the executive to evolve the requisite machinery and procedure thereby making the whole thing, from beginning to end purely administrative in character completely ignoring the legal position that the assessment of a tax on person or property is a quasi-judicial exercise. ... . . . . . . . . . . . . ." 48. In view of aforesaid decisions of the Hon'ble Supreme Court it is abundantly clear that in absence of machinery provision no assessment of tax and forfeiture of input tax can be sustained in the eye of law. 49. During the course of arguments the learned Advocate General has vehemently sought to distinguish the aforesaid judgment of the Hon'ble Supreme Court by contending , inter-alia....
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.... already stated above, for the first time provisions were made for forfeiture of ITC vide Rule 26(11A) of the JVAT Rules, which provided for forfeiture of excess ITC amount over and above the tax payable under Section 8(1) of the CST Act. In absence of machinery provisions contained in Rule 26(11A), excess ITC over and above the amount of tax payable under Section- 8(1) of the CST Act, 1956 was available for adjustment against tax, penalty and interest liability. Thus, the amount of ITC available partaked the character of tax as it was available for adjustment against the output tax liability. Reference in this regard may further be made to Statutory Form JVAT 200 which contains format for filing quarterly return. In the return column prescribed under the rules, there was no provision for incorporating the amount towards forfeited ITC which have been subsequently introduced in view of amendment carried out in the Rules vide notification dated 17.2.2017. In the return format applicable for the month of March, 2017 onwards, separate column has been inserted for forfeiture of ITC including ITC on consumables as under:- 58(A) ITC not admissible (forfeited ITC) for the current tax....