TaxTMI 
TaxTMI 
2023 (1) TMI 1023
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....s a 'credit of the amount of value added tax' which a registered person is entitled to migrate in its electronic credit ledger"? 4. Brief facts of the case (in W.P.(T) No. 1429 of 2021) is that the petitioner is primarily engaged in the business of supplying of machinery and providing engineering, commissioning and operational support services across the country and in the State of Jharkhand. Petitioner was duly registered under the provisions of Jharkhand Value Added Tax Act, 2005 [hereinafter referred to as 'JVAT Act, 2005' for short] and after implementation of the Goods & Services Tax Act, 2017 [hereinafter referred to as 'GST Act, 2017' for short] it was also registered under the said Act. Admittedly, Petitioner filed its returns for the quarter ending 30th June, 2017 i.e. immediately before appointed date and was having an excess input tax credit [hereinafter referred to as 'ITC' for short] of an amount of Rs. 1,73,69,826/-. The said amount comprised of Rs. 1,30,62,516/- pertaining to excess ITC and an amount of Rs. 43,07,310/- pertaining to unadjusted TDS deducted at source under Section 44 of the JVAT Act. The cumulative of the aforesaid amount in the return filed was ca....
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....7,310/-i.e. an amount equivalent to excess TDS reflected in the quarterly return of the Petitioner. Since subsequent rectification order was passed, wherein denial of transition of credit of value added tax was only confined to the amount of TDS, Petitioner preferred another Appeal online on 11th June, 2019, challenging the Rectification Order which was registered as Appeal Case No. BK/GST-02/2019-20. Since, Petitioner had already preferred the second appeal against the Rectification Order, its earlier Appeal against the original order became infructuous and, accordingly, Petitioner vide its e-mail dated 2nd March, 2020 prayed before the Appellate Authority for withdrawal of its first appeal. However, interestingly, despite the aforesaid fact, Appellate Authority proceeded to adjudicate the first appeal and was pleased to confirm the original Summary of Demand contained in Form GST DRC-07, wherein migration of the amount of credit of value added tax of Rs. 1,73,69,826/- was disallowed vide its order dated 02.03.2020 passed in Appeal Case No. Appeal Case No. BK/GST-03/2019-20. 6. Interestingly, in the Appellate Order, reference of the e-mail dated 02.03.2020, wherein Petitione....
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....the tax period 30th June, 2017 has been passed or not. Subsequent to the order passed by this Hon'ble Court, Counter Affidavit has been filed on behalf of Respondents and, admittedly, no rectification order dated 13.03.2019 has been enclosed along with said Counter Affidavit. In fact, in the Counter Affidavit, it has been clearly stated in paragraph 7(d) that no separate adjudication order was issued, rather, Form GST DRC-07 itself was an order/demand notice. Further, in the Counter Affidavit, assessment order pertaining to the period 2017-18 i.e. 01.04.2017 to 30.06.2017 has been annexed vide Annexure-A and a bare perusal of the said order dated 22nd March, 2021, it would be evident that at the time of VAT assessment, it was recorded that an amount of Rs. 1,73,69,826/- has been carried forward by the Petitioner in GST TRAN-1. 8. Brief facts of the case (in W.P.(T) No. 2404 of 2020) is that on 25.12.2017 return was filed by the petitioner for the period 01.04.2017 to 30.06.2017, showing excess amount of tax deducted at source amounting to Rs. 81,30,037/- which was auto populated at column 61 of the return being "excess input tax credit to be c/f to next period". Petitioner in te....
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.... in its purview the amount of TDS and the denial of migration of the said amount to the Petitioners by placing reliance upon Rule 117 of Jharkhand Goods and Service Rules, 2017 is not in accordance with law. It was further submitted that Rule 117 of the JGST Rules is per se contradictory to the main enactment i.e. Section 140(1) of the JGST Act. It was submitted that Section 140(1) of the JGST Act uses the term 'credit of Value Added Tax', whereas Rule 117 of the JGST Rules uses the term the 'amount of input tax credit' which is restrictive in nature and cannot be resorted to deny the benefit of migration of TDS in the electronic credit ledger. Reliance was placed upon the decision of 'Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise & Anr.' reported in (2016) 3 SCC 643, and it was contended that the Hon'ble Apex Court in the said judgment held that rules and regulations which are in the nature of subordinate legislation and which are ultra vires are bound to be ignored by the Constitutional Courts when the question of their enforcement arises. It was submitted that in absence of any specific challenge to Rule 117, this Hon'ble Court at the time of enforcement o....
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....he provisions of Section 52 of the JVAT Act to contend, inter alia, that Petitioners were entitled to claim refund of excess tax paid including refund of Excess ITC. It was vehemently submitted that unadjusted TDS amount in the returns were treated as Excess ITC and were allowed to be carried forward in the next succeeding months, whereas if the same was not allowed to be carried forward, the excess unadjusted TDS amount would have become refundable at the end of each quarter itself, on filing of the quarterly returns. It was submitted that Petitioners-assessess who were otherwise entitled for refund of the TDS amount on one hand were denied the benefit of refund by treating the unadjusted TDS amount as excess ITC amount to be carried forward in the next succeeding months and, on the other hand, the Respondents are not allowing the migration of the said excess ITC amount under the GST Regime as transitional credit. It was contended that if the unadjusted TDS amount was not allowed to be carried forward as excess ITC, the Petitioners would have got refund of the said amount immediately in terms Section 52 of the JVAT Act but instead of claiming refund, the Petitioners in a bona f....
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....n of TDS amount under JGST Regime. Heavy reliance was placed upon Rule 117 of the JGST Rules and it was contended that the intent of the provisions of Section 140(1) of the JGST Act can be understood from Rule 117 of the JGST Rules which only provides migration of the amount of input tax credit and not the TDS amount. It was submitted that input tax credit is in the form of concession and, thus, had to comply its statutory requirement before availing its benefit and since Rule 117 of the JGST Rules prescribed the manner and procedure for availing the transitional benefit, the same is required to be adhered to. It was submitted that TDS and input tax credit both under the JVAT Act and the JGST Act have been recognized distinctively and under both the enactments, TDS is not equivalent to ITC as its basic nature is different and TDS partakes the character of 'output tax', whereas input tax credit as its name suggests is 'input tax'. Various provisions of JVAT Act and the JGST Act have been referred by the Respondents to buttress their aforesaid contention. Reliance was also placed upon Section 51(5) of the JGST Act to contend, inter alia, that the under the GST Regime, TDS deducted wa....
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....nal arrangements for input tax credit.-- (1) A registered person, other than a person opting to pay tax under Section 10, shall be entitled to take, in his electronic credit ledger, credit of the amount of Value Added Tax, and Entry Tax, if any, carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods sold under notification, if any, claiming refund of value added tax paid thereon (where ever applicable)" Provided further that so much of the said credit as is attributable to any claim related to Section 3, sub-section (3) of Section 5, Section 6, Section 6A or sub-section (8) of Section 8 of the Cen....
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....ds or services or both:- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; (iii) rent-a-cab, life insurance and health insurance except where- (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession. (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except whe....
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.... shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of Section 39, in such manner as may be prescribed." Rule 117 of JGST Rules is quoted herein-under:- "117. Tax or duty carried forward under any existing law or on goods held in stock on the appointed day.- (1) Every registered person entitled to take credit of input tax under Section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying therein; separately, the amount of input tax credit of eligible duties and taxes as defined in explanation 2 to Section 140 to which he is entitled under the provisions of the said section: Provided that the Commissioner may, on the recommendations of the Council, extend the period of ninety days by a further period not exceeding ninety days. Provided further that where the inputs have been received from an Export Oriented Unit or a unit located in Electronic Hardware Technology Park, the credit shall be allowed to the extent as provided in sub-rule (7) of rule 3 of the ....
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....ct central tax at the rate of nine per cent or more and forty per cent for other goods of the central tax applicable on supply of such goods after the appointed date and shall be credited after the central tax payable on such supply has been paid: Provided that where integrated tax is paid on such goods, the amount of credit shall be allowed at the rate of thirty per cent and twenty per cent respectively of the said tax' (iii) The scheme shall be available for six tax periods from the appointed date. (b) The credit of central tax shall be availed subject to satisfying the following conditions, namely:- (i) such goods were not unconditionally exempt from the whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule; (ii) The document for procurement of such goods is available with the registered person; (iii) the registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2), submits a statement in FORM GST TRAN 2 at the end of each of the six tax peri....
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....all pay the tax deducted according to such returns to the State Government in such manner as may be prescribed. (4) Every person referred to in sub-section (3) shall issue to the payee a certificate of tax deduction and payment in such form in such manner as may be prescribed. (5) Any tax paid to the State Government in accordance with sub- section (3) shall be adjustable by the payee, on the authority of the certificate issued to him under sub-section (4), with the tax payable by him under this Act and the assessing authority shall, on furnishing of such certificate to it, allow the benefit of such adjustment after due verification of the payment. (6) If any person fails to deduct the whole or any part of the tax as required by or under the provisions of sub-section (1), or fails to pay the whole or any part of the tax as required by or under sub-section (3), then, the authority referred to in sub-section (3) may, at any time within five years of the close of the year when he failed to do so, by order in writing, direct him, after giving him a reasonable opportunity of being heard, to pay, by way of penalty, a sum equal to the amount of tax which he fail....
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.... Section 15, 'P' denotes the purchase tax paid by a registered dealer for any tax period as determined under Section 10 and 'I' denotes the input tax paid or payable and includes tax paid on Entry of Goods, for the said tax period as determined under Section 15." A holistic reading of the aforesaid provisions would reveal that TDS was deducted under Section 44 of the JVAT Act which is an amount of value added tax deducted in advance from a registered dealer. Further, under the JVAT Act, provisions were incorporated under Section 11 for levy of entry tax. Although, entry tax was levied under the JVAT Act itself but the said levy was imposed in view of the enabling provisions contained under 7 Schedule, List II, Entry 52 of the Constitution of India. Further, under Section 18(6) of the JVAT Act, a registered dealer was entitled to claim input tax credit even in respect of tax paid on entry of goods and, thus, entry tax was available as input tax credit. Thus, under the provisions of JVAT Act, tax paid was of the following three components, namely:- (i) Input Tax; (ii) Tax deducted as TDS; and (iii) Entry Tax. 13. The role of 'Transitional Provision' has been consi....
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....trued and the paramount object in statutory interpretation is to discover what the legislature intended and this intention is primarily to be ascertained from the text of the enactment in question. 14. It is in the aforesaid background that the provisions of Section 140(1) of the JGST Act are required to be construed. The said provision unambiguously provides for migration of credit i.e. tax paid under the erstwhile tax regime and the words used in Section 140(1) of the JGST Act, namely, 'credit of amount of value added tax and entry tax' is to be understood in the context in which it has been used. Admittedly, under the JVAT Act even entry tax was levied vide Section 11 and the said levy of entry tax was available as input tax credit for adjustment against output tax liability. TDS amount was also available for adjustment against output tax liability apart from the input tax credit which was available for adjustment against output tax liability. The intention of the legislature while enacting the transitional provision was to ensure that migration of unadjusted tax paid under repealed enactments are allowed to be carried forward for adjustment against the output tax liabilit....
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....dit' could only mean that if there is an express prohibition under the GST Act for claiming input tax credit, then the benefit of transitional would not be available. Section 17(5) of the JGST Act contains provisions prohibiting availment of input tax credit under the GST Act and, in our opinion, the interpretation of the proviso would be to restrict the migration of credit, if the credit pertains to the transactions which are prohibited under Section 17(5) of the JGST Act in which no input tax credit is available. Any contrary interpretation given to the proviso would have an effect of nullifying and/or setting at naught the real object of the transitional provision. The Hon'ble Apex Court in the case of S. Sundaram Pillai & Ors. v. P. Lakshminarayana Charya & Ors. (Supra) has held as under:- "27. The next question that arises for consideration is as to what is the scope of a proviso and what is the ambit of an Explanation either to a proviso or to any other statutory provision. We shall first take up the question of the nature, scope and extent of a proviso. The well established rule of interpretation of a proviso is that a proviso may have three separate functions. N....
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....possible construction of words to be found in the section, the proviso could be looked into to interpret the main section. However, when the main provision is clear, it cannot be watered down by the proviso. Thus, where the main section is not clear, the proviso can be looked into to ascertain the meaning and scope of the main provision. (c) According to Justice G.P. Singh, the learned author, the proviso should not be so construed as to make it redundant. In certain cases, "the legislative device of the exclusion is adopted only to exclude a part from the whole, which, but for the exclusion, continues to be a part of it", and words of exclusion are presumed to have some meaning and are not readily recognized as mere surplusage. As a corollary, it is stated that a proviso must be so construed that the main enactment and the proviso should not become redundant or otiose. This is particularly so, where the object of a proviso sometimes is only by way of abundant caution, particularly when the operative words of the enactment are abundantly clear. In other words, the purpose of a proviso in such a case is to remove any doubt. There are also instances where a proviso is in the....
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....(v) In S. Sundaram Pillai, etc, vs. V.R. Pattabiraman - [AIR 1985 SC 582], while dealing with the scope of a proviso and explanation to sub-section (2) of Section 10 of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, this Court held that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or qualifying something enacted therein which, but for the proviso, would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment, nor can it be used to nullify or set at naught the real object of the main enactment. Sometimes, a proviso may exceptionally have the effect of a substantive enactment. (e) After referring to several legal treatises and judgments, this Court held in the above judgment as under:- "43. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very conce....
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....of such amount of credit where there is an express prohibition in respect of such transaction of claiming input tax credit under Section 17(5) of the GST Act. 17. We have also carefully examined Rule 117 of the JGST Rules which restricts the transitional provision of Section 140(1) of the JGST Act and permits only, migration of 'input tax credit' as against credit of value added tax and entry tax stipulated under Section 140(1) of the JGST Act. Admittedly, Rule 117 of the JGST Rules, is a subordinate legislation and is restricts the scope of Section 140(1) of the JGST Act. As a Constitutional Court, we are bound to ignore Rule 117 of the JGST Rules when the question of its enforcement arises and mere fact that there was no specific relief sought for to strike down or to declare the said Rules as ultra vires would not stand in our way of not enforcing them. [See Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise & Anr. (Supra)]. The aforesaid view has also been expressed by the Hon'ble Apex Court in the case of Bharthidasan University v. All-India Council for Technical Education reported in (2001) 8 SCC 676, wherein it was held as under:- "14. The fact ....