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TaxTMI 
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2024 (6) TMI 288
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....Emmanuel, By Advs. K.S.Hariharan Nair Harima Hariharan G.Remadevi Rajath R Nath, By Adv P.N.Damodaran Namboodiri, By Adv A.Krishnan, By Advs. K.N.Sreekumaran P.J.Anilkumar (A-1768) N.Santhoshkumar, By Advs. A.Kumar P.J.Anilkumar G.Mini(1748) P.S.Sree Prasad For The Respondents: By Adv Sreelal N. Warrier, Sc, Central Board Of Excise &Amp; Customs Sri. Muhamed Rafiq-Spl. Gp, Sri. P.R. Sreejith -Sc, Gstn, Paravur, Ernakulam-683520. By Advs. Sri.P.R.Sreejith, Sc, Central Board Of Excise And Customs Sri. Muhamed Rafiq-Spl.Gp, By Adv Smt.Preetha S. Nair, Sc, Central Board Of Excise And Customs Adv, By Adv Malini K. Menon, Cgc Sri. Muhamed Rafiq-Spl.Gp JUDGMENT In the present batch of writ petitions, challenge has been made to Sections 16 (2) (c) and 16 (4) of the Central Goods and Services Tax Act and State Goods and Services Act, 2017. Background: 2. It took 13 long years, i.e., 2004-2017, for Goods and Services Tax to finally arrive in India, and a new tax regime could see the light of the day with effect from 01.07.2017. The Kelkar Committee used the word 'GST' for the first time in a formal document, i.e., the Executive Summary of the Kelkar Committee report. The Kelka....
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....tution (101st Amendment) Act 2016 came into force with effect from 16.09.2016. 7. The President of India Constituted the Goods and Services Tax Council (GST Council) on 15.09.2016. The GST Council was to make recommendations to the Union and the States inter-alia on model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-state trade and commerce and principles that govern the place of supply. The GST Council prepared the model GST law, model IGST law, and GST compensation law. With some modifications, those model GST laws prepared by the GST Council became the draft for the Central Goods and Services Tax Bill, the Integrated Goods and Services Tax Bill, the Union Territory Goods and Services Tax Bill, the Goods and Services Tax (Compensation to States) Bill and State Goods and Services Tax Bill. These Bills were debated and passed by the Lok Sabha, and thus, the Central Goods and Services Tax Act, the Integrated Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act came into life. 8. The GST laws have been enacted to....
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....supply either be the date of issue of invoice by the supplier or the last date, which is required under Section 31 to issue the invoice with respect to the supply on the date on which the supplier receives the payment with respect to the supply. Section 13 provides that the liability to pay tax on services shall arise at the time of supply which may be the date of issue of invoice by the supplier or, if the invoice is issued within the period prescribed under Section 31 or the date of receipt of payment whichever is earlier, or the date of provision of service if the invoice is not issued within the time period prescribed under Section 31 or the date of receipt of payment or the date on which the recipient shows the receipt of services in his books of account. Section 15 provides that the value of the supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both, provided the recipients and the supplier are not related, and the price is the sole consideration for the supply. Statutory Prescription: 11. As is evident from the Statement of Objects and Reasons of the GST Bill, pre-....
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....ting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person;] [(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;] (c) subject to the provisions of [section [***]], the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a peri....
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....ment, and subsection 4 of Section 49 enables the taxable person to pay his output tax utilising the balance available in the electronic cash ledger. In effect the tax already paid by the taxable person is allowed to be set off against the output tax liability. 13. The input tax credit is not an absolute right but is an entitlement subject to conditions and restrictions under the provisions of the Act and is to be availed in a specified manner. 14. Section 16 (2) prescribes four conditions to avail the input tax credit a) Possession of tax invoice, debit note or other prescribed tax payment document. b) Receipt of goods or services or both c) Actual payment of taxes for supply d) Furnishing of the return These four conditions are cumulative and not alternative. Clause (b) of Sub-section 2 mandates the receipt of goods or services for claiming the input tax credit. Clause (c) of Section 2 mandates the payment of tax to the Government by cash or by utilizing the input tax credit. The input tax so utilized must be admissible in respect of the supply. The utilization of input tax credit is under Section 41 or Section 43A as may be applicable.....
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....x; (c) a debit note issued by a supplier in accordance with the provisions of section 34; (d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports; (e) an Input Service Distributor invoice or Input Service Distributor credit note or any document issued by an Input Service Distributor in accordance with the provisions of sub-rule (1) of rule 54. (2) Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI are contained in the said document, [Provided that if the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person.] (3) No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand ....
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....to them by the supplier dealers, their case is covered in Circular No.183/15/2022-GST dated 27.12.2022 issued by the Central Board of Indirect Taxes and Customs. 19. It is submitted on behalf of the petitioners that the GSTR-2A is an auto-populated, dynamic, read-only document containing details of inward supplies based on details of outward supplies filed by the purchasing dealer. FORM GSTR-2A is only a facilitator for making a confirmed decision while doing self-assessment. Non-performance or non-operability of FORM GSTR-2A or, for that matter, the other forms should be of no avail because a registered person is obliged to submit a return on the basis of such self-assessment in the Form prescribed manually on an electronic platform. Non-availability of the payment of tax in GSTR-2A cannot impact the entitlement of the taxpayers to avail the input tax credit on the self-assessment basis in consonance with the provisions of Section 16 of the GST Act. It is further submitted that the CBIC in its press release dated 18.10.2018, has clarified that furnishing of output details in FORM GSTR-1 by the corresponding supplier(s) and the facility to view the same in FORM GSTR-2A by the re....
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....yment and therefore, the doctrine of impossibility would be applicable in such a situation; and (ii) where the revenue is able to recover the tax from the supplier dealer along with the interest applicable and penalty under Sections 73 or 74 of the GST Act, however, the recipient dealer would be denied the claim of input tax credit as the said tax would not get reflected in GSTR-2A. This situation would lead to unjust enrichment of the Government as on the same taxable transaction, the Government would collect tax from the recipient dealer and also from the supplier along with interest and penalty, as there is no provision for refunding the amount collected from the recipient in cases where the department successfully recovers the unpaid tax from the supplier who had defaulted. It is therefore, submitted that Section 16 (2) (c) is in violation of Article 19 (1) (g) of the Constitution of India. It is further submitted that this provision either be declared unconstitutional or read down and should be held that GSTR-2A is an auto-populated dynamic document based on GSTR-1 filed by the supplier dealer. GSTR-2A is a read-only document and the recipient dealer does not have any means....
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....ts on such supply. The ITC is the very basis of the GST regime. The tax structure under the GST is heavily dependent on ITC being available to the recipient dealer. The recipient dealer would depend heavily on the credit available to him under the Act for discharging his outward tax liability. If the eligible tax credit is blocked or denied or it is made to reverse credit already taken, it affects the business operation of the recipient dealer. It is the submission of the Counsel for the petitioners that Section 16 (2) (c) is a violation of Article 19 (1) (g) of the Constitution of India, inasmuch as the denial of eligible input tax credit affects the business operation of the recipient dealer. It is submitted that Section 16 (2) (c) of the GST imposes an unreasonable and onerous condition and gives unequal treatment to the bona fide recipient of the goods and services. The section does not provide any measure for compliance by the supplier dealer for making payment collected from the recipient dealer, and therefore, the said provision falls foul of Articles 14 and 19 of the Constitution of India. 27. It has also been submitted on behalf of the petitioners that furnishing of out....
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....a matter of right. This entitlement to ITC follows from complying with the conditions and is subject to the restrictions contained in Section 49 of the Act. Section 49 makes it clear that the ITC, 'as self-assessed in the return,' shall be credited to the electronic credit ledger of the registered person in accordance with Section 41. From reading the provisions of Sections 16 (1), 41 and 49, it would be clear that the ITC is nothing but the right of the recipient dealer. Under Section 16 (1) registered person 'shall be entitled' to take credit of ITC. This phrase would show the mandatory effect of the provision. Entitlement means rights of certain benefits and privileges. The submission is that the ITC is a matter of right and not a concession. Denial of ITC on a mismatch with the figure mentioned in the auto-populated documents in FORM GSTR-2A is unjustified. Authorities must conduct an enquiry and should verify the documents in possession of the purchaser or the recipient dealer to ascertain the bona fide of such a dealer in claiming the ITC on supplies received from the supplier dealer. Section 16 (2) begins with a non-obstinate clause and prescribes certain restrictions and co....
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....date with late fees, such returns should be accepted without applying the rigour of limitation prescribed under Section 16 (4) of the Act. 32. It is submitted that the provisions of Section 16 (4) of the Act are arbitrary in nature and hence violative of Articles 14 and 19 (1) (g) of the Constitution of India. The assessee cannot be made to suffer by disallowing ITC on account of the failure on the part of the Department to notify the FORM GSTR-2 and GSTR-3 respectively. It is also submitted that the retrospective amendment to Rule 61 of the CGST Rules, 2017 is also unconstitutional, being violative of Article 14 of the Constitution. Similarly, retrospective amendment to Rule 61(5) of the Rules is also unconstitutional, being violative of Article 279A of the Constitution of India. 33. Delay in making the entries within the time fixed should not be the basis for denying the benefits of ITC. It is further submitted that ITC is a facility of credit, and it is in the nature of vested rights. The credit earned under the GST Act is the property of the taxable person, and therefore, the denial of ITC would be in violation of Article 300A of the Constitution of India. This substantia....
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....ional court. If there is a manifest arbitrariness in the provision itself or the provision is unjust or discriminatory in nature, the said provision can be struck down as being violative of the Constitution. If a taxing statute violates the principle of equality or is discriminately unreasonable and arbitrary, it would be violative of Articles 14 and 19 (1) (g) of the Constitution of India. The condition that unless the return in Form 3B is filed within the stipulated time, the recipient dealer would not be entitled to ITC is arbitrary, unjust, and liable to be struck down. 35. It is also submitted that the supplier dealer acts as an agent of the Government to collect tax from the recipient dealer. The recipient dealer would pay the tax to the supplier dealer while receiving the supply of goods or services from him, and the supplier dealer collects tax on behalf of the Government to be deposited by him with the Government. It is submitted that though the tax has been collected by the Government through the supplier dealer, the ITC would be disallowed to the recipient dealer on the ground that he could not file the return in GSTR-3B on time and did not claim the ITC within the ti....
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....a directory and not mandatory. 39. In the alternative, Dr Pradeep Kumar submits that by Sections 100 of the Finance Act, 2022, Act 6 of 2022, the due date for furnishing of return under Section 39 in the month of September has been substituted with 30th day of November in Section 16 (4). It is submitted that the said substitution should apply retrospectively from 01.07.2017 to 30.11.2022, as it is only a procedural aspect. The amendment has been introduced to ease the difficulties pointed out. In several cases which are pending before the Court, the claim was made before 30th November, but in the relevant period, it was 20th October, which was the due date for furnishing the return under Section 39 for the month of September. It is submitted that if the retroactivity is given to the amended provision, the registered person can overcome the present difficulties. Learned counsel for the petitioners also submitted that this court may read down Section 16 (4) to give effect to the amended provision of providing the 30th day of November for the due date for furnishing the return under Section 39 for the month of September with effect from 01.07.2017, considering the peculiar nature o....
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....nder this Act for payment of tax dues under the Integrated Goods and Services Tax Act in accordance with the provisions of sub-section (5) of section 49, as reflected in the valid return furnished under sub-section (1) of section 39, the amount collected as central tax shall stand reduced by an amount equal to such credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the central tax account to the integrated tax account in such manner and within such time as may be prescribed." 43. In the absence of Section 16 (2) (c) in a case where the inter-state supplier defaults in making payment of tax (SGST+CGST collected) and the interstate supplier is allowed to take credit based on his invoice, the originating State Government will have to transfer amounts it never received in the tax periods in a financial year to the destination States. This would cause loss to the State inasmuch as the originating State would be required to transfer the amount without having received it, and this scenario, in the absence of Section 16 (2) (c), would completely upset the entire tax scheme under the GST laws. 44. It is further submitted that gra....
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....s cannot be said to be a restriction. The estimation of budgetary allocation has to be taken by the Central and State Governments every year, and they are required to pass a budget. There cannot be any uncertainty regarding tax collection, budgetary allocation and estimation of the Central and State Governments. Therefore, the time frame makes it a reasonable mechanism and cannot be said to be in violation of any of the rights of the petitioner as submitted by them. It is further submitted that the time limit for availing the ITC in the GST laws is not a new provision. Different VAT legislations and CENVAT Credit Rules provided time limits to claim eligible ITC. 47. To overcome the initial difficulties at the initial stage of implementation of the GST regime and the large-scale mismatch of outward supply reflected in recipients, GSTR-2A with ITC availed in GSTR-3B returns, the CBIC has issued Circular Nos.183/15/2022 and 193/05/2023, considering that GSTR-2A was not available during the inception of GST. The said circulars cover the period from the inception of the GST regime till the insertion of Section 16 (2) (aa) with effect from 01.01.2022. ITC can be claimed and availed by....
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.... set off is the creation of the statute under the terms and conditions provided by the legislation, which are required to be strictly observed. A registered person cannot claim an entitlement to set off as an absolute right. A dealer would not be entitled to claim set off unless the conditions precedent are met, which are prescribed in the statute. 52. Exemptions, concessions and exceptions are to be treated on par and must be strictly construed. ITC is not a matter of right. To claim the entitlement of ITC, the burden of proof is on the assessee. The assessee must establish the claim for the concession or benefit. Entitlement to ITC is neither a fundamental right nor a Constitutional right. Such entitlement is always subject to statutory prescription and can be regulated by the statute providing conditions and limitations. In support of the said submission, the learned Special Government Pleader has placed reliance on the judgment in Union of India & others V. VKC Footsteps (India) (P) Ltd. [(2022) 2 SCC 603] 53. It is submitted that the heading of Section 16 is the eligibility and conditions for taking ITC. Section 16 (1) provides for entitlement to take input tax credit. I....
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....e Government despite collection from the purchasing dealer. 56. The learned Government Pleader has submitted that there is no force in the arguments of the counsels for the petitioners that Section 16 (2) (c) is in violation of the equality clause as enshrined in Article 14 of the Constitution of India. The concession bestowed under Section 16 (1) is subject to the conditions/restrictions as provided in the Section. The ITC, being a concession/entitlement, can always be subjected to limitations and restrictions as the legislature may think it proper. The restriction placed under Section 16 (2) (c) is to ensure the payment of tax by the supplier to the Government and restrictions as to the time for such availment as contemplated under Section 16 (4) are applicable to all dealers, and therefore, there is no substance in the submissions of the counsel for the petitioners that there is a violation of Article 14 of the Constitution of India. The conditions/restrictions for availing the ITC or claiming of concession to the ITC are applicable to all registered taxpayers to claim the concession of the ITC, and therefore, it cannot be said that there is a violation of Article 14 of the C....
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....has to draw a line somewhere and some cases necessarily fall on the other side of the line. In support of the said submission, the learned Special Government Pleader has placed reliance on Khandige Sham Bhat v. AITO [AIR 1963 SC 591] and the State of Bihar and others v. Bihar Pensioners Samaj [(2006) 5 SCC 65]. 59. Heard Ms. Meera V Menon, Dr K P Pradeep, Mr. K P Abdul Azeez, Mr. Aji V Dev (Sr), Mr. Tomson T Emmanuel, Mr. K S Hariharan Nair, Mr. P N Damoodaran, Mr. A Krishnan, Mr. K N Sreekumaran, Mr. A Kumar (Sr) and Ms. G Mini, learned Counsel for the petitioners; Mr. Mohammed Rafiq learned Special Government Pleader for the State; and Mr. P R Sreejith, learned Senior Standing Counsel for the CBIC. Issues: 60. Having considered the rival submissions of the learned Counsel representing the petitioners, the Central Government, the State Government, and the CBIC, the following issues arise for determination in this batch of writ petitions: I) What are the grounds on which a taxing Statute can be held to be unconstitutional? II) What is the nature of the claim to Input Tax Credit under the scheme of the GST Act and the Rules made thereunder? III) W....
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....Legislature must enjoy a wide and flexible power to enable the Legislature to adjust its system of taxation in all proper and reasonable ways. The Legislature has much wider elbow room in picking and choosing places, objects, persons, methods and even rates of taxation so long as it is done reasonably. A taxing statute cannot be said to be invalid on the grounds of discrimination merely because other objects could have been taxed but are not taxed by the legislature. Similarly, the mere fact that the tax is more on some goods/persons or categories is no grounds to hold the provisions invalid. 64. A Constitutional Bench of the Supreme Court in Vivian Joseph Ferreira v. Municipal Corporation of Greater Bombay [AIR 1972 SC 845] has culled down the principles emanating from several previous decisions to hold a tax to be a valid tax. Paragraphs 14 to 16 of the said decision, which are relevant, are extracted hereunder: "14. The question of validity of taxing statutes has arisen before this Court in a number of cases. The principle emerging from them is that in order that a tax may be valid, it is firstly within the competence of the legislature imposing it, secondly that it ....
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....heavily on some in the same group or category is by itself not a ground for its invalidity, for then hardly any tax, for instance, sales tax and excise tax, can escape such a charge. (Twyford Tea Co. Ltd. v. State of Kerala 1970 (3) SCR 383: (AIR 1970 SC 1133).) 16. Definitions of taxation imply that a legislature can impose a tax for public purposes only. A tax for purposes other than public purposes would constitute taking of property without due process of law within the meaning of the Fourteenth Amendment in the United States. It would be objectionable in this country by reason of Art. 31 (1) of the Constitution. (Cooley on Taxation (4th ed.), Vol.1, 381, 382) Taxation, however, is, nonetheless, for public purpose even if particular persons receive more benefit from the use of the tax proceeds than others. (Ibid 392)." 65. Levy of taxes, the solemn function, is an attribute of sovereignty. It is an unavoidable necessity. No Government can run without tax collection. The tax cannot constitute imposing regulatory restrictions on free trade and commerce. The tax is a compulsory collection by the State to support its welfare activities. Article 265 of the Constitution o....
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.... legislature to levy taxes or enact legislation if the field is reserved for them under the relevant entries of List II and III of the Seventh Schedule. 69. The power to levy tax is a sovereign power controlled only by the Constitution, and any limitation on that power must be express one. Unless and until the Court finds or arrives at a conclusion that the Constitution itself has expressly prohibited legislation on the subject either absolutely or conditionally, the power of the Central/State to enact legislation within its legislative competence is a plenary power. 70. In the case of State of Karnataka v. M/s. M K Agro Tech Private Limited [(2017) 16 SCC 210] it has been held that taxing statutes are to be interpreted literally, and further, it is the legislature's domain as to how the tax credit is to be given and under what circumstances. In paragraph 32, the Supreme Court observed as under: "32. Fourthly, the entire scheme of the KVAT Act is to be kept in mind and Section 17 is to be applied in that context. Sunflower oil cake is subject to input tax. The legislature, however, has incorporated the provision, in the form of Section 10, to give tax credit i....
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....to taxing the raw material purchased outside the State or to taxing the sale of finished goods effected outside the State of Maharashtra. We cannot agree. Indeed, the whole issue can be put in simpler terms. The appellant (manufacturing dealer) purchases his raw material both within the State of Maharashtra and outside the State. Insofar as the purchases made outside the State of Maharashtra are concerned, the tax thereon is paid to other States. The State of Maharashtra gets the tax only in respect of purchases made by the appellant within the State. So far as the sales tax leviable on the sale of the goods manufactured by the appellant is concerned, the State of Maharashtra can levy and collect such tax only in respect of sales effected within the State of Maharashtra. It cannot levy or collect tax in respect of goods which are despatched by the appellant to his branches and agents outside the State of Maharashtra and sold there. In law (apart from Rules 41 and 41-A) the appellant has no legal right to claim set-off of the purchase tax paid by him on his purchases within the State from out of the sales tax payable by him on the sale of the goods manufactured by him. It is only by....
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....er is required to attach the original of the declaration forms on the certificate in the prescribed form received by him from the prescribed dealer along with his return filed by him. We have already extracted Section 13 of the Central Sales Tax Act, which deals with the power of the Central Government to make rules, the form and the manner for furnishing declaration under sub-section (8) of Section 8. Sub-section (3) of Section 13 provides that the State Government may make rules not inconsistent with the provisions of the Central Sales Tax Act, 1956 and the rules made under sub-section (1) to carry out the purposes of the Act. In exercise of the powers conferred by sub-sections (3), (4) and (5) of Section 13 of the Central Sales Tax, 1956, the Government of Karnataka made the Central Sales Tax (Karnataka) Rules, 1957. Under Rule 6 (b) (ii) of the Karnataka Rules, the State Government has prescribed the procedures to be followed and the documents to be produced for claiming concessional rate of tax under Section 8(4) of the Central Sales Tax Act. Thus, the dealer has to strictly follow the procedure and Rule 6 (b) (ii) and produce the relevant materials required under the said rul....
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.... an additional benefit given to dealer for claiming input credit in extended period. The use of the word "shall make the claim" needs no other interpretation." 76. In Union of India & others V. VKC Footsteps (India) (P) Limited [(2022) 2 SCC 603], while considering the issue with respect to the refund of additional ITC, the Rule limited the refund of unutilised ITC to input goods alone. Upholding the aforesaid rule, the Supreme Court held in paragraphs 88 and 90 as under: "88. The jurisprudential basis furnishes a depiction of an ideal state of existence of GST legislation within the purview of a modern economy, as a destination-based tax. But there can be no gain saying the fact that fiscal legislation around the world, India being no exception, makes complex balances founded upon socio-economic and concession of ITC is available on certain conditions, and observed as under: "11. From the aforesaid scheme of Section 19 the following significant aspects emerge: (a) ITC is a form of concession provided by the legislature. It is not admissible to all kinds of sales and certain specified sales are specifically excluded. (b) Concession of ITC i....
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....t hues. Given these intrinsic complexities, the legislature has to draw the balance when it decides upon granting a refund of accumulated ITC which has remained unutilised. In doing so, Parliament while enacting sub-section (3) of Section 54 has stipulated that no refund of unutilised ITC shall be allowed other than in the two specific situations envisaged in clauses (i) and (ii) of the first proviso. Whereas clause (i) has dealt with zero-rated supplies made without the payment of tax, clause (ii), which governs domestic supplies, has envisaged a more restricted ambit where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. While the CGST Act defines the expression "input" in Section 2 (59) by bracketing it with goods other than capital goods, it is true that the plural expression "inputs" has not been specifically defined. But there is no reason why the ordinary principle of construing the plural in the same plane as the singular should not be applied. To construe "inputs" so as to include both input goods and input services would do violence to the provisions of Section 54 (3) and would run contrary t....
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....ler is in the nature of concession or entitlement, which is not an absolute right and is subject to the conditions and restrictions as per the scheme of the GST legislation. This Court, therefore, does not find substance in the submissions of the learned Counsel for the petitioners that Section 16 (1) of the GST Act provides an absolute right to claim Input Tax Credit and conditions in sub-section (2) of Section 16 cannot take away the right conferred under sub-section (1) of Section 16. Issue No. III Whether Section 16 (2) (c) and Section 16 (4) of the CGST/SGST Act infringe the Constitutional provisions and are unsustainable? 78. The Supreme Court in Reserve Bank of India v. Peerless General Finance and Investments Co. Ltd & Others [(1987) 1 SCC 424] in paragraph 37 has held that the text and context of a taxing statute cannot be construed in isolation. The context and scheme of the Statute give meaning, and therefore, the same has to be taken into consideration while interpreting a Statute. Paragraph 37 of the said judgment is extracted hereunder: "37. We would also like to query what action of Reserve Bank of India and the Union of India are taking or proposin....
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....n, removing cascading effect irrespective of the destination, be it an intra-state or inter-state supply. The dual VAT system with uniform rates, simultaneous levy by the Centre and the States, and a unique IGST model ensures this destination-based tax compliance in all parts of India. The GST system minimises the disadvantages of entirely independent (erstwhile State VAT laws) and completely centralised systems. The flow of ITC, along with the supply chain of registered persons, ensures removing the cascading effect on one hand and the tax collection by a self-assessment method in every tax period on the other hand. It has to happen simultaneously in a financial year. 80. In Willowood Chemicals v Union of India [2018 58 GSTR 310 (Guj)], it has been held that granting tax credit cannot be allowed to linger on indefinitely, for it would impact revenue collection for each financial year and budgetary allocations and, in rem, revenue deficit. Paragraphs 30 and 35 of the said judgment are extracted hereunder: "30. Issue can be looked at from slightly different angle. Granting tax credit is an integral part of computation and collection of tax. Tax collection is an important....
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.... the Act also provides that only tax collected and paid to the government could be given as input tax credit. When the Government has not received the tax, a dealer cannot be given an input tax credit. It may be seen that under the various State VAT laws, the twin requirements were provided for granting ITC: (a) it was aimed to remove the cascading effect, and (b) collection of Tax for each financial year. The State legislations had to balance this linear bar. Under the VAT law, the ITC did not cross the originating State. The Central Sales Tax levied on inter-state sale of goods was assigned to the original State. 82. Under the GST regime, the tax collected has to be assigned to the jurisdiction where the consumption takes place. The ITC, therefore, crosses a State during inter-State supplies. Now, the scheme of the Act prescribes the conditions, restrictions, time limit, and the manner for availing the ITC and all together form the legal fulcrum that balances three requirements: (a) granting of ITC for removing cascading effect, (b) achieving collection of tax by self-assessment method for each financial year, and (c) ITC transfer compliance to the d....
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.... limits for ITC and time-bound tax collection in a financial year can be substituted or replaced with recovery actions against defaulters, the outcome of which is uncertain and not time-bound. 86. Section 16 of the CGST Act and Rules made thereunder provide conditions, restrictions, time limits and manners for availing the Input Tax Credit, which is a self-monitoring and self-policing provision. In order to claim ITC, each registered person has a reason and incentive to request documentation and tax payment compliance from the person behind him in the value-added tax chain to ensure that the ITC chain is not broken. A new provision, Section 16 (2) (aa), stands introduced with effect from 01.01.2022, providing for communication of the matching of the recipient's invoice with suppliers and outward supply via GSTR-2A/2B. With effect from 01.10.2022, Section 38 stands substituted with a provision for auto-generated statement GSTR 2B, indicating eligible and ineligible credits in respect of the inward supply. Section 41 is also substituted providing for reversal and re-availing of credit. Prior to that, the unamended Section 41, now substituted, provided that the supplier can take on....
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....ation of the declarations and returns submitted/filed by the registered person. 34. Section 16 of the 2017 Act deals with eligibility of the registered person to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. The input tax credit is additionally recorded in the electronic credit ledger of such person under the Act. The "electronic credit ledger" is defined in Section 2(46) and is referred to in Section 49 (2) of the 2017 Act, which provides for the manner in which ITC may be availed. Section 41 (1) envisages that every registered person shall be entitled to take credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger. 35. As aforesaid, every assessee is under obligation to self-assess the eligible ITC under Section 16 (1)and 16 (2) and "credit the same in the electronic credit ledger" defined in Section 2(46) read with Section 49 (2) of the 2017 Act. Only thereafter, Section 59 steps in, whereunder the registered person is obliged to self-assess the tax....
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....clause (ii) of the proviso, based on a circular which has been issued by the Ministry of Finance on 31 December 2018. In substance, the argument boils down to an effort to lead this Court to hold that in spite of the language which has been used in clause (ii) of the first proviso (where the credit is accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies), input services must be read into the term "inputs". The assessees argue that the Departmental understanding, as reflected in the circular, should be the basis of interpreting a statutory provision. Such an exercise would be impermissible, when its effect is to expand the area of refund contemplated by the first proviso to cover input services in addition to input goods despite statutory language to the contrary. Sub-Section (3) of Section 54 begins, in its main part, with the stipulation that a registered person may claim refund of any 'unutilised ITC at the end of any tax period'. Whether we construe the first proviso as an exception or in the nature of a fresh enactment, the clear intent of Parliament was to confine the grant of refund to the two categories spelt out in clauses....
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....gislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Parliament has confined the refund in the manner which we have described above. While recognizing an entitlement to refund, it is opened to the legislature to define the circumstances in which refund can be claimed. The proviso to Section 54 (3) is not a condition of eligibility (as the assesses's counsel submitted) but a restriction which must governed the grant of refund under Section 54 (3). we therefore, accept the submission which has been urged by Mr. N. Venkataraman, learned ASG. 90. Thus, the non-obstante clause in the negative sentence in Section 16 (2) restricts the eligibility under Section 16 (1) for entitlement to claim ITC. Section 16 (2) is the restriction on eligibility and Section 16 (4) is the restriction on the time for availing ITC. These provisions cannot be read to restrict o....
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....cate that the said provision should prevail despite anything to the contrary in the provision mentioned in such non-obstante clause. "Hence unless such clear inconsistency is established, overriding effect cannot be given over other provisions. In the present case both Section 16 (2) and (4) are two different restricting provisions, the former providing eligibility conditions and the later imposing time limit. However, both these provisions have no inconsistency between them. In R.S. Raghunath, the Apex Court further observed thus: "But the non-obstante clause need not necessarily and always be co-extensive with the operative part so as to have the effect of cutting down the clear terms of an enactment and if the words of the enactment are clear and are capable of a clear interpretation on a plain and grammatical construction of the words the non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting....
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....e furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. This entitlement of ITC is, however, subject to :- (a) such conditions and restrictions as may be prescribed and, (b) in the manner specified in Section 49. 23. Sub-section (2) of Section 16 is a non obstante clause and clearly states that no registered person shall be entitled to the credit of input tax in respect of any supply of goods or services or both unless he fulfills the requirements and satisfies the existence of other conditions prescribed in Clauses (a) to (d) thereof. 24. Sub-section (3) of Section 16 contemplates yet another circumstance when ITC on tax component cannot be allowed, i.e., where the registered person has claimed depreciation on the tax component of cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961. 25. Lastly comes the offending clause which is under challenge i.e. sub-section (4) of Section 16 of the CGST/BGST Act, which, in no unambiguous terms, provides that a registered person shall not be entitled to take ITC in respect of any invoice or debit no....
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....s relation to physical thing, as right to possess, use and dispose of it in accordance with law. In Ramanatha Aiyar's The Law Lexicon, Reprint Edn., 1987, at p. 1031, it is stated that the property is the most comprehensive of all terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have. The term property has a most extensive signification, and, according to its legal definition, consists in free use, enjoyment, and disposition by a person of all his acquisitions, without any control or diminution, save only by the laws of the land. In Dwarkadas Shrinivas case [1950 SCC 833 : 1950 SCR 869 : AIR 1951 SC 41] this Court gave extended meaning to the word property. Mines, minerals and quarries are property attracting Article 300-A. 28. Upon close reading of sub-section (1) of Section 16 of the CGST/ BGST Act, we are of the view that the provision under sub-section (4) of Section 16 is one of the conditions which makes a registered person entitled to take ITC and by no means sub-section (4) can be said to be violative of Article 300-A of the Constitution of India. 29. We are not convinced with the subm....
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....wed failing which there can be no benefit conferred on the assessee. The benefit is one conferred by the statute and if the conditions prescribed in the statute are not complied; no benefit flows to the claimant. 12. The contention of double taxation does not impress us especially since the claim is denied only when the supplier who collected tax from the purchaser fails to pay it to the Government. Taxation as has been held is a compulsory extraction made for the purpose of public good, by the welfare State and without the levy being paid to the Government; there can be no claim raised of the liability to tax having been satisfied and hence there is no question of double taxation. 13. The further contention raised by the assessee is also one of the statute having provided measures to recover the collected tax, which the selling dealer fails to pay to the Government. The mere fact that there is a mode of recovery provided under the statute would not absolve the liability of the tax payer to satisfy the entire liability to the Government. The purchasing dealer being the person who claims Input Tax Credit could only claim the Input Tax benefit if the supplier who co....
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.... Act, 2002, and upholding its constitutionality held that set off is impermissible without any tax being received into the Government treasury. It has been held that set off would be available where the tax has been deposited in the treasury and to that extent, the entitlement to set-off is created by the statute, in terms of which the set-off is granted under the legislation must be strictly observed. 96. Subsection 48 of the Maharashtra Value Added Tax Act, 2002 would read as under: "48. Set-off, refund, etc.:- (1) The State Government may, by rules, provide that,- (a) in such circumstances and subject to such conditions and restrictions as may be specified in the rules, a set-off or refund of the whole or any part of the tax,- (i) paid under any earlier law in respect of any earlier sales or purchases of goods treated as capital assets on the day immediately preceding the appointed day or of goods which are held in stock on the appointed day by a person who is a dealer liable to pay tax under this Act, be granted to such dealer; or. (ii) paid in respect of any earlier sale or purchase of goods under this Act be granted to the purch....
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.... the said goods effected by him : Provided that, where tax levied or leviable under this Act or any earlier law is deferred or is deferrable under any Package Scheme of Incentives implemented by the State Government, then the tax shall be deemed to have been received in the Government Treasury for the purposes of this sub-section. (6) Where at any time after the appointed day, a dealer becomes entitled to a refund whether under any earlier law or under this Act, then such refund shall first be applied against the amount payable, if any, under any earlier law or this Act and the balance amount, if any, shall be refunded to the dealer." 97. Paragraph 38 of the judgment of Mahalaxmi Cotton Ginning Pressing (supra) is extracted hereunder: - 38. Section 48 (5) uses the expression "actually paid" into the Government treasury. The words "actually paid" must receive their ordinary and natural meaning. A set off under Section 48 (5) would be allowable only to the extent of the tax, if any, that has been actually paid into the treasury in respect of the purchase tax paid on the same goods. The use of the word "actually" in conjunction with the word "paid" leaves....
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....from the introduction of GST till Section 16 (2) (aa) was introduced with effect from 01.01.2022. The ITC can be availed by the recipient for the bona fide scenarios listed in those Circulars on submitting proof of payment to the Government by the supplier. Therefore, if, during the pendency of these writ petitions, the petitioners who could have got the benefits of these Circulars and could not avail the benefits within the time limit prescribed, may approach the appropriate GST authority within a period of thirty days from today to avail the benefit of the aforesaid Circulars, if the same is/are applicable to their case. The GST authorities will examine the claim of the individual dealer by applying the provisions of the Circulars, and it will grant applicable relief to eligible dealers. 100. Prior to the amendment in Section 39 by the Finance Act 2022, the date for furnishing the return under Section 39 was 30th September. Considering the difficulties in the initial stage of the implementation of the GST regime, its understanding, and compliance, the Legislature effected the amendment and extended the time for filing the return for September to 30th November in each succeedin....