TaxTMI 
TaxTMI 
2024 (11) TMI 978
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.... D Submissions on behalf of the Petitioner 45 - 59 E Submissions on behalf of Respondent No. 3 60 - 66 F Submission on behalf of Respondent No. 1 67 G Submissions on behalf of Respondent No. 2 68 - 72 H Rejoinder Submission on behalf of the petitioner 73 - 75 I Discussion and Conclusion. 76 - 127 1. Rule, made returnable forthwith. Respondents waive service. By consent of the parties, heard finally. A. Introduction :- 2. The petitioner a consortium of two entities was awarded a contract by the Mumbai Metropolitan Development Authority (MMRDA) a project of public importance, namely the "Mumbai Trans Harbour Link Project", which involved construction of the longest bridge of 22 kms on the ocean connecting South Mumbai and Nhava-Sheva in Navi Mumbai. It is under such contract disputes have arisen on the application of the provisions of the Central Goods and Services Tax Act, 2017 (for short "CGST Act") as also the corresponding provisions of the Maharashtra Goods and Services Tax Act, 2017(for short "MGST Act") inter alia in regard to the petitioner's claim in regard to the input tax credit being not granted to the petitioner....
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.... from the pleadings, the factual antecedents under which the controversy arises needs to be illustrated :- The petitioner is an unincorporated consortium of two entities, namely, Larsen and Toubro Ltd. (L&T) and IHI Infrastructure Systems Co. Ltd., Japan (IHI). On 4 January, 2017, the Mumbai Metropolitan Region Development Authority (for short "MMRDA") invited tender for procurement and construction of a bridge for the "Mumbai Trans Harbour Link (MTHL) Project" (for short "the project"). The project was being funded by the Japan International Co-operative Agency. The petitioner was formed as an unincorporated consortium of L&T & IHI, "solely to bid for" and if successful, execute the project. The petitioner was a successful bidder. A letter of acceptance was issued to the petitioner by MMRDA on 17 November, 2017. A Consortium Agreement dated 22 December, 2017 was entered into between L&T and IHI. Thereafter, a Contract Agreement dated 26 December, 2017 was entered between MMRDA and petitioner. 5. The petitioner, as also the consortium members of the petitioner obtained registration under the GST laws, in compliance with the GST provisions. For the execution of the proje....
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..... The petitioner contends that the entire amount received by the petitioner from MMRDA as an advance/loan was to be recovered from the bills to be raised by the petitioner in the course of execution of the contract. 9. The petitioner contends that on receipt of such advance, the petitioner in turn remitted the said amounts to its constituent L&T together with GST of Rs. 32.02 crores. L&T thereupon issued a "Receipt Voucher (RV)" dated 28 March, 2018 indicating the amount received and the GST. Under the contract, such sequence was repeated for the next tranche of advance/loan granted to the petitioner by the MMRDA, this time an amount Rs.32.62 crores (approx) was disbursed to the petitioner in September 2018 and the same was transferred to the petitioner's constituent L&T. Such amount of Rs.32.62 crores was treated, accounted and remitted to the GST Department similar to the first tranche, Receipt Vouchers were issued by the petitioner to MMRDA and by L&T to the petitioner. 10. On the aforesaid backdrop, the case of the petitioner is that the petitioner was precluded from availing of the Input Tax Credit (ITC) of the GST paid to L&T (its constituent) for the reason that Sectio....
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....itioner contends that, hence, the petitioner is required to pay GST on the advances/loan received from the contractee/government entity. It is also required to reimburse tax on the advances/loan extended by it, in turn to its constituents. However, the petitioner is precluded from taking credit of this tax amount reimbursed by it, as a result, it ends up with an additional cash flow of Rs.10 crores thereby resulting in the government receiving tax on 110% of the contract value of Rs. 1000 crores. 14. In such circumstances the petitioner has contended that the government thus collects Rs. 110 crores as tax, while plainly only Rs.100 crores ought to have been collectible, being GST of 10% on the contract value of Rs.1000 crores. This, according to the petitioner, is due to the said arbitrary provisions of the GST Acts. 15. The petitioner contends that what is more concerning is the refund of unutilized input tax credit of Rs.10 crores, which becomes available once project work commences and which remains unutilized even after completion of the project, being denied to the petitioner by virtue of the proviso to Section 54 (3) of the CGST Act, since refund of unutilized ITC is re....
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.... to supplies "agreed to be made", as being ultra vires the provisions of Article 246A read with Article 366 (12A) and violative of Articles 14, 19(1) (g), 265 and 300A of the Constitution of India; c. in the nature of a Writ of declaration, declaring the provisions of section 16 (2) (b) of the CGST Act, and provisions of section 16 (2) (b) of the MGST Act as being contrary to the provisions of section 13 (2) and the Explanation thereto of the CGST Act and to provisions of Section 13 (2) and the Explanation thereto of the MGST Act, respectively, and as being arbitrary, unreasonable, discriminatory and violative of the provisions of Articles 14, 19 (1) (g), 265 and 300A of the Constitution of India; d. in the nature of a Writ of declaration, declaring that input tax credit may be availed under section 16 of the CGST Act, and under section 16 of the MGST Act, on the basis of a receipt voucher issued under Section 31 (3) (d) of the CGST Act and section 31 (3) (d) of the MGST Act respectively, notwithstanding the non-inclusion of receipt voucher under Rule 36 of the CGST Rules, 2017 and under Rule 36 of the MGST Rules, 2017 respectively; e. in the nature of a ....
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.... mobilization" and not loan. In such context, Section 76 (1) of the CGST Act has been referred which begins with a non-obstante clause inter alia providing that 'every person who has collected from any other person any amount as representing the tax under the said Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not'. 19. It is hence contended that if the amount received by the petitioner was loan as claimed by the petitioner, in that case there would be no taxable service as 'loan' is not included in definition of 'services' under clause 102 of Section 2 of the CGST Act. In such event, such activity would not qualify as "input services" for the Company. It is contended that for such reason, the petitioner would not be eligible to take Input Tax Credit on the amount of GST paid by it to L&T. It is next contended that in case, if such activity was loan as claimed by the petitioner i.e. non-taxable service, then the provisions of Sections 7, 12, 13, 16 and 54 of the CGST Act read with Rule 36 of the CGST Rules are not appl....
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....o tax the intra-state supplies of services, as per the provisions of Section 9 of the CGST Act. It is contended that the petitioner is neither an exporter nor covered by inverted duty structure as enumerated in Section 54 of the CGST Act and therefore, is not entitled for refund as per law. 22. It is next contended that the amount which was claimed as refund was paid in cash against output liability on advances received and that there was no cash balance at the end of December, 2018, thus, the reasons mentioned in the refund application that the petitioner has paid GST on the advance received, on which the joint venture partner-Larson & Toubro has also paid GST, which tantamounts to excess payment of GST to the Government is not a tenable proposition. It is lastly contended that the upfront amounts received by the petitioner from the MMRDA were advance for mobilization and not loan and hence, were clearly hit by the provisions of Section 76 (1) of the CGST Act. It is contended that if such activity was loan as claimed by the petitioner, then there would be no taxable service, for the reason that 'loan' is not included in definition of 'services' under clause 102 of Section 2 of ....
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.... scope of supply any agreement to supply, as the tax is not being levied on the agreement of supply but on receipt of payment. It is contended that the provisions of Section 7 and Section 13 are read together to understand the net effect and to examine validity or provisions of the Act. It is contended that the combined effect of Section 7 and Section 13 is that the supply includes agreement to supply but tax is not levied on such agreement but on receipt of payment under the Contract as provided under Section 13 of the GST Act. Hence, there is no lack of authority or competence on levy of tax on receipt of payment under an agreement to supply. 25. Insofar as the petitioner's case that Clause 14.2 of the Contract Agreement uses the word "Loan", it is contended that it is essentially advance payment for adjustment against the future running bills. It is stated that in any event it is well settled that nomenclature of transactions is not relevant and it is to be construed on the nature of transaction. 26. Insofar as the case of the petitioner on refund is concerned, it is contended that the petitioner has already availed of a remedy of making a refund application, which has bee....
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...." on the same and in these circumstances, the GST amount was remitted to the government. The petitioner's case however is that the payment being a loan, no GST is payable on the same, and hence even in the unlikely case of the challenge herein to the provisions of Sections 7, 13, 16 (2) (b) not succeeding, no tax would be payable on the same and refund would be due is the case before the statutory authorities, earlier in adjudication and now in appeal. It is contended that the petitioner's case in these Writ Petitions is the challenge to the above provisions, and that even if the payment were to be construed as an advance, no tax can be constitutionally collected on the same, that is, without the happening of the taxable event. In the alternative, it is contended that where the taxable event is treated as having happened by way of statutory fiction, then such fiction cannot be arbitrarily curtailed, but has to be given its full effect upon which ITC would be available immediately upon the tax being remitted on the advance, notwithstanding the non-inclusion of receipt voucher by the rule-making authority under Rule 36 of the CGST Rules. It is contended that the tax on supply....
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....is not the case of accumulation of ITC, rather it is a refund of output tax on the ground that it is not a taxable transaction and/or that it amounts to double taxation. Hence, the application is under the head 'any other' category. It is contended that Section 54 (3) is unconstitutional as it does not take into account the issues which are itself created by the legislation. It is therefore contended that it is no answer to the challenge to the constitutionality to say that Section 54 (3) caters only to two situations. 33. It is next contended that where there is no definition of "supply", the legislature is bound by the ordinary meaning of the word and cannot seek to enlarge the definition by creating a fiction. It is also contended that the Constitution enables levy of tax on "supply of services" and not on "receipt of payment". In other words, the taxable event is the supply and not receipt of payment. It is contended that it is not permissible for the legislature to alter the taxable event. 34. It is next contended that the respondent ought not to conflate between the wording of the provisions, the constitutionality of which is challenged by the petitioner and as ....
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....however, for availment of ITC, supply is said to be made only upon actual rendition of supply and availment of ITC is curtailed until then (notwithstanding that payment has been made and GST thereon remitted). This is contended to be patently arbitrary and unreasonable. 36. It is next contended that the amount of loan is paid as a percentage of the contract amount and since the contract amount is inclusive of tax, the amount received towards loan, was inclusive of tax, and therefore, the GST had to be 'back-worked'. It is contended that subsequently, when the petitioner came to understand that the loans did not fall within the GST net at all, refund applications were made. It is stated that this upfront loan, including the GST thereon, is to be recovered by MMRDA from the stage-wise payments and thus there is no question of unjust enrichment of the petitioner. It is next stated that the petitioner, by abundant caution, has also issued credit notes to MMRDA with regard to the GST portion. It is stated that in any case, the fact that GST was paid voluntarily cannot be put against the petitioner. As the issue is whether in law, the respondents are entitled to levy GST on th....
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....n fact done at such later time cannot preclude a claim for the delay especially when such delay causes prejudice, notwithstanding the fact that ITC may have been taken at a later point in time; further such prejudice continues which forms the subject matter of challenge of Section 54 of the CGST Act. It is contended that the denial of ITC upon payment of tax results in excess payment of tax has been explained by the petitioner in its pleadings. It is contended that even if ITC was substantively available upon payment of tax, its benefit could not be taken because of a procedural roadblock in Rule 36 of the CGST Rules, i.e. ITC could be taken only based on invoice and not based on a 'receipt voucher' which is the document required to be issued for advance payments. The constitutionality of the same is challenged by the petitioner. 40. It is next contended that since ITC was denied at the relevant time, it results in accumulation of ITC. However, Section 54 precludes refund of such accumulated ITC. Hence, the constitutionality of the relevant portion of Section 54 too is challenged. In conclusion, it is contended that the Writ Petition challenges the constitutional validity of the....
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....t-free loan has been challenged, the petitioner has abstained from adjusting the GST paid on the loans against invoices raised for supplies effected thereafter. It is submitted that it can be evidenced from GSTR-1 filed by the petitioner wherein Column 11 (b) adjustment has not been done till date which was verified by the department when the refund application has been filed. For such reason, there is no question of the Writ Petition becoming infructuous. 42. In regard to the issue regarding taking/utilization of ITC, without prejudice to its contentions on the constitutionality of the provisions of GST as assailed, it is the petitioner's case that the petitioner invoices and receives payments from MMRDA for the MTHL project. For the execution of the project, the petitioner has a back-to-back agreement with its constituents (M/s L&T Ltd, India and M/s IHI Infrastructure Systems Co Ltd, Japan). Thus, whatever payment + GST the petitioner receives from MMRDA (including loans/advances) is made over to the petitioner's constituents. Therefore, whatever GST is paid as input tax to the constituents is available as ITC and matches with, and is utilisable for, the payment of the pe....
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....he sum of Rs 64.64 crores thus continues as receivable in the books of the petitioner and the petitioner continues to be prejudiced to that extent. 44. In conclusion, it is submitted that the fact of ITC being originally precluded on the loan/advance, though allowed to be taken proportionately at the time of each stage-wise invoice, prejudices the taxpayer for the reason that if the output tax is not so reduced, while the ITC becomes fully utilisable against such full output tax, this results in excess output tax having been paid, thus the claim of the petitioner for refund. Further, if the output tax is reduced proportionately, this leads to accumulation of unutilized ITC, for which no refund is available as per Section 54 of CGST Act. It is thus submitted that either way, the petitioner is prejudiced and thus the petition ought to be allowed by holding that the petition has not become infructuous. D. Submissions on behalf of the Petitioner:- 45. Mr. Arvind Datar, learned Senior Counsel for the petitioner has made the following submissions in support of the reliefs prayed by the petitioner:- 46. Larsen & Toubro Ltd. and IHI Infrastructure Systems Co. Ltd., Japan (for s....
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....plained in a table which reads thus:- S.No Particulars Amount (Rs. Crores) BEFORE PROJECT WORK COMMENCES 1. Payment under Cl.14.2 by MMRDA to the Consortium 100 2 GST thereon @ 12% [Consortium's OUTPUT TAX] 12 3 Amt paid by MMRDA to the Consortium 112 4 Consortium's output tax to be remitted (in cash or by ITC) by the Consortium to the Govt. 12 5 Back-to-Back payment by Consortium to L&T/IHI 100+12 GST 6 Consortium's INPUT TAX from sl. No. 5, denied as ITC until Consortium receives service from L&T/IHI 12 7 Thus, output tax under sl.no. 4 is remitted in cash 12 AFTER PROJECT WORK COMMENCES 8 Aggregate of subsequent payments by MMRDA to the Consortium (net of recovery of Cl.14.2-payments) 900+108 GST 9 Consortium's output tax to be remitted (in cash or by ITC) by the Consortium to the Govt. 108 10 Aggregated of subsequent back-to-back payments by the Consortium to L&T and IHI (net of recovery of cl. 14.2-payments) 900+108 GST 11 Consortium's INPUT Tax (sl.No.10), available as ITC 108 12 Thus, output tax under sl. no.9 is remitted thru ITC ....
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....rtium members=Rs. 120 crores From Consortium as per sl. No. 7 in the table = Rs. 12 crores. 132 This being the petitioner's challenge in prayer clause (d). 50. On the petitioner's challenge to the constitutional validity of the provisions of Section 7 in prayer clause (a), it is submitted that Article 246A of the Constitution provides for levy of "goods and services tax" which is defined in Article 366 (12A) of the Constitution to mean "tax on supply of goods or services or both". It is submitted that the plain reading of Article 246A read with Article 336 (12A) would show that GST can be levied only on supply of goods and not on 'future supplies', as contemplated by Sections 7, 12 and 13 of the CGST Act. The latter two provisions fix the time of supply as earlier of receipt, invoice or actual supply. It is thus submitted that Section 7 defines supply to include "supplies to be made" is ultra vires the provisions of Article 246 read with Article 366 (12A) and Article 265 of the Constitution. 51. In such context, it is further submitted that the CGST Act tacitly recognizes that supply ought to have been made for GST to be levied, and hence, the legal fiction in the "E....
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....f services, as GST is levied on both. It is submitted that all the statutory provisions towards supply of goods and supply of services are treated at par throughout the Act and the Rules made thereunder. Thus, granting of exemption only for supply of goods with reference to Section 12 (2) (b) and denying the same for services under Section 13 (2) (b) is violative of Article 14 of the Constitution of India. It is hence submitted that as the levy of tax on "supply to be made" is unconstitutional, the petitioner is consequently entitled to refund of the amounts paid. 54. Insofar as prayer clause (c) is concerned, namely substantive denial of benefit of 'input tax credit' (ITC), it is submitted that Section 13 (2) (b) read with the 'Explanation' thereto creates a legal fiction whereby supply is deemed to have been made on the date of receipt of payment. Thus, the liability to pay the tax arises simultaneously at the time of payment. It is submitted that, however, Section 16 (2) (b) provides that ITC cannot be claimed unless supply is received. It is submitted that this is plainly arbitrary and creates a serious hardship because the supplier is unable to utilize the ITC towards any o....
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....nswered in favour of the petitioner, this would mean that Section 7 (1) (a) can levy GST on "supplies agreed to be made". This would, in turn, mean that tax could be levied simply upon an agreement with consideration, even without the actual receipt of such consideration. Thus, there is no necessity for a legal fiction to provide that the supply is deemed to be made to the extent of receipt. In other words, the only purpose / aim of such a fiction would be to facilitate the taking of ITC by stipulating the fulfillment of Section 16 (2) (b) through the fiction. 58. Insofar as the challenge raised in prayer clause (c) is concerned, it is submitted that there cannot be a procedural denial of ITC. In such context, the submission is that even proceeding on the basis that ITC of the GST remitted on advance payments for services is available, it is submitted that the receipt voucher which is the document required by Section 31 (3) (d) in respect of an advance, has not been specified under Rule 36 of the CGST Rules as a document based on which ITC can be taken. It is submitted that Rules cannot take away what a Statute provides. It is also settled that tax credit cannot be denied becaus....
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....ses (a) and (b) of sub-section (2), the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment; and the other clauses of the explanation, which according to her, would justify the tax being required to be deposited in case, when the payments were made by the MMRDA to the petitioner-consortium, however, the benefit of deposit of such tax would not be to the benefit of the petitioner, to claim ITC, considering the provisions of section 16 (2) (b). In supporting such contention, reliance is placed on the reply affidavits filed on behalf of respondent No. 3. 62. Ms. Cardozo would next submit that the writ petition be held to be not maintainable as the same has been filed by the petitioner without fully exhausting the alternate remedy of an appeal as availed by the petitioner which is pending adjudication. It is hence submitted that on such count the petition needs to be dismissed. Ms. Cardozo in support of her submission has placed reliance on the decision of the Supreme Court in Union of India vs. V.K.C. Footsteps India Private Ltd. (2022) 2 SCC 603. Ms. Cardozo submits that Supreme Court in paragraph 110 of this deci....
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....sion on the contention of the petitioner that advance payment is treated as an interest free loan. However, the petitioner has submitted that this issue will be raised by them in the statutory appeal and, therefore, is not pressed for in the present proceedings. F. Submissions on behalf of Respondent No. 1 :- 67. Mr. D. P. Singh, learned counsel for respondent No. 1 has adopted the submissions as made by Ms. Cardozo on behalf of the GST Council. G. Submissions on behalf of Respondent No. 2 :- 68. Mr. Sonpal, learned Special Counsel for respondent Nos.2 - State Authorities has made the following submissions: 69. At the outset, it is submitted that the petitioner has applied for refund of unutilized ITC which was rejected and an appeal against the rejection order is pending, however, the petitioner, in these circumstances, has challenged the vires of the provisions of the CGST Act and the Rules, which, according to the petitioner, is outside the scope of the appeals which are pending, hence, such challenge can be raised by the petitioner after the pending appeals are decided. It is contended that at the material point of time, it could be assumed that ITC was not avail....
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....s submitted that the petitioner has suffered from its own short falls, as there is no clock back, hence, ITC cannot be availed after filing returns from September of next financial year. Referring to the decision in R. K. Garg vs. Union of India (1981) 4 SCC 675, it is submitted that it is settled law that in a fiscal Statute, a larger latitude is given to the Government to frame the enactment. In support of his submission, reliance is placed on the decision of the Supreme Court in State Of M.P vs. Rakesh Kohli & Anr. AIR 2012 SC 2351. H. Rejoinder Submission on behalf of the petitioner :- 73. Section 54 (3) deals with ITC whereas the petitioner is challenging the vires and refund of output tax liability and, therefore, the decision in case of Union of India vs. VKC Footsteps India Private Limited 2021 (52) GSTL 513 (SC) is not applicable. 74. As merely because Article 366 (12A) excludes alcoholic liquor, it cannot be contended that the respondents can levy tax on future supplies also. Section 13 (2) deems to have been rendered in case of advance receipt but the same is contrary to Article 366 (12A) which speaks only on supply of goods and not on future supplies. The defin....
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....the Contractor submits a guarantee in accordance with this Sub-Clause. The total advance payment, the number and liming of installments (if more than one), and the applicable currencies and proportions, shall be as stated in the Contract Data. Unless and until the Employer receives this guarantee, or if the total advance payment is not stated in the Contract Data, this Sub-Clause shall not apply. The Engineer shall deliver to the Employer and to the Contractor an Interim Payment Certificate for the first installment after receiving a Statement (under Sub-Clause 14.3 [Application for Interim Payment Certificates] and after the Employer receives (i) the Performance Security in accordance with Sub-Clause 4.2 [Performance Security] (ii) a guarantee in amounts and currencies equal to the advance payment. This guarantee shall be issued by an entity and from within a country (or other jurisdiction) approved by the Employer, and shall be in the form annexed to the Contract Data or in another form approved by the Employer. The Contractor shall ensure that the guarantee is valid and enforceable until the advance payment has been repaid, but its amount may be progre....
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....ts which shall include the relevant report on progress in accordance with Sub-Clause 4.21 [Progress Reports). The Statement shall include the following items, as applicable, which shall be expressed in the various currencies in which the Contract Price is payable, in the sequence listed: (a) the estimated contract value of the Works executed and the Contractor's Documents produced up to the end of the month (including Variations but excluding items described in sub-paragraphs (b) to (g) below); (b) any amounts to be added and deducted for changes in legislation and changes in cost, in accordance with Sub-Clause 13.7 (Adjustments for Changes in Legislation) and Sub-Clause 13.8 (Adjustments for Charges in Cost); (c) any amount to be deducted for retention, calculated by applying the percentage of retention stated in the Contract Data to the total of the above amounts, until the amount so retained by the Employer reaches the limit of Retention Money (if any) stated in the Contract Data; (d) any amounts to be added and deducted for the advance payment and repayments in accordance with Sub-Clause 14.2 [Advance Payment]; ....
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....ayment Certificates and a statement to that effect to be submitted by the petitioner to the MMRDA. This statement inter alia includes "any amounts to be added and deducted for the advance payment and repayments in accordance with sub-clause 14.2 (advance payment)". 80. Thus, although under clauses 14.2 the nature of the payment is an advance payment and in a given situation could be treated as an interest free loan for mobilization and design, however, merely because clause 14.2 labels such advance payment as interest free loan, whether in the present facts and more particularly considering the manner in which the parties acted upon under the said clause, the factual scenario whether would regard the nature and character of such payment did not attract payment of GST. Such aspect needs to be examined. This more particularly for two fold reasons, firstly that clause 14.2 read with clause 14.3 indicates that the advance payment does not simplicitor remain to be "an interest free loan" as the advance payment is permitted to be proportionately deducted, as it forms part of the contract amount which becomes payable by MMRDA (employer) to the contractor (petitioner). Also clause 14.2 ....
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....DA/ENG1/000752 dated 26^th Dec 2017 Adv. Receipt No: 001 Project ID No: ID-P 255 Date: 6/Mar/2018 IICA Concurrence No: ID-P 255/C - 002 for INR and JPY Portion ID-P 255/C 006 for USD Portion ID-P 255/C 005 for EURO Portion Detail of Employer: Detail of Contractor INTERIM PAYMENT Mumbai Metropolitan Region Development Authority (MMRDA) Name: L&T-IHI Consortium PAN: AAATM7106R PAN: AABAL5822F TAN: MUMM16747D TAN: MUML10837B GSTIN: Mobilization advance Payment Certificate Top Sheet GSTIN: 27AABAL5822F1ZS Address: 2^nd Floor, New Office Building, Plot No. R-05, R-06 & R-12, E - Block, Bandra Kurla Complex, Bandra (E), Bandra, Mumbai, Maharashtra, India 400051. Local Address: L&T - IHI Consortium C/o Larsen & Toubro Limited, Landmark 'A' wing 5^th Floor, Suren Road, Andheri East, Mumbai:-400093 Detail of Engineer: Name: Dr. S H Robin Sham, CBE M/s. AECOM Asia Company Ltd., PADECO Co. Ltd - Al-Handasah Consultants -TY Lin International Consortium Regd. Address: L&T - IHI Consortium, Nuclear and Special Bridges Business Unit, L&T Construc....
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....ackage - 1 Project office, Mumbai - 400015, Maharashtra, India INVOICE TO L&T-IHI CONSORTIUM 5 FLOOR, A WING, LANDMARK BUILDING, ANDHERI EAST, MUMBAI MUMBAI -400093 MAHARASHTRA, INDIA CONSIGNEE NAME & ADDRESS L&T-IHI CONSORTIUM 305 & 306 - 3^rd Floor, B Wing, Nava Bharat Estate, PD Mello Road, Oppo. Sewri Railway Station, Sewri West, Mumbai-400015 Maharashtra, India INVOICE NO: LEMHLE18RV000085 DATE: 29-Sep-2018 CUSTOMER ORDER/LOA No : MTHL-PKG-01/MMRDA/L&T/001 CUSTOMER ORDER/LOA DATE: 22-Dec-2017 PLACE OF SUPPLY : Maharashtra / 27 Maharashtra PLACE OF DELIVERY: Maharashtra / 27 IC REFERENCE Doc Ref No GST Reg No. 27AABA L5822F1 ZS Heavy Civil Infrastructure IC 00/AM/000003 GST Reg No. CLIENT CODE SOURCE STATE JOB CODE JOB ORDR NO./DATE 27AABAL5822F1 ZS LO01245 Maharashtra LE171107- Nuclear & Special Bridges LE171107/00001/22-dEC-2017 HNS/SAC BOQ UMO Quantity Rate Amount AM - Progress LS 1.0000 2237281644.0000 2237281644.00 Total Basic Amount Total Taxable Amount CGST - 6.00% - Maharashtra SGST - 6....
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....anded the advance as an interest free loan nor treated the same to be an interest free loan, when it remitted the amounts along with the GST, to its constituent and having clearly availed such amounts as a mobilization advance to be adjusted in the payments which were to become due and payable to the petitioner, as the contractual work would progress. 85. Accordingly, the petitioner having received the GST amounts from the MMRDA qua both the advances that too voluntarily, and having deposited the GST amounts with the Government, in our opinion, the petitioner has now intended to take a different position that both these advances be treated purely as a loan. Necessarily, considering the mandatory provisions of Section 76 of the GST Acts, the petitioner could not have "not" deposited the GST amounts received by it from the MMRDA, with the government. 86. On the aforesaid conspectus, as to how the provisions of the GST laws would consider such amounts being paid to the petitioner by the MMRDA under the contract, qua the petitioner's liability to pay the GST amounts, needs to be considered. In examining this issue, some of the provisions of the GST Act are required to be note....
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....eans the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis; (83) "outward supply" in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business; (84) "person" includes-- (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (h) any body corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; (j) a local authority; ....
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.... owns, operates or manages digital or electronic platform for such supply, shall be deemed to be a supplier of such actionable claims, whether such actionable claims are supplied by him or through him and whether consideration in money or money's worth, including virtual digital assets, for supply of such actionable claims is paid or conveyed to him or through him or placed at his disposal in any manner, and all the provisions of this Act shall apply to such supplier of specified actionable claims, as if he is the supplier liable to pay the tax in relation to the supply of such actionable claims;] (108) "taxable supply" means a supply of goods or services or both which is leviable to tax under this Act; (118) "voucher" means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument; (119) "works contract" means a contract for building, cons....
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.... Tax Credit (ITC). The petitioner being denied the refund as also the ITC, it is the petitioner's case that the provisions of Sections 7, 12, 13, 16 (2) (b) are ultra vires the Constitutional provisions and/or provisions of CGST / MGST Act, noted by us hereinabove. 89. We may observe that at the first blush, some of the petitioner's contentions on the vires of the assailed provisions, although sounded attractive, however, on a deeper scrutiny, the challenge to the vires of the provisions in the context in hand, apart from being misconceived, needs to fail. The following discussion would aid our conclusion. 90. Before we delve on the question of the challenge to the validity of these provisions, we refer to the principles of law which have guided the Courts in dealing with the questions when validity of the statutory provisions is in question. In R. K. Garg Vs. Union of India & Ors. (supra) the Supreme Court in the context of challenge to the legality of an economic legislation namely the validity of the Special Bearer Bonds (Immunities and Exemptions) Act, 1981, has held that laws relating to economic activities need to be viewed with greater latitude and that the court s....
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....gulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events-self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. The court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry" that exact wisdom and nice adoption of remedy are not always possible and that "judgment is largely a prophecy based on meagre and un-interpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States....
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....irrationality. The High Court failed to keep in mind the well defined limitations in consideration of the constitutional validity of a statute enacted by Parliament or a State Legislature. The statute enacted by Parliament or a State Legislature cannot be declared unconstitutional lightly. The court must be able to hold beyond any iota of doubt that the violation of the constitutional provisions was so glaring that the legislative provision under challenge cannot stand. Sans flagrant violation of the constitutional provisions, the law made by Parliament or a State Legislature is not declared bad. 14. This Court has repeatedly stated that legislative enactment can be struck down by Court only on two grounds, namely (i), that the appropriate Legislature does not have competency to make the law and (ii), that it does not take away or abridge any of the fundamental rights enumerated in Part - Ill of the Constitution or any other constitutional provisions. 15. In Mcdowell and Co. while dealing with the challenge to an enactment based on Article 14, this Court stated in paragraph 43 (at pg. 737) of the Report as follows : " ........ A law made....
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.... is whether the statute is so arbitrary or unreasonable that it must be struck down. At best, a statute upon a similar subject which derives its authority from another source can be referred to, if its provisions* have been held to be reasonable or have stood the test of lil' file, only for the purpose of indicating what may be said to be reasonable in the context. We proceed to examine the_ provisions of the said Act upon this basis." 44. It is this paragraph which is strongly relied upon by Shri Nariman. We are, however, of the opinion that the observations in the said paragraph must be understood in the totality of the decision. The use of the word 'arbitrary' in para 7 was used in the sense of being discriminatory, as the reading of the very paragraph in its entirety discloses. The provisions of the Tamil Nadu Act were contrasted with the provisions of the Land Acquisition Act and ultimately it was found that Section 11 H insofar as it provided for payment of compensation in instalments was invalid. The ground of invalidation is clearly one of discrimination. It must be remembered that an Act which is discriminatory is liable to be labelled as arbitrary. It....
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....er to the wisdom of the legislature unless it enacts a law about which there can be no manner of doubt about its unconstitutionality." 24. In Hamdard Dawakhana and another v. The Union of India and others, AIR 1960 SC 554, inter alia, while referring to the earlier two decisions, namely, Bengal Immunity Company Ltd. and Mahant Moti Das, AIR 1959 SC 942, it was observed in paragraph 8 (at pg. 559) of the Report as follows: "8. Therefore, when the constitutionality of an enactment is challenged on the ground of violation of any of the C articles in Part Ill of the Constitution, the ascertainment of its true nature and character becomes necessary i.e. its subject-matter, the area in which it is intended to operate, its purport and intent have to be determined. In order to do so it is legitimate to take into consideration all the D factors such as history of the legislation, the purpose thereof, the surrounding circumstances and conditions, the mischief which it intended to suppress, the remedy for the disease which the legislature resolved to cure and the true reason for the remedy." 27. A well-known principle that in the field of taxation, the Legislature e....
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....I, and in relation to "Time of Supply of Services"- (Section 13), as contained in Chapter IV. These provisions are required to be noted which read thus:- "CHAPTER III LEVY AND COLLECTION OF TAX 7. Scope of Supply - (1) For the purposes of this Act, the expression "supply" includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation - For the purpose of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services ....
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.... pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section. (2) The time of supply of goods shall be the earlier of the following dates, namely:-- (a) the date of issue of invoice by the supplier or the last date on which he is required, under [ * * * ] section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply: Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount. Explanation 1.--For the purposes of clauses (a) and (b), "supply" shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment. Explanation 2.--For the purposes of clause (b), "the date on which the supplier receives the payment" shall be the date on which the payment is entered in his books of account or the date on wh....
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....eriod prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or (b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or (c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply: Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount. Explanation.--For the purposes of clauses (a) and (b)-- (i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment; (ii) "the date of receipt of payment" shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his....
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....sions of Article 246A read with Article 366 (12A) as also of Article 14, 19 (1) (g), 265 and 300A of the Constitution of India. We extract the provisions of Articles 246A and Article 366 (12A) of the Constitution hereunder:- "246A. Special provision with respect to goods and services tax (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.-The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council. 366. Definitions. In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say- (12A) "goods and services ....
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....when the Court pointed out that the word "course" etymologically denotes movement from one point to another. It was held that the expression "in the course of" not only implies a period of time during which the movement is in progress but also postulates a connected relation. It was observed that the expression "in the course of carrying on of business etc." meant that the gift should have "some relationship" with the carrying on of the business to bring the gift within that provision and that it must further be established that there was some "integral connection" or relation between the making of the gift and the carrying on of the business. The relevant observations of the Supreme Court are required to be noted which read thus: "6. The words "in the course of" were considered by this Court in State of Travancore Cochin Vs. Shanmugha Vilas Cashew Nut Factory, 1954 SCR 53 (AIR 1953 SC 333) in connection with the language employed in Article 286 of the Constitution. It was pointed out that the word "course" etymologically denotes movement from one point to another and the expression "in the course of" not only implies a period of time during which the movement is in progre....
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.... supply attracting payment of GST. We may observe that such intention can also be gathered from the insertion of sub-section (1A) in Section 7, which was incorporated by the CGST Amendment Act, 2018 with retrospective effect from 1 July 2017, providing that where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II, which includes 'works contract' as defined in Section 2 (119), finding place in item 6 of Schedule II defining a 'composite supply'. Thus, the legislative intention behind Section 7 is quite clear that such composite contract would fall within the definition of supply as envisaged by Section 7 (1) (a). 100. This apart, such meaning of the word "supply" as Section 7 (1) (a) would postulate, can also be gathered from the reading of Section 7(1)(aa), which was inserted by the Finance Act No. 13 of 2021, with effect from 1 January 2022, which inter alia provides for the activities or transactions, by a person other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other va....
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....t Section 7 would nonetheless be required to be held to be ultra vires the provisions of Article 246A, 366 (12A) of the Constitution, as also other constitutional provisions of Section 14, 19 (1) (g) and 300A as it takes within its ambit supply of goods or services agreed to be made. In any event Section 7 cannot be read de hors several other provisions of the GST Acts. It needs to be read under the legislative scheme as envisaged under the Act and not otherwise. In fact, the foregoing discussion would show that no valid ground can be gathered, for such provision to be held ultra vires the said constitutional provisions, for this reason, the petitioner's challenge to the vires of Section 7 on the ground that it applies to supplies agreed to be made is not well founded. 105. We may observe that Section 9 of the CGST Act providing for "Levy and Collection" ordains that subject to the provisions of sub-section (2), there shall be levied a tax called the Central Goods and Services Tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption. Section 9 is the charging section. Hence, going by Section 9, for all supplies ....
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....ied in sub-clause (a), (b) and (c) read with the 'Explanation'' thereunder. Sub-clause (a) provides that the time of supply of services shall be the earliest of the dates namely the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or under clause (b) the date of provision of service, if the invoice is not issued within the period prescribed under Section 31 or the date of receipt of payment, whichever is earlier. 'Explanation' for the purposes of clauses (a) and (b) provides that the supply shall be deemed to have been made, to the extent it is covered by the invoice or, as the case may be, the payment; and further that the date of receipt of payment shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier. Sub-section (5) of Section 13 provides that where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall be as provided in clauses (a) and (b)....
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....oner, an invoice could not be issued as at the relevant time in Phase I, i.e. when the first tranche was received by the petitioner, as there was no supply of goods or services or both. 109. We may observe that under Sections 12 and 13, the issuance of an invoice is not sacrosanct or the only necessary incident under Sections 12 and 13, for the reason that these provisions explicitly provide for alternatives, that is apart from the issuance of an invoice by the supplier, the date of receipt of payment, as also the date of provision of service, if the invoice is not issued within the prescribed period under Section 31 or the date of receipt of payment, whichever is earlier are included, to reckon the time of supply. Hence, if the parties agreeing to the nature of the supply, as the agreement between the parties in the present case postulate, and such supply if falls within the parameters of Section 7 (1) and in pursuance thereto a deposit of the GST is made, then necessarily such voluntary action on the part of the parties, is within the purview of section 7. In such event, necessarily, qua the time of supply of services, such supply would stand governed by sections 12 and 13. Th....
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.... It was observed that alternatively, it may empower a statutory authority to prescribe such single point for the purpose. It was also observed that the single point at which the tax may be imposed must be a definite ascertainable point, so that both the dealer and the sales tax authorities may know clearly the point at which the tax is to be levied. It is in such context, the Supreme Court made the following observations:- "6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity." In our opinion, considering our discussio....
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....ds into India would commence when the goods cross the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reached the customs barriers and the bill of entry for home consumption is filed. On such observations, the Supreme Court dismissed the appeal confirming the decision of the High Court. In our opinion, the principles of law and the legal position as discussed by the Supreme Court may not be applicable in the facts of the present case and more particularly applying the principles of the Constitution Bench of the Supreme Court as laid down in State of Madras v. Gannon Dunkerley & Co. (supra). In this decision, entry 48 in List 2 of Schedule 7 of the Constitution fell for interpretation, when the Supreme Court held that the same is required to be interpreted not in a strict sense but in a broad sense. It was also held that such constitutional provisions cannot be construed in its popular sense, but must be interpreted in its legal sense. In our opinion, the petitioner merely referring to the provisions of Article 246A read with Article 366 (12A) of the Const....
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....rectly inconsistent, contrary or ultra vires the provisions of Section 13 (2), which recognizes that GST is liable to be paid on incidents enumerated in sub-section (2), the relevant incident in the present case being the advance payment received by the petitioner from the MMRDA along with GST being remitted to L&T, along with the output tax, in discharge of the petitioner's statutory obligation. It is, therefore, the petitioner's contention that Section 16 (2) (b) takes away and/or negates the consequences which are brought about by Section 13 (2) (b), hence, on account of such inconsistency, necessarily Section 16 (2) (b) be held to be ultra vires the provisions of Section 13 (2) (b) of the CGST Act. 113. To examine such contentions of the petitioner, we need to note Section 16 providing for "Eligibility and conditions for taking input tax credit", which falls under Chapter V "Input Tax Credit". Section 16 reads thus: Section 16. Eligibility and conditions for taking input tax credit. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of inpu....
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....ount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be ^6[paid by him along with interest payable under section 50], in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. Pr....
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....aving deposited GST would not be in a position to comply with the requirements of clause (b) of sub-section (2), which provides that the petitioner has received the goods or services or both at the time of receiving of the advance payment of which tax has been deposited. This apart, it is also the petitioner's case that the requirement of sub-section (2) (b) of Section 16 is contrary to the provision of Section 13, which imposes a liability to pay tax on services at the time of supply in accordance with the provisions of sub-section (2) (a) and (2) (b), i.e. on the date of receipt of payment (as no invoice was received in the present facts). 116. We find that there is substance in the contention as urged on behalf of the petitioner insofar as the petitioner's entitlement to avail of the ITC is concerned. In the context, peculiar to the facts in hand, we are of the clear opinion that applying the jurisprudential principles governing the goods and service tax and even on first principles, it cannot be a situation that in the circumstances, as in the present case, the petitioner could be denied the credit of ITC. This merely for the reason that, in the situation in hand, the petiti....
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....saction ought to have been viewed and approached by the department, in the context of applicability of provisions of Section 16 (2) (b) read with the provisions of Section 13 (2). 118. In the aforesaid context, we may also observe that sub-section (1) of Section 16 inter alia makes a person entitled 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 and the said amount shall be credited to the electronic credit ledger of such person. Thus, the entitlement to take credit of input tax charged on any supply of goods or services is in regard to such components "used" or "intended to be used in the course" or "furtherance of his business", is the basic requirement for the amount to be credited to the electronic credit ledger of such person. Although sub-section (1) is conditional upon the fulfillment of the requirements as contained in sub-section (2), in our opinion, the incorporation as contained in sub-section (2) (b) being one of the conditions, namely that the person has received the goods or services or both would also be required to be read, to further the....
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.... goods or services are actually received, to be reckoned as an incident, at which point of time, the liability to pay tax on services would arise, and not in respect of specific incidents as provided for under sub-section (2). This would create a complete dichotomy, disturbance or friction in the interplay between Section 13 (2) and Section 16 of the CGST Act. In our opinion, this can never be the intention of the legislature. Thus, there needs to be a harmonious interpretation of provisions of Section 13 read with the provisions of Section 16. The intention underlying sub-section (1) of Section 16 is not only required to be effected but safeguarded by a meaningful and purposive reading of the provisions of Section 13 (2), so as to apply the provisions of sub-section (2) (b) of Section 16, as it stands and intended by the legislature. Any interpretation otherwise in our opinion would cause deleterious effect and a disharmony in the working of these GST provisions. For these reasons, the petitioner was entitled to the input tax credit under the provisions of Section 16 as in the present peculiar facts, merely referring to the provisions of Section 16 (2) (b), it could not have been ....
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.... input tax credit.- (1) The input tax credit shall be availed by a registered person, including the Input Service Distributor, on the basis of any of the following documents, namely,- (a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31; (b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax; (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 s....
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....e petitioner, satisfied the requirements of Section 31 read with Rule 39 as tax was deposited with the Government under the ARV and the same was remitted as an output tax to L&T by the petitioner. 124. In any event the purpose of a tax invoice is to confer and attribute certainty in relation to the supply of services as envisaged and in the context as understood under the GST laws. However, what cannot be overlooked is the provisions of sub-section (3)(d) of Section 31 of the CGST Act as noted by us hereinbefore, specifically include within the ambit of the tax invoice, as defined under Section 31, to provide that a registered person shall on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment. Sub-section (3) of Section 31 begins with a non-obstante clause when it provides that the contents of sub-section (3) are notwithstanding anything contained in sub-sections (1) and (2). Thus the rigour and the mandate of sub-section (1) and (2) of Section 31 is not applicable to the operation of sub-section (3) which stands on ....