TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 266
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....e, is that the petitioner is a trader dealing in automobiles, motorbikes and other vehicles and registered under the GST Laws having been issued a certificate of registration on 22.09.2017. In the petition, it has been stated that the petitioner is a sub-dealer of Hero MotoCorp Ltd. and engaged in selling motorbikes after procuring them from the primary dealer of Hero MotoCorp Ltd. He being sub-dealer, was not issued direct invoices by the manufacturer- Hero MotoCorp Ltd. and instead, the invoice was issued by the Hero MotoCorp to the primary dealer capturing the incidence of excise duty. As such, the excise duty paid by the primary dealer initially came to be embed in the cost of the goods when purchased by the petitioner. The petitioner was not in possession of the documents evidencing payment of excise duty on the goods in question being sold by the petitioner as sub-dealer of Hero MotoCorp Ltd. 3. It is further averred in the petition that the petitioner being a sub-dealer of the auto manufacturers had accumulated balance of credit of excise duty on the goods purchased and held in stock as on 30.06.2017 i.e. the day immediately preceding the appointed day when the Central Go....
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.... therefore, was made, but no head was paid and he was informed vide Memo 20.05.2018 that his complaint is closed. The petitioner believes that its claim under TRAN-3 could not be processed as it was not supported by simultaneous claim of transitional credit of excise duty under TRAN-1. Subsequently, another notification No.34/2017 was issued on 15.09.2017 adding instructions in the standard format of TRAN-1 form to mandate simultaneous filing of TRAN-1 and TRAN-3 where the trader/dealer sought to claim credit through CTDs'. Submissions of the petitioner: 7. Learned counsel for the petitioner argued that even though there is no requirement of the substantive provisions, as contained in Section 140 of the CGST Act, 2017, in the matter of claim of transitional credit, the Rule framed by the Rule Making Authority exceeds power under the enabling Act, imposing a condition of submitting statutory declaration in TRAN-1 within the stipulated period. It is his submission that firstly, on fulfillment of eligibility conditions prescribed under sub-section (3) of Section 140 of the CGST Act, 2017, entitlement to credit of excise duty is vested; secondly the Rule requiring submission of d....
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....ithin stipulated period in form GST GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit, to which he claims to be entitled to under the provisions of law. It is extendable for a further period of ninety days. 10. Learned counsel for the respondents further submits that sufficient opportunity has been granted by further providing that on the recommendation of the GST Council, further time for electronic submission of form GST TRAN-1 upto 31.03.2019 could have been allowed in respect of those registered persons, who could not submit declaration by due date on account of technical difficulties on common portal and in respect of whom the Council has made a recommendation. The petitioner failed to fulfill the statutory condition of submitting statutory declaration within the stipulated period, or within the extended period. Even no representation was made for consideration of the GST Council fur further extension upto 31.03.2019. He would further submit that submission of claim within the stipulated period is not provided for the first time under the Rules, but the substantive provision of Section 140 itself provides that such ....
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....issions, it need to be noticed that the petitioner is not assailing constitutional validity of any of the provisions contained either in Section 140 of the CGST Act, 2017, or the provisions contained in Rule 117, or any other rule of the CGST Rules, 2017, much less the validity of two notifications dated 30.06.2017 and 15.09.2017. The petitioner's case is that the provisions contained in sub-section (3) of Section 140 of the CGST Act, 2017 read with the provisions contained in Rule 117 of the CGST Rules, 2017 and various circulars have to be construed and interpreted in a manner that once statutory conditions, as laid down in Section 140(3) of being eligible to claim transitional credit, are made out, the provisions contained in the rule requiring certain procedural formalities to be completed, even if not complied with, could not be made a basis to deny claim. In other words, the petitioner's argument is that the requirement of submission of TRAN-1 declaration, as provided under Rule 117 of the CGST Rules, 2017, is not a substantive or mandatory provision, but merely processual or directory, violation of which cannot lead to rejection of claim. Once eligibility to claim transition....
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....t 6 [of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law 2[within such time and] in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law2 [within such time and] for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day3 [within such time and] ....
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....son shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed. (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or Act, provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994 (32 of 1994), but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,- (a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and (b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of subsection (3). (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day bu....
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...., credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day2 [within such time and in such manner] as may be prescribed: Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier: Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law. (9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such3 [cred....
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.... Act, 1994 (32 of 1994), in respect of inputs and input services received on or after the appointed day. 4[Explanation 3.-For removal of doubts, it is hereby clarified that the expression "eligible duties and taxes" excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under subsection (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975).]" 16. The petitioner, admittedly being registered person, who was not liable to be registered under the existing laws just before the appointed day i.e. 01.07.2017, could claim input tax credit for eligible duties in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock on the appointed day. 17. However, it is relevant to notice that substantive provision contained in sub-section (3) of Section 140 of the CGST Act, 2017, clearly mandates that entitlement to take credit of eligible duties would be available within such time and in such manner, as may be prescribed, subject to conditions as laid down. 17.1 Therefore, apart from condition enumerated in clause (i) to clause (v), th....
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....day; and (ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day; (b) in the case of a claim under sub-section (3) or the proviso or clause (b) of sub-section (4) or subsection (6) or sub-section (8) of section 140, specify separately the details of stock held on the appointed day; (c) in the case of a claim under sub-section (5) of section 140, furnish the following details, namely:- (i) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law; (ii) the description and value of the goods or services; (iii) the quantity in case of goods and the unit or unit quantity code thereof; (iv) the amount of eligible taxes and duties or, as the case may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services; and (v) the date on which the receipt of goods or services is entered in the books of account of the recipient. (3) The amount of credit specified in th....
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.... in FORM GST TRAN-2 by 3[30th April, 2020].] (iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal; (v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person." 18. Rule 117 of the CGST Rules, 2017 requires the registered person entitled to take credit of input tax under Section 140 of the CGST Act, 2017, to submit declaration electronically in Form GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section. Therefore, the prescription of time limit is not merely a provision of Rule framed by the Rule Making Authority in exercise of rule making power conferred on it under the CGST Act, 2017, but is also a statutory mandate, as contained in sub-section (3) of Section 140 of the CGST Act, 2017, that such claim has to be made within the prescribed time and in such manner, as may be prescribed. Therefore, the Rule Makin....
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....hat claim of input tax credit in the form of transitional credit, under fulfillment of eligibility conditions, as provided in sub-section (3) of Section 140 of the CGST Act, 2017, become a vested right and, therefore, the same cannot be taken away, nor defeated only on the ground of non-fulfillment of processual provisions. 23. In support of this contention, reliance has been placed on the decisions rendered in the cases of Eicher Motors Ltd. & Ors. Vs. UOI (supra); Global Ceramics Pvt. Ltd Vs. Principal Commissioner of Central Excise Delhi-I (supra); CCE, Pune Vs. Dai Ichi Karkaria Ltd. (supra); Dipak Vegetable Oil Indusries Ltd. Vs. Union of India (supra); and Siddharth Enterprises Vs. The Nodal Officer (supra). 24. In the case of Eicher Motors Ltd. & Ors. Vs. UOI (supra), by introducing new scheme under the rules, the credit attributable to inputs already used in the manufacture of the final products and the final products which were already cleared from the factory alone, were sought to be lapsed. Thus, the benefit of credit was sought to be taken away by retrospective application, which was under challenge. It was in this context that Their Lordships in the Hon'ble Supre....
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....ly laid down that input tax credit facility is a concession, which can be availed only in accordance with the provisions of law and not dehors the same. 28. In the case of Jayam & Co. Vs. Assistant Commissioner & Anr. AIR 2016 SC 4443, following principle was propounded while dealing with challenge to the constitutional validity of Section 19(20) of the Tamil Nadu Value Added Tax Act in the matter of claim of input tax credit under the scheme of the Act : - "12. It is a trite law that whenever concession is given by statute or notification etc. the conditions thereof are to be strictly complied with in order to avail such concession. Thus, it is not the right of the 'dealers' to get the benefit of ITC but its a concession granted by virtue of Section 19. As a fortiorari conditions specified in Section 10 must be fulfilled. In that hue, we find that Section 10 makes original tax invoice relevant for the purpose of claiming tax. Therefore, under the scheme of the VAT Act, it is not permissible for the dealers to argue that the price as indicated in the tax invoice should not have been taken into consideration but the net purchase price after discount is to be the ....
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.... conditions under which Input Tax Credit can be claimed by a dealer, hence, on non-compliance of the conditions the Input Tax Credit has rightly been denied to the appellants. Section 19(11) is a part of the same statutory scheme and does not suffer from any ultravires. Learned Advocate-General submits that judgment of this Court in Jayam and Company v. Assistant Commissioner and another, 2016 (15) SCC 125: (AIR 2016 SC 4443), where validity of Section 19(20) of the T.N. VAT Act, 2006 has been upheld and it has been laid down that whenever concession is given by the statute or notification, the conditions thereof should strictly be complied with in order to avail such concession, is fully applicable in the facts of the present case and all the appeals are liable to be dismissed." 29.2 On the submissions made, the issues arising for consideration were outlined as below:- "13. From the submissions of the learned counsel for the parties and evidence on record following are the issues which arise for consideration in this batch of appeals: (1) Whether Section 19(11) violates Article 14 and 19(1)(g) of the Constitution of India? (2) Whether Section 19(11) i....
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....h deduction when the very extension of the benefit of set-off is itself a boon or a concession. It was open to the rule-making authority to provide for a small abridgement or curtailment while extending a concession. Viewed from this angle, the argument that providing for such deduction amounts to levy of tax either on purchases of raw material effected outside the State or on sale of manufactured goods effected outside the State of Maharashtra appears to be beside the point and is unacceptable. So is the argument about apportioning the sale-price with reference to the proportion in which raw material was purchased within and outside the State." 33. A Three-Judge Bench in (2005) 2 SCC 129: (AIR 2005 SC 1594), India Agencies (Regd.). Bangalore v. Additional Commissioner of Commercial Taxes, Bangalore had occasion to consider Rule 6(b)(ii) of Central Sales Tax (Karnataka) Rules, 1957, which requires furnishing original Form-C to claim concessional rate of tax under Section 8(1). This Court held that the requirement under the Rule is mandatory and without producing the specified documents, dealers cannot claim the benefits. Following was laid down in paragraph 13: (para 12 of....
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....below : - "35. The judgment on which learned Advocate General of Tamil Nadu had placed much reliance ie. Jayam and Company v. Assistant Commissioner and Another, (2016) 15 SCC 125: (AIR 2016 SC 4443), is the judgment which is relevant for present case. In the above case, this Court had occasion to interpret provisions of Tamil Nadu Value Added Tax Act, 2016, Section 19(20), Section 3(2) and Section 3(3). Validity of Section 19(20) was under challenge in the said case. This Court after noticing the scheme under Section 19 noticed following aspects in paragraph 11: "11. From the aforesaid scheme of Section 19 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 is available on certain conditions mentioned in this section. (c) One of the most important condition is that in order to enable the dealer to claim ITC it has to produce original tax invoice, completed in all respect, evidencing the amount of input tax." 36. This Court further held that it is a trite law that ....
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....ct, was reiterated relying upon the dictum in the case of Jayam & Co. Vs. Assistant Commissioner & Anr. (supra). 31. In the case of Jayam & Co. Vs. Assistant Commissioner & Anr. (supra), it was authoritatively laid down that when a concession is given by the statute, the Legislature has power to make the provision stating the form and the manner in which such concession is to be allowed. There was no right, inherent or otherwise, vested with the dealer to claim the benefit of input tax credit except in accordance with the provisions of law. The objective of such provision imposing restrictions and regulations was also discussed as below:- "13. For the same reasons given above, challenge to constitutional validity of sub-section (20) of Section 19 of VAT Act has to fail. When a concession is given by a statute, the Legislature has power to make the provision stating the form and manner in which such concession is to be allowed. Sub-section (20) seeks to achieve that. There was no right, inherent or otherwise, vested with dealers to claim the benefit of ITC but for Section 19 of the VAT Act. That apart, we find that there were valid and cogent reasons for inserting Sectio....
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.... "Purchase price of 10 Washing Machines Tax paid on purchase at ...Rs. 1,00,000/- 12.5% (ITC allowed) ... Rs. 12,500/- Sale price after discount ... Rs. 75,000/- Tax payable on sales at 12.5% ... Rs. 9,375/- Excess ITC available (Difference between ITC and Output Tax) ... Rs.3,125/- Rs. 12,500-Rs.9,375 Excess ITC Adjusted ... Rs. 3,125/-" 67. As rightly contended by the learned Advocate General, the "Input Tax Credit" adjusted in the above illustration comes to Rs. 3,125/- in a single transaction and that it would run to several lakhs and crores for a year for a single dealer. The excess Input Tax Credit earned by the petitioners is being adjusted against the outstanding tax due or carried forward to next year or refunded. If this trend is allowed to continue, the concept of VAT that meant for payment of tax on every value addition gets defeated. 68. In order to protect the revenue and with a vie to curb the clandestine transactions resulting in evasion of tax, in respect of second and subsequent sales, Section 19(20)was introduced, where any dealer has sold goods at a price lesser than the price of the goods pu....
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....me limit for submission of statutory declaration. The Rule Making Authority has to frame rule to carry out the object and purpose of the Act in exercise of its rule making power. Therefore, it was absolutely mandatory for the Rule Making Authority to prescribe the period of limitation for submitting statutory declaration. As to what should be the period within which such submission should be made and whether there should be a provision for further extension, and if so, in what circumstances and in what matter, was left by the legislature to be provided by the Rule Making Authority. Such a provision in a fiscal statute providing for time limit within which statutory limitation to avail credit is made, is not merely procedural but not only substantive but mandatory also. 34. In the case of ALD Automotive Pvt. Ltd. Vs. Commercial Tax Officer Now Upgraded as the Assistant Commissioner (CT) & Ors. (supra), Their Lordships in the Hon'ble Supreme Court also reiterated the principles applicable to determine whether a provision is directory or mandatory as below:- "41. Learned Counsel for the appellant has referred to judgment of this Court in Dal Chand v. Municipal Corporation,....
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....n from whom the sample was taken to make such arrangements as he might like to challenge the report of the Public Analyst, for example, by making a request to the Magistrate to send the other sample to the Director of the Central Food Laboratory for analysis. Where the effect of noncompliance with the rule was such as to wholly deprive the right of the person to challenge the Public Analyst's report by obtaining the report of the Director of the Central Food Laboratory, there might be just cause for complaint, as prejudice would then be writ large. Where no prejudice was caused there could be no cause for complaint. I am clearly of the view that Rule 9(j) of the Prevention of Food Adulteration Rules was directory and not mandatory..." 42. This Court in the above case clearly laid down that whether particular provision is mandatory or directory has to be determined on the basis of object of particular provision and design of the statute. The period of 10 days in submitting the report of the public analyst was held to be directory for the reason that on the negligence of those to whom public duties are entrusted no one should suffer. Such interpretation should not be put....
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....l claims of transitional credit are settled within a reasonable time limit. It has to be noted that provisions contained in Section 140 of the CGST Act, 2017 intended to extend the benefit of input tax credit in certain cases by removing anomaly on account of transmission of tax regime from Central Excise Act, VAT Act and Service Tax Law to GST regime. All such claims are required to be settled within the stipulated period and it cannot be left at the choice of the claimant to claim benefit at any point of time he chooses. Moreover, the legislative policy clearly appears to avoid raising of stale claims, verification of which itself may be difficult or even impossible with passage of time due to non-maintenance of various records of sale and purchase by dealers beyond reasonable period. If the arguments of the petitioner were to be accepted, a person could claim transitional credit at any time, which could be not only months but years after. We have already held that such a provision is mandatory and cannot be termed as a directory one. Moreover, it is well settled that fiscal laws require strict construction. 37. Even though the validity of provisions contained in Rule 117 of t....