TaxTMI 
TaxTMI 
2025 (5) TMI 1976
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....red to as 'CGST Rules') and Tamil Nadu Goods and Services Tax (TNGST) Rules, 2017 (hereinafter referred to as 'TNGST Rules'). Rule 36(4) of the respective GST Rules read identically. 2. These Writ Petitions are of the year 2020. When these Writ Petitions were filed, Rule 36(4) of the respective GST Rules read differently from how it read after its amendment with effect from 01.01.2022. 3. Rule 36(4) of the CGST Rules as it stood at the time when these Writ Petitions were filed and at the time of passing of this Order are reproduced below for the sake of clarity:- Table-I Rule 36(4) of CGST Rules with effect from 09.10.2019 Rule 36(4) of CGST Rules with effect from 01.01.2022 36. Documentary requirements and conditions for claiming Input Tax Credit: (1) ..... (2) ..... (3) ..... (4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of sectio....
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....e Input Tax Credit (ITC) that could be availed as per Rule 36(4) of the respective GST Rules under Section 37(1) of the GST Acts, if necessary documents were not uploaded as per Rule 36(4) of the respective GST Rules are as under:- Table-II Sl. No. Period/Date Nature of Registration Amendment to CGST vide Notification No. Amendment to TNGST vide Notification No. 1 01.01.2017 to 08.10.2019 Sub-rule 4 to Rule 36 not in the respective GST Rules --- --- 2 09.10.2019 to 31.12.2019 20% Notification. No.49/2019-Central Tax (CT) dated 09.10.2019/6th Amendment Rules, 2019 Notification. No. SRO A-39(a)/2019, dated 11.10.2019/6th Amendment Rules, 2019 3 01.01.2020 to 31.12.2020 10% Notfn.No.75/2019-Central Tax (CT) dated 26.12.2019 Notification No.SRO A-46(a-1)/2019 dated 30.12.2019/9th Amendment Rules, 2019 4 01.01.2021 to 31.12.2021 5% Notification No. 94/2020 Central Tax (CT) dated 22.12.2020 Notification No. SRO.A48(a)/2020 dated 23.12.2020/14th Amendment Rules, 2020 5 01.01.2022 to 31.12.2022 NIL Notification. No.40/2021-Central Tax (CT) dated 01.01.2022/10th (Amendment) Rules, 2021 Notification. No. SRO A/24(d)/2021 dated 30.12.2021/10th (Amendment) R....
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....that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing such details for such class of taxable persons as may be specified therein: Provided also that any extension of time limit notified by the Commissioner of State tax or Commissioner of Union territory tax shall be deemed to be notified by the Commissioner. 37. Furnishing details of outward supplies.- (1) Every registered person, other than an Input Service Distributor, a non-resident taxable person and a person paying tax under the provisions of section 10 or section 51 or section 52, shall furnish, electronically, subject to such conditions and restrictions and in such form and manner as may be prescribed, the details of outward supplies of goods or services or both effected during a tax period on or before the tenth day of the month succeeding the said tax period and such details shall subject to such conditions and restrictions, within such time and in such manner as may be prescribed, be communicated to the recipient of the said supplies. Provided that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for f....
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.... Credit (ITC) under Rule 36(4) of the respective GST Rules by a registered person like the Petitioner. 16. That apart, it is submitted by the learned counsel for the Petitioner that once a registered person satisfies the requirements of Section 16(2) of the respective GST enactments, the Input Tax Credit (ITC) availed by such registered person as specified in the provision are to be allowed. 17. Further, it is submitted by the learned counsel for the Petitioner that if the tax charged in respect of supply which was actually being paid to the Government by the supplier either in cash or through utilization of Input Tax Credit (ITC), the credit availed by such a registered person has to be allowed. 18. It is further submitted by the learned counsel for the Petitioner that merely because there is an omission on the part of the supplier to file the returns correctly under Section 37 of the respective GST enactments read with Rule 36 of the respective GST Rules, the Input Tax Credit (ITC) that is available for the Petitioner under Section 16 of the respective GST enactments cannot be restricted. Therefore, it is submitted that Rule 36(4) of the respective GST Rules are ultra vires an....
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....nsel for the Petitioner would contend that Rule 36(4) of the respective GST Rules is beyond the scope, mandate and concern of the provisions of the parent Act. It is also submitted that it is a settled law that every Rule must satisfy the touchstone of a parent statute's provision and failure to do so renders the Rule ultra vires the provisions of the parent statute. In this regard, the learned counsel for the Petitioner would rely upon the decision of the Hon'ble Supreme Court in "General Officer Commander-in-Chief Vs. Subhas Chandra Yadav", AIR (1988) SC 876. 25. Learned counsel for the Petitioner would also submit that sub-rule 4 to Rule 36 of the respective GST Rules have been inserted by invoking the powers conferred under Section 164 of the respective GST Acts and the said provision cannot be invoked for introducing Rule 36(4) for two reasons viz., firstly, the introduction of Rule 36(4) to the respective GST Rules were not recommended by the GST Council. 26. Thus, it is submitted that the introduction of Rule 36(4) vide Notification No.49/2019-Central Tax (CT) dated 09.10.2019 is violative of Section 164 of the GST enactments inasmuch as the requirement of recommen....
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....xi. The Assistant Commissioner (CT), Chennai Vs. Sri. Vinayaga Agencies, 2020 (4) TMI 141. xii. The Assistant Commissioner (CT), Chennai and another Vs. Sri Vinayaga Agencies, 2021 (2) TMI 1037. xiii. Chunni Lal Parshadi Lal Vs. Commissioner of Sales Tax, Uttar Pradesh, Lucknow, 1986 VIL 05 SC. xiv. M/s.D.Y.Beathel Enterprises Vs. The State Tax Officer (Data Cell), Tirunelveli, 2021 VIL 308 MAD. xv. Society for Tax Analysis and Research Vs. Union of India and others, TS 1151 HC 2019 (GUJ) NT. xvi. Sales Tax Bar Association (Regd.) and another Vs. Union of India and others, TS 1152 HC 2019 (DEL) NT. xvii. Himanshu Mohta and Associates Vs. Union of India and others, TS 1153 HC 2019 (DEL) NT. xviii. Myres Tyre Supply (India) Limited Vs. The Assistant Commissioner (ST), Madurai and others in W.A.(MD) No.345 of 2019 dated 26.02.2020. xix. Myres Tyre Supply (India) Limited Vs. The Assistant Commissioner (ST), Madurai and others in W.P.(MD) Nos.18723 and 18724 of 2018 dated 26.02.2020. xx. General Officer Commander-in-Chief Vs. Subhas Chandra Yadav, AIR (1988) SC 876. xxi. Kunj Behari Lal Butail and others Vs. State of Himachal Pradesh and others, (2000) 3 SCC 40 / 200....
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....ncession extended by the legislature. It is subject to conditions, restrictions and prohibitions stipulated in the Act and prescribed in the Rules. An assessee does not have an absolute right to Input Tax Credit, it is circumscribed and contingent upon the satisfaction of the restrictions and conditions imposed by law. (b) It is completely within the prerogative of the Government to grant a concession and the degree of concession. The recipient of such concessions does not have any legally enforceable right to demand the degree of concession granted, except to enjoy the benefits of the concession during the period of grant. In this regard, he rely on the decision of the Hon'ble Supreme Court in State of Rajasthan and others Vs. J.K.Udaipur Udyog Limited and others, 2004 (7) SCC 67. (c) The very entitlement of a registered person to take credit of input tax per se is subject to such conditions and restrictions as may be prescribed. Thus, the power to prescribe conditions and restrictions, including the power to prescribe limitation on the amount of credit that a registered person is entitled to has been conferred on the Government. (d) A registered person shall not be enti....
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....s, the learned Senior Standing Counsel for the Respondents in both the Writ Petitions sought for dismissal of these Writ Petitions and would urge this Court to uphold the validity of the impugned Rule 36(4) of the respective GST Rules. 39. In support of his contention, the learned Senior Standing Counsel for the Respondent has placed reliance on the following decisions of the Hon'ble Supreme Court and that of this Court:- i. State of Rajasthan and others Vs. J.K.Udaipur Udyog Limited and others, 2004 (7) SCC 67. ii. M/s.P.R.Mani Electronics Vs. Union of India, MANU/TN/3610/2020. 40. We have heard the learned counsel for the Petitioner, the learned Senior Standing Counsel and the learned Additional Government Pleader for the Respondents. 41. GST enactments were implemented with effect from 01.07.2017. The implementation of GST enactment was an ambitious attempt to integrate various indirect taxes and modernize the tax collection. These enactments subsumed various Central and State Indirect Tax enactments which were in force till then. These GST enactments were enacted to bring an end to the uncertainty in the tax rates that prevailed till then in various States for the sa....
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....m 1994 under the provisions of the Central Excise Rules, 1944. Further, liberalization was made with the implementation of the Service Tax Credit Rules, 2002 by allowing a provider of taxable service to avail Input Tax Credit (ITC) on service tax paid on input services. 50. With effect from 10.09.2004, Input Tax Credit (ITC) was made available on both Service Tax and Central Excise Duty including Additional Duty of Customs payable under the provisions of the Central Excise Tariff Act, 1975 and various cess that were being levied under various Finance Acts for being set off against Service Tax liability, Central Excise Duty and Cess liability under CENVAT Credit Rules, 2004. 51. The above experience led to enactment of various State Value Added Tax enactments by each of the States and Union Territory from the year 2004, 2005 and 2006. However, VAT enactments were abused by several unscrupulous dealers leading to huge leakage State Revenue in each of the States. 52. However, when GST enactments were implemented, the Government thought it fit to allow the credit in a calibrated manner so that revenue leakages can be minimised and contained. This was also discussed in the meeting of....
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....ed to 10% and still later it was reduced to 5%. Eventually, no Input Tax Credit (ITC) was to be allowed if the details required under Section 37(1) of the respective GST enactments were not furnished by the supplier of goods and / or service. 61. These restrictions were placed as the system i.e., Information and Technology (IT) Platform that was developed by the IT wing of the Government did not address to all the concern behind the object of the implementation of respective GST enactments. Thus, restricted credit was allowed till details were uploaded by the supplier. 62. It has to be borne in mind that the basic feature of the respective GST enactments and the Rules made thereunder is to allow a recipient of such goods and / or service or both who are themselves engaged in supply of taxable goods and / or services or both or supply of zero rated supply of goods and / or service or both (i.e., output supply) to avail Input Tax Credit (ITC) on the tax borne by them on such inward supplies. 63. This object is traceable to the MODVAT Rules referred to supra. Trade Notice No.38/1999 dated 2nd April, 1991 issued by the Bombay Collectorate in its clarification issued in the context o....
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....ean levy of tax on tax. The GST is levied on the net value added portion and not on the entire transaction value as the taxpayer would enjoy input tax credit. Barring few indirect taxes, all the major indirect taxes levied by the Central and State Governments are subsumed into the GST. Consequently, taxpayers and suppliers are untroubled about paying multiple indirect taxes under different laws. In the GST framework, simple rules have been prescribed to utilize the cross-sectional credit of input taxes. A trader who could not claim credit of tax paid on services, can seek and get credit on goods as well as services. This framework of seamless credit was introduced to safeguard that taxes on supplies are paid to the extent of value additions and net liability - and to avoid double taxation." 66. It has to be borne in mind that the GST Council as also the Government were aware of the bitter experience under the VAT regime due to ineligible Input Tax Credit (ITC) being passed on and availed on the strength of either fake and / or fictitious invoices. 67. They were also aware of the huge leakage of revenue under the VAT regime where without actual supply of goods and corresponding pa....
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....ay be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed. (2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41, to be maintained in such manner as may be prescribed. (3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed. (4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed. (5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of-- (a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of ....
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.... the purposes of this section,- (a) the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger; (b) the expression,- (i) -tax dues? means the tax payable under this Act and does not include interest, fee and penalty; and (ii) -other dues? means interest, penalty, fee or any other amount payable under this Act or the rules made thereunder. (10) [A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for integrated tax, central tax, State tax, Union territory tax or cess, in such form and manner and subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act. (11) Where any amount has been transferred to the electronic cash ledger under this Act, the same shall be deemed to be deposited in the said ledger as provided in subsection (1). 74. Reference was made to Section 37 of the respective GST Acts in Section 16 of the respective GST Acts for ....
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....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 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 added to his output tax liability, along with interest thereon, 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 of the amount towards the value of supply of goods or services or both along with tax payable thereon. 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 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. (2) Notwithstanding anything contained....
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....vail 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. 75. Thus, under the substantive provision for availing Input Tax Credit (ITC) is Section 16 of the GST Act, conditions or restrictions in availing Input Tax Credit (ITC) could be imposed in the manner specified in Section 49 of the GST Acts which gives the power to the Central Government. 76. Thus it is evident that the conditions and restrictions can be prescribed. The expression in Section 16(1) of the respective GST Acts i.e., subject to such conditions and restrictions as may be prescribed in the manner specified in Section 49 of the respective GST Acts must be read conjunctively with Section 37 of the respective GST enactments. 77. It is for this reason, Rule 36(4) of the respective GST Rules was incorporated in 2019 vide amendments to the respective GST Rules to ensure that full credit could be availed subject to the supplier also additionally complying with the requirements under Section 37(1) of the respective GST enactments. 78. Apart from the above, the experience gained under the initial experi....
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....ealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgment of taking delivery of goods, tax invoices and payment particulars, etc. and the actual physical movement of the goods by producing the cogent materials, the assessing officer was absolutely justified in denying ITC, which was confirmed by the first appellate authority. Both, the second appellate authority as well as the High Court have materially erred in allowing ITC despite the purchasing dealers concerned having failed to prove the genuineness of the transactions and failed to discharge the burden of proof as per Section 70 of the KVAT Act, 2003. The impugned judgment(s) and order(s) passed by the High Court [State of Karnataka v. Tallam Apparels, 2021 SCC OnLine Kar 15785], [State of Karnataka v. Ecom Gill Coffee Trading (P) Ltd., 2021 SCC OnLine Kar 15783], [CCT v. Rajshree Impex, 2021 SCC OnLine Kar 15784], [Transworld Star Manjushree v. CCT, 2021 SCC OnLine Kar 15782] and the second appellate authority allowing ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside. The orders passed by the assessing officer denying ITC to the pu....
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....ended for an invalid legislation. This also keeps courts within their track and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not static but dynamic. This infuses fertility in the field of interpretation. This equally helps to save an Act but also the cause of attack on the Act. Here the courts have to play a cautious role of weeding out the wild from the crop, of course, without infringing the Constitution. For doing this, the courts have taken help from preamble, Objects, the scheme of the Act, its historical background, the purpose for enacting such a provision, the mischief, if any which existed, which is sought to be eliminated. ... This principle of reading down, however, will not be available wh....
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....partment would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across the material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under Section 40A of the Act." 91. The above view is not correct and in any event cannot be applied to hold that Rule 36(4) of the respective GST Rules are arbitrary for the reasons explained by us. We had also taken a contra stand in Tvl. Sahyadri Industries Limited's case (cited supra). 92. Relevant portion of Tvl. Sahyadri Industries Limited's case (cited supra) is extracted hereunder:- "131. In our view, input tax credit can be denied only if the invoices issued to the petitioners/appellants by the registered dealers were bogus invoices and/or invariance with the office copy of the invoice maintained at the registered dealers end who effected such sale to the petitioners/appellants and where there was no movement of goods for the corresponding value declared in the original copy of invoice contemplated under Rule 10(2) of TN VAT Rules, 2007. 132. However, if the ....
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....dit being availed which are passed on by unscrupulous persons by merely obtaining GST registration. 94. Similarly, the decision of the Hon'ble Punjab and Haryana High Court in Gheru Lal Bal Chand's case (cited supra), relied by the Petitioner, where the constitutional validity of a similar Section 8 of the Haryana VAT Act, 2003 was being considered, the Court held that law cannot envisage an almost impossible eventuality and that law nowhere envisages imposing penalty either directly or vicariously where a person is not connected with any such event or an act. Thus, it is not the case in the present dispute. 95. The present Writ Petitions were filed in the month of February, 2020 after the implementation of the GST enactments. The GST enactments then were not as evolved as they are at present. However, after these Writ Petitions were filed, the provisions have been strengthened to facilitate a legitimate entrepreneur and / or a business entity to avail Input Tax Credit (ITC) with the incorporation of Form GSTR - 2A under Rule 61 of the respective GST Rules vide Notification No. 79/2020 Central Taxes (CT) dated 15.10.2020 with effect from 15.10.2020. 96. With the incorporatio....
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.... vide Notification No.79 dated 15.10.2020. Credit will be auto-populated. Therefore, the credit is available which is auto-populated in Form GSTR 2A. Input Tax Credit (ITC) that is availed is provisional. It can be asked to be paid back, if there are, any violations either at the suppliers end or at the the recipient's end. 101. Restrictions imposed under Rule 36(4) of the respective GST Rules to avail full credit of Input Tax in absence of the mandatory compliance by the supplier of goods or service as is contemplated under Section 37(1) of the respective GST Acts was a temporary measure to regulate the availing of Input Tax Credit (ITC). Ipso facto, it cannot be held that Rule 36(4) of the respective GST Rules is in violation of Article 14 of the Constitution of India. 102. We are not able to discern any violation of Article 14 of the Constitution of India by virtue of the restrictions under Rule 36(4) of the respective GST Rules. That apart, there is a presumption of constitutionality of GST enactments and Rules framed under the enactments. The restrictions were placed with a view to implement the object of allowing legitimate Input Tax Credit on the goods or service suppl....