TaxTMI 
TaxTMI 
2025 (5) TMI 1976
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.... and Services Tax (CGST) Rules, 2017 (hereinafter referred 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 detai....
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....hich are not reproduced as the provisions read mutatis mutandis. 8. The details of the percentage of eligible 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 09.10.2019/6^th Amendment Rules, 2019 Notification. No. SRO A-39(a)/2019, dated 11.10.2019/6^th 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 30.12.2019/9^th 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 23.12.2020/14^th Amendment Rules, 2020 5 01.01.2022 to 31.1....
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....vided that the registered person shall not be allowed to furnish the details of outward supplies during the period from the eleventh day to the fifteenth day of the month succeeding the tax period: Provided further 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 suc....
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....mendment Act, 2018, it has not been notified. Therefore, in the absence of implementation of Section 43A of the respective GST enactments during the period in dispute, there was no scope for imposing restriction in availing the Input Tax 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 resp....
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....of Section 43A of the respective GST Acts. However, the Section itself has not been implemented and therefore the Rule which could have been traced to this Section cannot be enforced de hors the Section being implemented. 24. Therefore, the learned counsel 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....
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....ate Tax Officer and others, 2023 VIL 629 KER. ix. Praveen Bhaskaran (Proprietor) M/s. Galaxy Traders Vs. Union of India, Represented by its Secretary, Ministry of Finance, New Delhi and others, 2023 VIL 676 KER. x. M/s.JKM Graphics Solutions Private Limited Vs. The Commercial Tax Officer, Chennai, 2017 VIL 123 MAD. 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 othe....
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.... Tax (CGST) Act, 2017. 36. It is submitted by the Respondents that the legal position under the respective GST Acts read with the CGST Rules regarding the recipient's entitlement to take Input Tax Credit (ITC) on inward supplies, the details of which the supplier neither furnished in his returns nor deposited the corresponding tax charged with the Government can be summarized thus: (a) Input Tax Credit (ITC) is a concession 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 Ud....
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....r and other assessee's of Input Tax Credit in toto. 37. Learned Senior Standing Counsel would also submit that merely because Rule 36(4) of the respective GST Rules could also be traced to Section 43A of the respective GST Acts when it is notified, it cannot be construed to mean that it could not be traced to Sections 41(1) and 16(1) of the respective GST Acts. Therefore, it is submitted that the impugned Rule 36(4) is intra vires the respective GST Acts. 38. Therefore, with these contentions, 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 Standin....
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.... a standalone Rule under the CENVAT Credit Rules, 2001. It was later substituted with CENVAT Credit Rules, 2002 and eventually as CENVAT Credit Rules, 2004 with effect from 10.09.2004. CENVAT Credit Rules, 2004 was in force till 30.06.2017. 48. In the same spirit, the GST enactments were implemented to allow the recipient of goods and / or service liable to pay tax on the out supply on the tax paid on the supply of input goods and service. 49. During the interregnum, Input Tax Credit (ITC) was also allowed on capital goods from 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 CEN....
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....ved to ensure that the object to allow credit is fulfilled and tax paid by the supplier of goods and / or service is allowed as Input Tax Credit (ITC) subject to proper statutory compliance by both supplier of goods and / or service and recipient of goods and / or service under the respective GST enactments and the Rules made thereunder. 60. If the supplier fails to furnish the details in the returns under Section 37(1) of the CGST and respective State GST enactments, restricted credit was allowed. Initially, it was allowed at 20%. Later, it was reduced 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 t....
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....anufactured on the very day that it becomes available. 19. It is, therefore, that in the case of Eicher Motors Ltd. Vs. Union of India., [1999(106) ELT 3] this Court said that a credit under the MODVAT scheme was as good as tax paid." 65. Recently also, the Hon'ble Supreme Court in "Union of India Vs. Cosmo Films Limited", 2023 (385) E.L.T. 66 (S.C.) reiterated the above position in the context of the respective GST enactments wherein it was observed as under:- "The GST regime is based on the idea of removing cascading effect of the taxes. The cascading effect of taxes mean 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....
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....ial incorporation of Section 16 in the respective GST Acts with effect from 01.07.2017, in sub-clause (2)(a) to Section 16, there was no reference to Section 37 of the respective GST Acts. 73. For the sake of clarity, Section 49 of the CGST Act reads as under:- "49. Payment of tax, interest, penalty and other amounts.- (1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may 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 mad....
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.... (8) Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely:-- (a) self-assessed tax, and other dues related to returns of previous tax periods; (b) self-assessed tax, and other dues related to the return of the current tax period; (c) any other amount payable under this Act or the rules made thereunder including the demand determined under section 73 or section 74. (9) Every person who has paid the tax on goods or services or both under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both. Explanation.--For 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.....
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.... of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person. (c) subject to the provisions of Section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under Section 39. Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment. Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a 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....
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....in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under Section 39. Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon recipient of the last lot or instalment. Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a 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 [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. 75. Thus, under the substantive provision for availing Input Tax Credit (ITC) is Section 16 of the GST Act, cond....
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.... 09.10.2019. 82. Insertion of Rule 36(4) into the respective GST Rules in the year 2019 was intended to not only protect the interests of the Government but also the dealers / registered tax payers under the respective GST enactments so that they are not later exposed to recovery proceedings if the tax was not indeed paid by the supplier of goods and / or service. 83. That apart, credit availed under the respective regimes were and are provisional and could and can be called upon to be paid back or reversed. In this connection, a reference is also made to the decision of the Hon'ble Supreme Court in "The State of Karnataka Vs. M/s.Ecom Gill Coffee Trading", (2023) 18 SCC 809 : (2023) 111 GSTR 1 : 2023 SCC OnLine SC 248, wherein it was held as under:- "22. In view of the above and for the reasons stated above and in absence of any further cogent material like furnishing the name and address of the selling dealer, 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 asses....
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....e scheme of the statute and to fulfill its purposes. 87. In "B.R.Enterprises Vs. State of U.P.", (1999) 9 SCC 700, which was followed by the Hon'ble Supreme Court in Calcutta Gujarati Education Society (cited supra), the Court held as under:- "First attempt should be made by the courts to uphold the charged provision and not to invalidate it merely because one of the possible interpretations leads to such a result, howsoever attractive it may be. Thus, where there are two possible interpretations, one invalidating the law and the other upholding, the latter should be adopted. For this, the courts have been endeavouring, sometimes to give restrictive or expansive meaning keeping in view the nature of legislation, maye beneficial, penal or fiscal etc. Cumulatively, it is to subserve the object of the legislation. Old golden rule is of respecting the wisdom of legislature that they are aware of the law and would never have intended 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 ....
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....holds that the expression 'dealer or class of dealers' occurring in Section 9(2)(g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with Section 50 of the Act where there is no mismatch of the transaction in Annexure 2A and 2B. Unless the expression 'dealer or class of dealers' in Section 9(2)(g) is 'read down' in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution. 54. The result of such reading down would be that the Department is precluded from invoking Section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bonafide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department 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 co....
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....n would be in addition to tax invoices, particulars of payment etc., as held by the Hon'ble Supreme Court in M/s.Ecom Gill Coffee Trading Private Limited. 135. In the light of the above decision of the Hon'ble Supreme Court and in the light of the above discussion, we hold that the challenge to the impugned orders in T.C.Nos.19 to 21 of 2022 has to fail. Considering the fact that there is no challenge by the Commercial Tax Department insofar as the benefit of decision of this Court in Jinsasan Distributors case referred to supra has been conferred the rights that have already crystallized in favour of the assessee's/petitioners in T.C.Nos.19 to 21 of 2022 alone are not disturbed. Since the cases have been remitted back, these petitioners shall file their reply within 30 days. The authority shall pass orders in the light of the observation contained herein." 93. This view also cannot be applied in the changed circumstances under the GST enactments. To allow Input Tax Credit (ITC) without any restrictions is to encourage even ineligible credit being availed which are passed on by unscrupulous persons by merely obtaining GST registration. 94. Similarly, the decision of ....
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....er reduced to 10% and thereafter reduced to 5% was removed by amendment to Rule 36(4) vide Notification No.40/2021- Central Tax (CT) dated 01.01.2022 / 10th (Amendment) Rules, 2021 under CGST Rules and vide Notification No.SRO A/24(d)/2021 dated 30.12.2021 / 10th (Amendment) Rules, 2021 under TNGST Rules. 99. In our view, the amendment to Rule 36(4) starting from Notification No.49/2019-Central Tax (CT) dated 09.10.2019 / 6th Amendment Rules, 2019 as far as CGST Rules and Notification No.SRO A-39(a)/2019, dated 11.10.2019 / 6th Amendment Rules, 2019 as far as TNGST Rules allowing restricted availment of Input Tax Credit (ITC) at 20%, thereafter at 10% and later at 5% was intended to benefit the recipient to ensure that at least a portion of the Input Tax Credit (ITC) was available pending furnishing of the documents with regard to return by the supplier of goods or service. 100. This restricted availment of Input Tax Credit (ITC) itself has been now phased out in the IT system, since the IT system has been fully evolved with the incorporation of Form GSTR 2A vide Notification No.79 dated 15.10.2020. Credit will be auto-populated. Therefore, the credit is available which is au....