TaxTMI 
TaxTMI 
2026 (3) TMI 1674
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....ution of India and strike down the same; (b) Alternatively, issue a Writ of mandamus, or a Writ in the nature of mandamus, or any other appropriate Writ, Order or directions, reading down Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 in such a manner which allows the benefit of ITC to bona fide recipients such as the Petitioner which has complied with all the other conditions under Section 16(2) of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 despite any fault/lapse or non-payment of tax to the Government by the suppliers; (c) Issue a Writ, order or directions in the nature of declaration or certiorari or any other writ, order or direction of like nature to declare Rule 36 (4) of the Central Goods and Services Tax Rules, 2017 and Karnataka Goods and Service Tax Rules, 2017 [Annexure B] as null and void and hold it to be ultra vires the Central Goods and Services Tax Act, 2017 and Karnataka Goods and Services Tax Act, 2017 as also declaring the same as unconstitutional being violative of Articles 14 and 19(1)(g), Article 265 and Article 300A of t....
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....goods or services or both including the obligation which is cast on the suppliers, thereby rendering the impugned provisions as manifestly arbitrary and falling foul of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India. Alternatively, petitioner has prayed for reading down of the aforesaid impugned provisions of the CGST / KGST Act in such a manner that allows the benefit of ITC to bona fide recipients such as, the petitioner which has complied with all other conditions under Section 16(2) of the CGST / KGST Act despite any fault / lapse or non-payment of tax to the Government by the suppliers. It was therefore contended that the petition deserves to be disposed of accordingly. 4. Heard learned Senior Counsel for the petitioner and learned counsel for the respondents as well as learned AGA and perused the material on record. 5. In addition to reiterating the various contentions urged in the petition and rejoinder / reply filed by the petitioner and the material on record, learned Senior Counsel for the petitioner submits that the impugned provisions are manifestly arbitrary, ultra vires and unconstitutional falling foul of Articles 14, 19(1)(g), 265 and 300A of....
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.... Chunni Lal Parshadi Lal vs. Commissioner of Sales Tax, UP (1986) 2 (SCC) 501 14. Govindan & Co vs. The Sate of Tamil Nadu, (1975) 35 STC 50 (Mad.) 15. Sri vinayaga Agencies vs. Asst. Commr. (CT), 2013 SCC OnLine Mad 323 16. Bharat Steels vs. Commercial Tax Officer, 2015 SCC OnLine Mad 9136 17. Infiniti Wholesale Ltd. V. Assistant Commissioner, (2015) 82 VST 457 18. Assistant Commissioner vs. Infiniti Wholesale Ltd., [2017] 99 VST 341 (Mad) 19. Bharat Steel v.Commercial Tax Officer, 2015 SCC OnLine Mad 9136 20. Infiniti Wholesale Ltd. V. Assistant Commissioner, (2015) 82 VST 457 21. Assistant Commissioner vs. Infiniti Wholesale Ltd., [2017] 99VST 341 (Mad) 22. Commissioner of Central Excise, Jalandhar v. Mahajan Steel and Allied Industries, 2009 SCC OnLine P&H 6941 23. Shree Yarns vs. Assistant Commissioner, 2017 SCC OnLine Mad 5730 24. Lawrance Livingston vs. Commercial Tax Officer, 2019 SCC OnLine Mad 10993 25. R.S.Infra Trasmission Ltd., v. State of Rajasthan, 2018 SCC OnLine Raj 3587 26. The State of Madras vs. Radio and Electricals Ltd., and Anr, 1966 SCC OnLine....
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....l) 54. Best Corp Science Pvt.Ltd., vs. Principal Commissioner CGST Commissionerate, (2024) 22 Centax 531 (DeL) 55. Commissioner Trade and Tax, New Delhi vs. Shanti Kiran (P) Ltd., (2025) 35 Centax 222 (S.C.) 56. R.T. Infotech vs. Additional Commissioner, Grade 2 (2025) 31 Centax 204 (All) 57. Lokenath Construction Pvt. Ltd., vs. Tax/ Revenue Government of West Bengal, (2024) 18 Centax 97 (Cal) 58. Siddharth Enterprises vs. Nodal Officer, 2019 (29) GSTL 664 59. Kunj Behari Lal Butail vs. State of H.P. (2000) 3 SCC 40 60. Global Energy Pvt.Ltd., vs. Central electricity Regulatory Commissioner, (2009) 15 SCC 570 61. Petroleum and Natural Gas Regulatory Board vs. Indraprastha Gas Limited, (2015) 9 SCC 570 62. Bimal Chadnra Banerjee vs. State of M.P., 1970 (2) SCC 467 63. UoI vs. Intercontinental Consultants and Technocrafts Pvt.Ltd., (2018) 4 SCC 669 64. Indian Express Newspaper (Bombay) Pvt. Ltd., vs. UoI, (1985) 1 SCC 641 65. Babaji Kondaji Garad vs. Nasik Merchants Co-operative Bank Ltd., (1984) 2 SCC 50 66. Gupta modern Breweries vs. State of J&K, (2007) 6 SCC 317 ....
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....VAT with the Government, then the purchaser dealer would not be entitled to claim the benefit of entry tax credit and the said aspect is not examined by the Tribunal. 9. We do not find that the matter can be stretched to that extent as sought to be canvassed. Once the purchaser dealer-assessee satisfactorily demonstrates that while purchasing goods, he has paid the amount of VAT to the selling dealer, the matter should end so far as his entitlement to the claim input tax credit. If the selling dealer has not deposited the amount in full or a part thereof, it would be for the Revenue to proceed against the selling dealer. But thereby the benefit of input tax credit cannot be deprived to the purchaser dealer." 10. The Division Bench of the Delhi High Court in the case of On Quest Merchandizing India's case supra, held as under: "39. Applying the law explained in the above decisions, it can be safely concluded in the present case that there is a singular failure by the legislature to make a distinction between purchasing dealers who have bona fide transacted with the selling dealer by taking all precautions as required by the DVAT Act and those that have not. Ther....
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....x would be worse, the interpretation would give result to an absurdity. Such a construction has to be avoided. In other words, the genuineness of the certificate and declaration may be examined by the taxing authority, but onus cannot be put on the assessee to establish the correctness or the truthfulness of the statements recorded therein. The authorities can examine whether the Form VAT C-4 was bogus and was procured by the dealer in collusion with the selling dealer. The department is required to allow the claim once proper declaration is furnished and in the event of its falsity, the department can proceed against the defaulter when the genuineness of the declaration is not in question. However, an exception is carved out in. The event where fraud, collusion or connivance is established between the registered purchasing dealers or the immediate preceding selling registered dealer or any of the predecessors selling registered dealer, the benefit contained in Form VAT C-4 would not be available to the registered purchasing dealer. The aforesaid interpretation would result in achieving the purpose of the rule which is to make the object of the provisions of the Act workab....
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....ved earlier, Section 9(2) is an exception to the general rule granting input-tax credit to dealers who qualify for the benefit. The conditions for operation of the exception are well defined. The absence of any condition such as the one spelt out in clause (g) and its addition in 2010, rules out legislative intention of its being a mere clarification of the law which always existed." 43. The Petitioners have argued that Section 9(2)(g) also suffers from the vice of arbitrariness and is, on that ground, hit by Article 14 of the Constitution. There is some uncertainty as of today on whether a law can be struck down only on the ground of arbitrariness thereby attracting Article 14 of the Constitution. This doubt has been created by the decision of the Supreme Court in Rajbala v. State of Haryana (supra) and Binoy Viswam v. Union of India (2017) 7 SCC 59 the correctness of both of which has been doubted by the Supreme Court in its recent 3:2 decision in Shayara Bano v. Union of India 2017 (9) SCALE 178, invalidating triple talaq where, in the majority opinion of Justice R. F. Nariman, after noting that the decision in State of Andhra Pradesh v. McDowell & Co. (1996) 3 SCC 709 ....
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....(2)(g) of the DVAT Act as it stands. In M/s. Mahalaxmi Cotton Ginning Pressing & Oil Industries v. State of Maharashtra (supra) the Bombay High Court was concerned with interpreting Section 48(5) of the MVAT Act, which reads as under: "(5) For the removal of doubt it is hereby declared that, in no case the amount of set off or refund on any purchase of goods shall exceed the amount of tax in respect of the same goods, actually paid, if any, under this Act or any earlier law, into the Government Treasury except to the extent where purchase tax is payable by the Claimant dealer on the purchase of the said goods effected by him: Provided that, where tax levied or leviable under this Act or in earlier law is deferred or is deferrable under any Package Scheme of Incentives implemented by the State Government, then the tax shall be deemed to have been received in the government treasury for the purposes of this sub-section." 46.2 It can straightway be seen that Section 48(5) of the MVAT Act is not an exact replica of Section 9(2)(g) of the DVAT Act. For instance, Section 48(5) of the MVAT Act requires the selling dealer to have "actually paid" the tax collected....
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....e of Madras (1962) 13 STC 98 (SWC); AIR 1962 SC 1037, whether the tax is passed on by the selling dealer to the purchasing dealer is a matter of their contractual understanding. Once that is the position that has held the field in our jurisprudence for over fifty years and has been reiterated in Khazan Chand v. State of Jammu and Kashmir (1984) 56 STC 214 (SC); AIR 1984 SC 762 and Central Wines v. Special Commercial Tax Officer (1987) 65 STC 48 (SC); (1987) 2 SCC 371, by the Supreme Court, a dealer cannot obviate his liability to pay tax on his sale transaction, by claiming a set off and placing the responsibility to recover tax on an earlier link in the chain on the Revenue. To test the constitutionality of Section 48(5) one must ask oneself whether the legislature has acted discriminatorily or whether the provision is facially or ex facie discriminatory. Neither is the object or effect of Section 48(5) discriminatory. The State legislature was not bound to grant a set off. If the legislature had not granted a set off, that would not have a bearing on its competence or on constitutionality, since a tax on the sale of goods falls within the purview of Entry 54. In granting a set of....
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.... pay tax being essentially on the selling dealer. It was held there that a selling dealer cannot obviate his liability to pay tax on his 'sale transaction' by claiming set off and placing the responsibility to recover tax on an earlier link in the chain on the Revenue. It proceeds on the basis that the State Legislature is not "bound to grant a set off". It further states that the Legislature cannot be "compelled to grant a set-off, ignoring the conditions which it imposes". 46.6 In the present case, the conditions imposed for the grant of ITC are spelt out in Sections 9 (1) and (2) of the DVAT Act and have been adverted to earlier. The claim of the purchasing dealer in the present case is not that it should be granted that ITC de hors the conditions. Their positive case is that each of them, as a purchasing dealer, has complied the conditions as stipulated in Section 9 and therefore, cannot be denied ITC because only selling dealer had failed to fulfil the conditions thereunder. More importantly, the Court finds that there is no provision in the MVAT Act similar to Section 40A of the DVAT Act. Section 40A of the DVAT Act takes care of a situation where the selling dealer ....
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....the tax liability. 47.2 The provision under challenge in Jayam & Co. v. Assistant Commissioner (supra) was Section 19 (20) of the TNVAT Act which reads as under: "(20) Notwithstanding anything contained in this section, where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him, the amount of the input tax credit over and above the output tax of those goods shall be reversed." 47.3 Here again, it can be seen that Section 9(2)(g) of the DVAT Act is differently worded. Three conditions that were mandated by the above provision as noted by the Supreme Court were as under: "(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." 47.4 The Court in Jayam & Co. went strictly by the wording of the above provi....
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.... The second situation which summons its aid is where the provisions of the statute are vague and ambiguous and it is possible to gather the intention of the legislature from the object of the statute, the context in which the provision occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend or bend it even if such recasting is in accord with good reason and conscience. In such circumstances, it is not possible for the Court to remake the statute. Its only duty is to strike it down and leave it to the legislature if it so desires, to amend it. If the remaking of the statute by the courts is to lead to its distortion that course is to be scrupulously avoided. The doctrine can never be called into play where the statute requires extensive additions and deletions." 52. It was further explained in the same decision as under: "The Courts, though, have no power to amend the law by process of interpretation, but do have power to mend it so as to be in conformity with the intendment of the legislature. Doctrine of reading down is one of the princ....
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....st Merchandizing India's case supra and held as under: "On hearing Learned Additional Solicitor General appearing for the petitioner, we are not inclined to interfere with the impugned order. The special leave petition is dismissed. 2. Learned Additional Solicitor General, however, submits that a batch of petitions were decided by the impugned order and there are some of the case where the purchase transactions are not bona fide like the present case and those case ought to have been remitted back to the competent authority. 3. Learned Additional Solicitor General Submits that the petitioner would move the High Court with necessary particulars for directions in this behalf for which liberty is granted, as prayed for. 4. Pending applications(s), if any, stand disposed. Of." 12. In Onyx Design's case supra, this Court followed the aforesaid judgments and held as under: "12. From the aforesaid rulings, it is clear that the benefit of input tax cannot be deprived to the purchaser dealer, if the purchaser dealer satisfactorily demonstrates that while purchasing goods, he has paid the amount of tax to the selling dealer. If the selling deal....
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....usly where a person is not connected with any such event or an act. Law cannot envisage an almost impossible eventuality. The onus upon the assessee gets discharged on production of Form VAT C-4 which is required to be genuine and not thereafter to substantiate its truthfulness by running from pillar to post to collect the material for its authenticity. In the absence of any mala fide intention, connivance or wrongful association of the assessee with the selling dealer or any dealer earlier there-to, no liability can be imposed on the principle of vicarious liability. Law cannot put such onerous responsibility on the assessee otherwise, it would be difficult to hold the law to be valid on the touch tone of articles 14 and 19 of the Constitution of India. The rule of interpretation requires that such meaning should be assigned to the provision which would make the provision of the Act effective and advance the purpose of the Act. This should be done wherever possible without doing any violence to the language of the provision. A statute has to be read in such a manner so as to do justice to the parties. If it is held that the person who does not deposit or is required to deposit the....
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....lidly registered selling dealers who have issued tax invoices in accordance with the Act where there is no mismatch of the transactions. It was observed that unless the expression "dealer or class of dealers" in section 9(2)(g) "read down" in the above manner, the entire provision has to be held to be violative of article 14 of the Constitution. It is also significant to note that the said judgment has been confirmed by the honourable apex court. 16. The reasonings of the prescribed authority for disallowing the input-tax credit recorded in the assessment order are quoted hereunder: "The reply filed by the assessee was studied in detail. It is true that the dealer has effected purchases from the dealers who have been registered under the provisions of the KVAT Act, 2003. While some of them have been subsequently de-registered, others were still filing returns during the assessment year. However, in all the cases where input credit is proposed to be disallowed, it is very much true that those dealers have not remitted the taxes collected from the assessee. This would lead to substantial loss of revenue to the State. Since the amount collected by the assessee is not....
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....he registered selling dealer depositing the said collected tax amount in full or a part thereof. The charging provision of section 3 provides that the tax shall be levied on every sale of goods in the State by a registered dealer or a dealer liable to be registered in accordance with the provisions of the Act. Further, the tax shall also to be levied, and paid by every registered dealer or dealer liable to be registered on the sale of taxable goods to him for use in the course of his business, by a person who is not registered under this Act. Indisputably, the petitioner has purchased the goods from a registered dealer not from an unregistered dealer. Section 9 of the KVAT Act provides collection of tax by registered dealers. If there is any default on the part of such registered dealers in not remitting the tax, so collected into the Government treasury or any designated bank and furnish monthly returns as specified under section 35 to the prescribed authority, the proceedings are required to be initiated against such registered selling dealers in accordance with the provisions of the KVAT Act. 18. The Division Bench of this court in the case of Bhavani Enterprises (2019)....
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....-prescribed authority shall reconsider the matter in accordance with law keeping in mind the observations made hereinabove and after providing an opportunity of hearing to the petitioner shall conclude the reassessments in an expedite manner. 23. Writ petitions stand disposed of in terms of the above." 13. Subsequently, in Jain Steel's case supra, this Court relied upon Onyx Design's case supra and held as under: "7. Having heard the learned counsel appearing for the parties and perusing the material on record, it is ex fade apparent that the assessing authority has denied the input tax credit mainly on the ground that the selling dealer has not deposited the taxes collected. It is recorded that the selling dealer-M/s. Sai Baba Industries, Tumkur TIN : 29290220285, has not filed monthly returns in VAT-100s from December 2014 onwards; it clearly goes to prove that the petitioner has not paid output taxes payable to the Government. There is no dispute regarding the genuineness of the purchase made by the petitioner-purchasing dealer. The assessing authority sans examining the transaction of the petitioner inasmuch as the payment of taxes made to the sell....
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.... false or fake. A dealer entering into a genuine transaction of purchase always knows the existence and identity of selling dealer. Considering these aspects, the Division Bench has held that these questions remains finding of fact, not giving raise to any question of law and has restored the penalty. 11. There is no cavil on the said legal proposition. Now, the fulcrum of dispute is whether the assessee has discharged the burden of proving the claim of input tax credit on the payment of taxes alleged to have been made. Without examining the same, merely on the ground that no selling dealer has deposited the collected taxes, input tax credit has been denied. This factual aspect requires to be reconsidered by the assessing authority in the light of the judgments referred to above. 12. Even as regards denial of input tax credit relating to the purchase of old used machinery from M/s. Saibaba Industries claimed as capital goods by the assessee is not supported by any satisfactory reasons. 13. For the aforesaid reasons, the assessment order impugned deserves to be set aside. Accordingly, the impugned order and the demand notice both dated March 30, 2019 at an....
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....sub-section (2) of Section 9 made ITC benefit available to a purchasing dealer only when the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period. Reading down clause 2 2 DVAT Act (g) of sub-section (2) of Section 9, in On Quest Merchandising India (supra), the Delhi High Court held: "62. In light of the above legal position, the Court hereby 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 transactions in Annexures 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. 63. The result of such reading down would be that the Depart....
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....lling dealer in case the selling dealer had failed to deposit the tax collected by it. 2. It is submitted that the Delhi High Court has observed that the provisions of section 9(2)(g) of the Delhi Value Added tax Act, 2004 can be read down and the demand raised against the purchasing dealers, who have entered into bona fide transaction, cannot be sustained. It is also submitted that the special leave appeal against the said judgment of the Delhi High Court has already been dismissed by the honourable Supreme Court on January 10, 2018 vide petition for Special Leave to Appeal No. 36750 of 2017 [Commissioner of Trade and Taxes v. Arise India Limited, (2024) 129 GSTR 542 (SC); 2018 SCC OnLine SC 3859.]. 3. Mr. S.C. Keyal, learned Standing Counsel, CGST and Mr. B. Gogoi, learned counsel for the respondent State are not in position to dispute the fact that the controversy raised in these writ petitions is squarely covered by the decision of the Delhi High Court rendered in On Quest Merchandising India Pvt. Ltd. [On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi, (2018) 56 GSTR 177 (Delhi); 2017 SCC OnLine Del 11286.]. 4. Before the Delhi Hig....
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....rchase 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 transactions in annexures 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 bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that 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 come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under section 40A of the DVAT Act." 6. The hono....
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....efraud the Revenue as hereunder: "1) The Challenge in this writ petition is primarily to the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017( for shot ' the Act') In additional In addition, petitioner has also sought for quashing of an order dt.17.5.2022 issued by the Assistant Commissioner, Central Goods and Services Tax, Tripura Division-I, Agartala (Respondent no. 3) confirming a demand of Rs. 1,11,60,830/- along with interest and penalty under section 73 of the said Act. The factual background to the filing of the Writ Petition: 2) The petitioner, a proprietary concern engaged in trading of rubber products, had purchased different products from M/s Sentu Dey (for short "supplier/ Respondent no. 4") on due payment of Goods and Services Tax (for short 'GST') and further sold them as such. These transactions took place between July, 2017 to January,2019 involving GST of Rs. 1,11,60,830/- which it had paid to its vendor/supplier. 3) On an investigation by officers of the Enforcement Branch of the CGST Commissionerate, Agartala of the supplier Company, it was discovered that the respondent no. 4 was supp....
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....l validity of Section 16(2)(c) of the Act as violative of Art.14,19(1)(g) and 300-A of the Constitution of India and also challenging the order dt.17.5.2022 passed by the respondent no. 3. 10) The respondents 2 and 3 filed counter affidavit refuting the pleas of the petitioner and contended that there is no basis to say that Section 16(2)(c) of the Act is violative of above provisions of the Constitution and contended that it is valid in all respects. They also contended that Courts must be slow in inferring unconstitutionality of taxing statues as legislature has lot of freedom in enacting such laws. According to them the impugned order dt.17.5.2022 does not suffer from any defect or error and should be sustained. Consideration by the Court: 11) Section 16 deals with eligibility and conditions for taking ITC. The said section to the extent relevant for our consideration states: "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 input tax charged on....
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....yable 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 9[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) ...... (4) ... ... [Provided ... ... [(5) ... .... (6) " (emphasis supplied) 12) Section 16(2)(c) of the Act thus denies to an assessee availment of ITC in relation to supply of goods or services or both if tax charged in respect of such supply has not been actually paid to the Government or through utilization of input tax credit admissible in respect of the said supply. 13) Rule 36 of the Central Goods and Services Tax Rules, 2017 is also relevant and it states: "Rule 36: Documentary Requirements and Conditions for claiming Input Tax Credit: (1) The input tax credit s....
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....or services. The purchaser/dealer then avails the tax paid to the supplier as ITC in its Electronic Credit Ledger and offsets its partial liability by using the said ITC and the tax collected on the profit margin is paid in cash. The concept of ITC is to avoid burden of double taxation on the tax payer. 15) Section 16 deals with the eligibility conditions to avail ITC. Section 16(2)(c) allows availment of ITC to the purchaser only when the supplier had discharged the output liability through cash or by using ITC. But if the supplier has not paid the tax to the Government, the purchaser is not eligible to avail ITC. 16) The fact that there is no mechanism with the recipient of goods to verify whether the supplier has discharged its liability to the Government, or not, is not disputed by respondents. In view of this, it is impossible for the purchaser to check whether the supplier has deposited the tax paid by him to the Government and then avail ITC. Also the supplier is not normally under the control of the purchaser. It is not disputed that it is not possible for a purchaser to keep a check on activities of its supplier or ensure that the latter makes over to the....
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.... 24) Reading down a provision is undoubtedly an accepted method to save it from the vice of unconstitutionality. It would be appropriate in the instant case too to adopt the said principle. 25) In B.R. Enterprises v. State of U.P. (1999) 9 SCC 700 : (2000) 120 STC 302, at page 764, the situation where such a principle of reading down can be applied is explained in the following terms: "81. ..... 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 the Preamble, Objects, the scheme of the Act, its historical backgro....
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....ich the stringent step of prosecution is considered not necessary. The option is with the Commissioner and if he thinks levy of penalty would achieve the purpose of collection of the tax he can have recourse to the provisions of Section 22(4-A). Before levying a penalty under Section 22(4-A), the Commissioner shall give reasonable opportunity of being heard as to why the penalty should not be levied. Reading the two provisions harmoniously, we are of the view that the discretion is given to the Commissioner to resort to one of the two remedies as the facts of the case may require. In graver cases he will be justified in taking the drastic remedy and resorting to prosecution in the criminal court if he is satisfied that such a course is necessary for the collection of the tax expeditiously. If the discretion is not properly exercised the court may be justified in interfering in such cases but the law cannot be held to be invalid." (emphasized supplied) 27) A provision similar to Section 16(2)(c) of the Act also existed in Section 9(2)(g) the Delhi Value Added Tax Act, 2004. 28) This provision was considered by the Delhi High Court in Quest Merchandising In....
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....transacting with the selling dealer, somehow ensure that the selling dealer does in fact deposit the tax collected from the purchasing dealer and if the selling dealer fails to do so, undergo the risk of being denied the ITC. Indeed section 9(2)(g) of the DVAT Act places an onerous burden on a bona fide purchasing dealer. ....... ... 53. . In light of the above legal position, the Court hereby 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 transactions in Annexures 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 bona fide entered into a purc....
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....he Supreme Court in M/s Arise India (4 supra) and held: "In light thereof, as we find that there is no dispute regarding the selling dealer being registered on the date of transaction and neither the transactions nor invoices in questions have been doubted, based on any inquiry into their veracity, we do not find a good reason to interfere with the order of the High Court directing for grant of ITC benefit after due verification. The appeals lack merit and are, accordingly, dismissed." 32) The contention of the Dy. Solicitor General of India that the judgments of the Supreme Court in M/s Arise India (4 Supra) and in Commissioner Trade and Tax, Delhi 6 supra) are not binding precedents, cannot be countenanced. 33) This is because in the former case, the Solicitor General, who is the law officer of the Union of India, himself wanted to pursue cases pending in the Delhi High Court where the transactions were not bona fide, thus implying that the Government had accepted the basis of the judgment. In the latter case, the Supreme Court applied to the facts of the said case the principle that if the transactions are not doubted, ITC cannot be denied. When ....
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.... (c) Madhya Pradesh High Court in M/s Shree Krishna Chemicals v. Union of India 2025 (2) TMI 1006 (M.P) (d) Madras High Court in M/s Baby Marine (Eastern) Exports v. Union of India and others 2025 (8) TMI 791 (Madras) (e) Andhra Pradesh High Court in Thirumalakonda Plywoods v. assistant Commissioner 2023 SCC Online AP 1476. 40) In the opinion of these High Courts, the legislature must enjoy a wide and flexible power to enable it to adjust its system of taxation in proper and reasonable ways, though it is permissible to declare a taxation statute as unconstitutional if it infringes the fundamental rights guaranteed under part III of the Constitution; that input tax credit is in the nature of a benefit or concession extended to the dealer under the statutory scheme ; even if it held to be an entitlement, this entitlement is subject to the restrictions as provided under the scheme or the statute; and that claim to input tax is not an absolute right, but it can be said that it is an entitlement subject to the conditions and restrictions as envisaged in Section 16(2) to 16(4), Section 43, and the Rules made thereunder. They hold that as per the scheme....
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.... taxation and they have to be interpreted, they cannot be so interpreted as to tax the subject twice over to the same tax If any double taxation is involved, the legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over." 22. The above referred cases make it clear that there is no prohibition as such on double taxation provided that the legislature contains a special provision in this regard. Now, the only question that remains to be decided is whether in fact there is a specific provision for including the income earned from the Sikkim lottery ticket prior to 1-4-1990 and after 1975, in the income tax return or not. We have gone through the relevant provisions but there seems to be no such provision in the IT Act wherein a specific provision has been made by the legislature for including such an income by an assessee from lottery ticket. In the absence of any such provision, the assessee in the present case cannot be subjected to double taxation." (emphasis supplied) 45) We do not find anything in the language of the Act which expressly enable....
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....ura State GST authorities and it was found liable to pay Rs. 19,74,32,052.63/- on account of tax, interest and penalty under SGST and CGST Acts and an amount of Rs.53,93,605/- each of SGST and CGST was recovered for the period August 2017 to February 2018 and Rs. 4,86,901/- towards CGST and Rs. 5,86,126/- towards SGST was recovered for the period April, 2018 to August,2018. It is stated that this recovery was done till 6-7-2020. 52) The respondent no. 4 has also filed a counter affidavit on 22.8.2023 stating that it's GST registration has been suspended/cancelled since 21.1.2020 and criminal cases have also been filed against it. 53) Importantly, the Assistant Commissioner (Respondent no. 3) had invoked only Section 73 of the Act against the petitioner and issued a Show Cause notice to petitioner on 7.1.2021 which resulted in the impugned order dt.17.5.2022. Section 73 lays down the procedure for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts. 54) The fact that Section 74 of the Act which lays down the pro....