TMI Blog2018 (10) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions, there would arise a need for making transitional arrangements. In the present case, the source of the petitioner's grievance or dissatisfaction is that the inputs and capital goods are treated differently. When we find that the inputs and capital goods form different and distinct classes, the question of subclassification or artificial demarcation would not arise - it appears that the suggestion of the respondents is that unlike inputs, the capital goods which can be in the nature of plant and machinery including highly sophisticated specially designed and manufactured machines, may take much longer time for delivery and installation after the orders are placed by the manufacturers and the legislature was not inclined to keep the issues of migration of tax credits and pending claims open for indefinite period of time. If it is accepted that there is no time period for claiming input tax credit as contained in section 19(11), the provision would become too flexible and would give rise to large number of disputes including of verification of claim of input credit. Taxing statutes contained self contains scheme of levying computation and calculation of tax. The time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable both in relation to inputs as well as capital goods. The statute also makes provisions to enable the assessee to avail the credit of duty paid on inputs which were in transit as on 01.07.2017. However, when it comes to the question of taking credit of the duty paid on the capital goods in transit and received on or after 01.07.2017, no facility is provided to enable the assessee to claim credit of the excise duty paid on such capital goods. This is where the grievance of the petitioner arises. 5. Shri Nainawati appearing for the petitioner, drew our attention to the relevant statutory provisions. His main focus was on section 140 of the CGST Act and particularly subsection (5) thereof which provides that 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 but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document was recorded in the books of account of such person within a period of thirty days from the appointed da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Subrule (1) of rule 57Q essentially provided the benefit of duty paid on capital goods used by the manufacturer in his factory for payment of duty of excise leviable on its final product subject to conditions contained therein. Term capital goods defined in the definition below subrule (1). Subrule (2) of rule 57Q provided that notwithstanding anything contained in subrule (1), no credit of the specified duty paid on capital goods shall be allowed if such duty has been paid on such capital goods before first day of March 1994. Thus, this rule for the first time granted the facility of utilizing the specified duty paid on capital goods used by the manufacturer in the factory discharging its duty liability but restricted the application thereof to the duty which was paid on such capital goods after 01.03.1994. 8. CENVAT credit Rules, 2004, also granted similar benefits. Term capital goods was defined in rule 2A. Rule 3 of the CENVAT credit Rules, 2004, pertains to CENVAT credit. Subrule (1) of rule 3 provided that a manufacturer or producer of final products or a provider of output service shall be allowed to take credit to be called CENVAT credit of the various duties specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, the input tax credit on the said tax component shall not be allowed. 11. Section 17 of CGST Act pertains to apportionment of credit and blocked credits. Subsection (1) of section 17 provides that where the goods or services or both are utilized by the registered person partially for the purpose of any business and partially for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. Likewise, subsection (2) of section 17 provides that where the goods or services or both are used by the registered person partially for affecting taxable supplies including zero rated supplies and partially for exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero rated supplies. 12. Rule 43 of the Central Goods and Service Tax Rules, 2017 ('CGST Rules' for short) provides the manner of determination of input tax credit in respect of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person was entitled in respect of the said capital goods under the existing law. (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 but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day: Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days: Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this subsection. 14. These statutory provisions make a few things clear. Facility to avail credit on excise duty paid on capital goods used by the manufacturer in his factory for discharging duty liability on the finished products was made available under rule 57Q of the Central Excise Rules, 1945 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately preceding the appointed day under the existing law in such manner as may be prescribed. Subsection (2) of section 140 provides that the registered person other than one opting to pay tax on composition basis shall be entitled to take in his electronic credit ledger credit of unavailed CENVAT credit in respect of capital goods not carried forward in return furnished under the existing law as may be prescribed. These provisions thus, enable an assessee to carry forward and take credit of unutilized CENVAT credit paid on inputs as well as on capital goods, of course in the manner as may be prescribed and subject to conditions contained in the said provision. Subsection (5) of section 140 however makes a distinction between the capital goods and inputs. It provides that a registered person shall be entitled to take credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty on tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transit. This demarcation itself would not be artificial, arbitrary or in any manner, discriminatory. The capital goods and inputs used in manufacturing process have always been treated differently and distinct treatment have been given under the earlier statutes. If the legislature therefore was of the opinion that in relation to capital goods in transit, duty paid before the appointed date cannot be claimed as a credit in the GST regime, we do not find that the distinction is in any manner artificial or arbitrary. 20. Article 14 as is wellknown, prohibits class legislation but not reasonable classification. To bring in the element of discrimination in terms of Article 14 of the Constitution, the onus would be on the petitioner to establish that the persons or things treated differently form a homogeneous class. In the present case, the source of the petitioner's grievance or dissatisfaction is that the inputs and capital goods are treated differently. When we find that the inputs and capital goods form different and distinct classes, the question of subclassification or artificial demarcation would not arise. One of the grounds cited in the affidavit in reply filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry that exact wisdom and nice adoption of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience . Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Reig Refining Company 94 Lawyers Edition 381 be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six months from the date of the documents specified in the proviso. The contention that such amendment would take away an existing right was rejected. In case of State of Gujarat v. Reliance Industries Limited, reported in [2017] 16 SCC 28 it was held and observed that how much tax credit should be given and under what circumstances, is a domain of a legislature. 24. In a recent judgment dated 12.10.2018, in case of ALD Automative Pvt. Ltd. v. The Commercial Tax Officer, the Supreme Court confirmed the judgment of the Madras High Court upholding validity of section 19(20) of Tamilnadu Value Added Tax Act, 2006, the special provision provides that in case of any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before the end of the financial year or before 90 days from the date of purchase whichever is later. This provision thus provided time limit for a dealer to claim tax credit in respect of transaction of taxable purchase. This provision was attacked on the ground that it laid down restrictions on enjoyment of input tax credit which the main provision granting such facility do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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