TMI Blog2022 (5) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... liability. Therefore, the tax payment through the electronic credit ledger is a legally recognized mode of payment under the GST Act. In fact, it is settled legal position that the input tax credit is as good as tax paid by the assessee. Thus, the payment of tax by utilization of the tax credit is a valid mode of payment. The denial to release refund/ reimbursement on the ground that only part amount has been paid by the writ-applicants through the electronic cash ledger is not legally tenable - It may not be out of place to state that the fact that the output tax even in respect of this contract has been paid through the electronic credit ledger does not mean that the input tax credit is claimed in respect of this contract. There is a difference between availment of the input tax credit and the utilization of the input tax credit. Insofar as the passing of the benefit of the input tax credit is concerned, the input tax credit factually availed qua the contract is to be calculated. This is clear from the terms of the order of the Ministry of Railways as well as the JPO. However, insofar as the utilization of the input tax credit from the electronic credit ledger is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the Gujarat Value Added Tax Act, 2003 (for short, the VAT Act ). It appears that the writ-applicants had opted for a lump sum tax scheme and hence their tax liability under the VAT Act was 0.6%. Further, the service tax in respect of the construction contracts pertaining to the railways was exempt by virtue of the Mega Exemption Notification No.25/2012 issued under the Finance Act, 1994. 6. The GST regime was introduced in the country w.e.f. 1.7.2017. The VAT as well as the service tax was subsumed in the GST Act. It is not in dispute that the applicable rate of tax under the GST Act in case of the writ-applicants is 12%. 7. The contractors preferred a representation with the Railways for granting reimbursement of the additional tax liability under the GST Act in respect of the contracts which were entered into prior to the GST regime. This was particularly because the GST Act has conferred a right to the suppliers of goods or services to collect tax from the recipients by way of issuance of tax invoice. 8. Having regard to the representations made by the contractors, the Railways Board issued an order dated 27.10.2017 giving instructions to all the Railway Divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible in respect of other contracts. 16. The writ-applicants received a letter from the Deputy Engineer on 7.5.2019 again alleging that as against the tax refund/reimbursement of Rs.1,23,02,620=00 claimed by the writ- applicants, the tax of only Rs.33,92,980=00 was paid through the electronic cash ledger. The writ-applicants were asked to furnish the details of other contracts and input tax credit claimed qua such contracts. 17. Thereafter, it appears that the writ-applicants lodged a complaint dated 10.5.2019 with the Chief Engineer complaining that the refund/reimbursement was being withheld despite the fact that all the details as called for had been provided. The writapplicants further pointed out that the details of the other contracts which were irrelevant were being called for. 18. The writ-applicants, thereafter, received the impugned letter dated 13.5.2019 from the Deputy Engineer informing them that they would not be granted reimbursement of the GST amount since only a part amount of the tax was paid through the electronic cash ledger. 19. Several correspondences were exchanged between the writapplicants and the respondents and the writ-applicants gave their s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the GST Act of tax actually paid on the inward supply, which is legally admissible as credit for the purpose of payment of the output tax. There is no distinction between the tax paid through the electronic cash ledger and the tax paid through the electronic credit ledger. Therefore, the refusal to grant the refund on the basis that substantial amount is paid through the electronic credit ledger is not sustainable. The reliance is placed on the following judgements : (i) Eicher Motors Ltd. vs. Union of India and Another, (1999) 2 SCC 361. (ii) Jayaswal Neco Ltd. vs. Commissioner of Central Excise, (2015) 10 SCC 651. (b) The insistence on the part of the respondents to produce the details of other contracts with a view to establish as to the input tax credit in respect of which the contract has been utilized for making the payment of the output tax is absolutely unwarranted. At the outset, the Joint Procedure Order of the Western Railways clearly provides for contract-wise calculation of the refund/recovery. The supplementary agreement has also been entered into for the contract in question. A Chartered Accountant has certified that the GST-paid goods have not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts executed by the writ-applicants with the Railways are yet to be furnished and, therefore, the refund/reimbursement with respect to the present contract cannot be released. (c) While the pay order for grant of refund/reimbursement was generated, the respondents wanted to further verify the refund claim and, therefore, the same has been withheld. ANALYSIS : 25. The issue that arises for our consideration is, whether the respondents are justified in withholding the refund/ reimbursement in favour of the writ-applicants. 26. The Government of India, through the Ministry of Railways, had issued an order on 27.10.2017 for the GST neutralization of the contracts. The order reads as under : Government Of India Ministry Of Railways (Railway Board) New Delhi No. 2017/CE-I/CT/7/GST, dated 27.10.2017 To, As per list attached Sub: Impact of GST on Existing Works Contracts 1. Ministry of Railways have received a number of representations from Zonal Railways, railway contractors and contractors associations with a request that the increased tax liability due to implementation of GST should be borne by railways in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force before GST implementation i.e., Excise duty, VAT including VAT on Excise duty, Entry tax, Octroi duty, prevalent Service tax etc., irrespective of whether the same were actually paid by agency or not. 3.5 The rate reasonability and quantities of input materials for which ITC shall be available to the contractor, should be ensured by the executive with due care in consultation with associate finance. 3.6 Sample post checks of the compensation made to the contractor may be got undertaken by the GST consultant engaged by the Zonal Railways/Production Units. 3.7 Recovery, if any, which is required to be done from the contractors, may be regulated as per Section 171(1) of CGST Act, 2017. 4. This is issued with the approval of Board (ME, FC, CRB). (Prem Sagar Gupta) Executive Director/Civil Engineering(G)/Railway Board 27. Pursuant to such order, the Western Railways issued a Joint Procedure Order dated 21.1.2018 laying down the procedure for the GST neutralization based upon the policy of the Government of India. The relevant portion of the order reads thus : 4. The review for GST neutrality is to be done on a case to case basis on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in this worksheet and calculations should be duly certified by Statutory/Tax Auditor auditing books of the contractor. This worksheet shall be submitted for each of the bills, which may have already been passed as per provision of para 15 of this JPO and also for all other bills being processed after the notification of the GST for the contracts falling in the categories in para 1(i) and (iii) GST rates as applicable at the time of actual passing of bills will be adopted. The worksheet shall contain details of the quantities of all input materials/services procured for the particular work/ works. The contractor shall also certify that the invoices submitted for the work have not been/ will not be used for any other work to claim Input Tax Credit (ITC)/refund. The contractor shall also give a certificate that no refund claims of GST are pending settlement with the GST authorities. At the Railway end, the component of input materials/ services for SOR/USSOR items will be checked with reference to the rate analysis available in the SOR/USSOR, For NS items, the executive officer will carry out a detained rate analysis considering the input materials/services required for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w all the agreements to ensure that recovery is done, wherever due. The recovery shall be effected from the on account bills on hand and if no account bills are pending, the recovery shall be effected from the final bill/security deposit or any other dues. 28. It is germane to note that paragraph 4 of the JPO as above provides that the review for the GST neutrality is to be done on case-to-case basis. Further, it is provided in paragraph 8.2 as above of the JPO that a supplementary agreement is to be entered into by the executive with the contractor for dealing with the impact of the GST in individual contracts. Paragraph 8.6(b) of the JPO provides that the contractor will have to provide a worksheet for the tax liabilities before the GST and after the GST including the list of items for which the input tax credit is available for the work. It is further provided that the worksheet should contain the details of the quantities of the input materials/services procured for the particular works. Paragraph 8.6(c) of the JPO further provides that the contractor shall submit the original tax invoices for all the input material/services procured for the particular work in support of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unfortunate to note that the respondents have not been able to understand the basic scheme of the GST Act. The input tax credit is admissible under Section 16(1) of the GST Act of the tax paid on goods and services used in the course of the business. The input tax credit claimed by a taxable person gets credited into his electronic credit ledger. Such amount is the actual tax that such taxable person has paid to his supplier, which is further paid to the Government treasury. Thereafter, while making the payment of the output tax, Section 49 of the GST Act entitles a taxable person to utilize the balance available in the electronic credit ledger. Thus, the tax which was already paid by a taxable person is effectively allowed to be set off against the output tax liability. 33. Therefore, the tax payment through the electronic credit ledger is a legally recognized mode of payment under the GST Act. In fact, it is settled legal position that the input tax credit is as good as tax paid by the assessee. A reference may be made to a judgement of the Supreme Court in the case of Jayaswal Neco Ltd. (supra), wherein the following was observed after relying upon the earlier decisions : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as tax paid . 34. Thus, the payment of tax by utilization of the tax credit is a valid mode of payment. The denial to release refund/ reimbursement on the ground that only part amount has been paid by the writ-applicants through the electronic cash ledger is not legally tenable. The entire amount of the output tax paid under the GST Act in relation to the contract in respect of which the supplementary agreement has been entered into with the writ-applicants needs to be forthwith released irrespective of the fact, whether such amount has been paid through electronic cash ledger or through electronic credit ledger. 35. Insofar as the passing of the benefit of the input tax credit to the respondents is concerned, if no input tax credit is attributable to this particular contract since no GST-paid inputs have been used for the execution of the contract, then the question of passing of the benefit of the tax credit also does not arise. The certificate of the Chartered Accountant certifying that no GST-paid goods have been used for executing this particular contract is not refuted by the respondents. The terms of the JPO clearly envisage refund or recovery separately for each c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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