TMI Blog2023 (1) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be construed. The said provision unambiguously provides for migration of credit i.e. tax paid under the erstwhile tax regime and the words used in Section 140(1) of the JGST Act, namely, credit of amount of value added tax and entry tax is to be understood in the context in which it has been used - Admittedly, under the JVAT Act even entry tax was levied vide Section 11 and the said levy of entry tax was available as input tax credit for adjustment against output tax liability. TDS amount was also available for adjustment against output tax liability apart from the input tax credit which was available for adjustment against output tax liability. Proviso to Section 140(1) of the JGST Act provides that a registered person shall not be allowed to tax credit where the said amount of credit is not admissible as input take credit under the GST Act. It was contended by the Respondents that since TDS was in the nature of output tax, it was not admissible as input tax credit under the GST Act and, hence, cannot be allowed to be migrated. The Petitioners at the time of filing of their returns were left with no option but to forward the unadjusted TDS amount as excess input tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Goods Services Tax Act, 2017 [hereinafter referred to as GST Act, 2017 for short] it was also registered under the said Act. Admittedly, Petitioner filed its returns for the quarter ending 30th June, 2017 i.e. immediately before appointed date and was having an excess input tax credit [hereinafter referred to as ITC for short] of an amount of Rs. 1,73,69,826/-. The said amount comprised of Rs. 1,30,62,516/- pertaining to excess ITC and an amount of Rs. 43,07,310/- pertaining to unadjusted TDS deducted at source under Section 44 of the JVAT Act. The cumulative of the aforesaid amount in the return filed was carried forward as excess ITC to the next period as per Statutory Form JVAT-200 prescribed for filing quarterly returns. GST Regime was implemented with effect from 1st July, 2017, and in terms of Section 140(1) of the JGST Act, Petitioner was entitled to carry forward credit of value added tax reflecting in its return immediately preceding the appointed date and, accordingly, Petitioner claimed transition of the amount of credit of value added tax of Rs. 1,73,69,826/- by filing GST TRAN-1 online in GSTN Portal on 28th September, 2017. However, a Summary of Show Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, Petitioner vide its e-mail dated 2nd March, 2020 prayed before the Appellate Authority for withdrawal of its first appeal. However, interestingly, despite the aforesaid fact, Appellate Authority proceeded to adjudicate the first appeal and was pleased to confirm the original Summary of Demand contained in Form GST DRC-07, wherein migration of the amount of credit of value added tax of Rs. 1,73,69,826/- was disallowed vide its order dated 02.03.2020 passed in Appeal Case No. Appeal Case No. BK/GST-03/2019-20. 6. Interestingly, in the Appellate Order, reference of the e-mail dated 02.03.2020, wherein Petitioner has sought withdrawal of its Appeal was specifically noted and even submission of the Respondent-Department was duly noted regarding passing of the Rectification Order, but, despite the said fact the Appellate Authority proceeded to decide the said Appeal which was already rendered infructuous in view of the Rectification Order. Since the Appellate Authority passed order in Original Appeal confirming the original demand contained in Form GST DRC-07, Petitioner was compelled to file a rectification application before the Appellate Authority for recall of the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 has been annexed vide Annexure-A and a bare perusal of the said order dated 22nd March, 2021, it would be evident that at the time of VAT assessment, it was recorded that an amount of Rs. 1,73,69,826/- has been carried forward by the Petitioner in GST TRAN-1. 8. Brief facts of the case (in W.P.(T) No. 2404 of 2020) is that on 25.12.2017 return was filed by the petitioner for the period 01.04.2017 to 30.06.2017, showing excess amount of tax deducted at source amounting to Rs. 81,30,037/- which was auto populated at column 61 of the return being excess input tax credit to be c/f to next period . Petitioner in terms of Section 140 (1) of the JGST Act, 2017, transmitted the said amount in its Electronic Credit Ledger within the stipulated period by filing declaration in TRAN-01. Thereafter, on 09.05.2018 petitioner received a notice in Form GST ASMT-10 stating, inter alia, that the petitioner has wrongly migrated the amount pertaining to excess TDS in TRAN-01. On 21.06.2018 Form GST DRC-01 DRC-02 being summary of show cause notice was issued under Section 73 of the JGST Act, 2017. Thereafter, the petitioner submitted reply. On 12.07.2018 adjudication order was passed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted to deny the benefit of migration of TDS in the electronic credit ledger. Reliance was placed upon the decision of Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise Anr. reported in (2016) 3 SCC 643, and it was contended that the Hon ble Apex Court in the said judgment held that rules and regulations which are in the nature of subordinate legislation and which are ultra vires are bound to be ignored by the Constitutional Courts when the question of their enforcement arises. It was submitted that in absence of any specific challenge to Rule 117, this Hon ble Court at the time of enforcement of the said Rules being the Constitutional Court is bound to ignore Rule 117 to the extent, it is repugnant to Section 140, as it restricts migration only of the amount of Input Tax Credit as against the migration of credit of Value Added Tax as specified in Section 140. Elaborating the aforesaid arguments, it was submitted that under the VAT Regime, tax paid was of the following three components, namely:- (i) Input Tax; (ii) Tax deducted as TDS; and (iii) Entry Tax. It was contended that since tax paid under the VAT Act included all the aforesaid three components, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho were otherwise entitled for refund of the TDS amount on one hand were denied the benefit of refund by treating the unadjusted TDS amount as excess ITC amount to be carried forward in the next succeeding months and, on the other hand, the Respondents are not allowing the migration of the said excess ITC amount under the GST Regime as transitional credit. It was contended that if the unadjusted TDS amount was not allowed to be carried forward as excess ITC, the Petitioners would have got refund of the said amount immediately in terms Section 52 of the JVAT Act but instead of claiming refund, the Petitioners in a bona fide manner have migrated the unadjusted TDS amount under GST Regime which is otherwise a revenue neutral situation. It was further contended that in the impugned orders, the claim of migration of TDS amount was rejected only by placing reliance upon Rule 117 of the JGST Rules but in the Counter Affidavit and/or during the oral submissions, Respondents have sought to substitute reasons for denial of migration of TDS amount by placing reliance upon the proviso to Section 140(1) of the JGST Act which is not tenable in law and is contrary to the ratio laid down by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is required to be adhered to. It was submitted that TDS and input tax credit both under the JVAT Act and the JGST Act have been recognized distinctively and under both the enactments, TDS is not equivalent to ITC as its basic nature is different and TDS partakes the character of output tax , whereas input tax credit as its name suggests is input tax . Various provisions of JVAT Act and the JGST Act have been referred by the Respondents to buttress their aforesaid contention. Reliance was also placed upon Section 51(5) of the JGST Act to contend, inter alia, that the under the GST Regime, TDS deducted was required to be credited under the electronic cash ledger and not electronic credit ledger which by itself would demonstrate that TDS was in the nature of output tax and not in the nature of input tax. It was further submitted that the words credit of amount of value added tax used under Section 140(1) is to be understood with the heading of Section 140 which uses the term transitional arrangements for input tax credit and the heading can be looked into to ascertain the true legislative intent. Reliance was placed upon the decision of the Hon ble Apex Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods sold under notification, if any, claiming refund of value added tax paid thereon (where ever applicable) Provided further that so much of the said credit as is attributable to any claim related to Section 3, sub-section (3) of Section 5, Section 6, Section 6A or sub-section (8) of Section 8 of the Central Sales Tax Act, 1956 (74 of 1956) which is not substantiated in the manner, and within the period, prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules 1957 shall not be eligible to be credited to the electronic credit ledger: Provided also that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law when the said claims are substantiated in the manner prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957. Section 140(1) of the Central Goods and Services Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession. (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course of furtherance of business. Explanation .-For the purposes of clause (c) and (d), the expression construction includes re-construction, renovation, additions, or alterations or repairs, to the extent of capitalization, to the said immovable property; (e) goods or services or both on which tax has been paid under Section 10; (f) goods or services or both received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled under the provisions of the said section: Provided that the Commissioner may, on the recommendations of the Council, extend the period of ninety days by a further period not exceeding ninety days. Provided further that where the inputs have been received from an Export Oriented Unit or a unit located in Electronic Hardware Technology Park, the credit shall be allowed to the extent as provided in sub-rule (7) of rule 3 of the CENVAT Credit Rules, 2004. (2) Every declaration under sub-rule(1) shall- (a) in the case of a claim under sub-section (2) of Section 140, specify separately the following particulars in respect of every item of capital goods as on the appointed day- (i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and (ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day (b) in the case of a claim under sub-section (3) or clause (b) of sub- section (4) or sub-section (6) or sub-section (8) of Section 140, specify separately the details of stock held on the appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Schedule; (ii) The document for procurement of such goods is available with the registered person; (iii) the registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2), submits a statement in FORM GST TRAN 2 at the end of each of the six tax periods during which the scheme is in operation indicating therein, the details of supplies of such goods effected during the tax period; (iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal; and (v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person. Section 44 of the JVAT Act, reads as under:- 44. Special provisions relating to Deduction of Tax at Source in certain cases.-( 1) The State Government may, having regard to the effective recovery of tax, require in respect of contractors or any other class or classes of dealers that any person making payment of any valuable consideration to them for the execution of a works contract in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by or under sub-section (3), then, the authority referred to in sub-section (3) may, at any time within five years of the close of the year when he failed to do so, by order in writing, direct him, after giving him a reasonable opportunity of being heard, to pay, by way of penalty, a sum equal to the amount of tax which he failed to deduct or pay as aforesaid. Section 11(1) of the Value Added Tax Act, reads as under:- 11. Charge on Tax on Entry of Goods.-( 1) Notwithstanding anything contained in Sections 8, 12, 13 and 14 of this Act or any notification issued thereunder, there shall be levied and collected a tax on Import price(s), on entry of such goods mentioned in Schedule III of this Act, into the State or into a local Area for consumption, use or sale therein, subject to such condition as may be prescribed. Provided that the tax levied on import price(s) of such goods mentioned in Schedule III, shall be levied at the rate of 4 per-centum. Provided further that where a dealer has paid tax on entry of such goods, on which he is not liable to pay Tax u/s 17 of the Act, but is liable to pay tax by virtue of sale of such goods, under sub section 3 of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entry of goods and, thus, entry tax was available as input tax credit. Thus, under the provisions of JVAT Act, tax paid was of the following three components, namely:- (i) Input Tax; (ii) Tax deducted as TDS; and (iii) Entry Tax. 13. The role of Transitional Provision has been considered by the Hon ble Apex Court in the case of K. S. Paripoornan v. State of Kerala and Others reported in (1994) 5 SCC 593, and paragraph 71 of the said judgment is quoted as under:- 71. Section 30 of the amending Act bears the heading Transitional provisions . Explaining the role of transitional provisions in a statute, Bennion has stated: Where an Act contains substantive, amending or repealing enactments, it commonly also includes transitional provisions which regulate the coming into operation of those enactments and modify their effect during the period of transition. Where an Act fails to include such provisions expressly, the court is required to draw inferences as to the intended transitional arrangements as, in the light of the interpretative criteria, it considers Parliament to have intended. (Francis Bennion : Statutory Interpretation, 2nd Edn., p. 213) The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment against output tax liability. The intention of the legislature while enacting the transitional provision was to ensure that migration of unadjusted tax paid under repealed enactments are allowed to be carried forward for adjustment against the output tax liability in the GST Regime. There cannot be any dispute with respect of the aforesaid purpose for which transitional provisions under GST Act was enacted. The use of the words credit of amount of value added tax and entry tax had a definite purpose to be achieved. As already stated above, entry tax was levied under Section 11 of the JVAT Act and was available as input tax credit for adjustment against output tax liability. The legislature in its wisdom even provided for migration of the unadjusted entry tax amount under the GST Regime as otherwise the said amount would have become refundable to the assesse in terms of Section 52 of the JVAT Act. Similarly, amount deducted towards TDS was adjustable against output tax under the JVAT Act and the legislature in its wisdom by using the words credit of amount of value added tax intended to allow migration of TDS amount under the GST Regime as otherwise the said unadjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit of an Explanation either to a proviso or to any other statutory provision. We shall first take up the question of the nature, scope and extent of a proviso. The well established rule of interpretation of a proviso is that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment. (Emphasis Supplied) Similarly, the Hon ble Apex Court in the case of Prabha Tyagi v. Kamlesh Devi (Supra) has held that:- 62. In this context, it would be useful to adumbrate on the principles that govern the interpretation to be given to proviso in the context of main provision. (a) The normal function of a proviso is to except something out of the provision or to qualify something enacted therein which, but for the proviso, would be within the purview of the provision. As a general rule, a proviso is added to an enactment to qualify or creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso sometimes is only by way of abundant caution, particularly when the operative words of the enactment are abundantly clear. In other words, the purpose of a proviso in such a case is to remove any doubt. There are also instances where a proviso is in the nature of an independent enactment and not merely, an exception or qualifying what has been stated before. In other words, if the substantive enactment is worded in the form of a proviso, it would be an independent legislative provision concerning different set of circumstances than what is worded before or what is stated before. Sometimes, a proviso is to make a distinction of special cases from the general enactment and to provide it specially. (d) At this stage, the construction or interpretation of a proviso could be discussed as gathered from various judgments of this Court. (i) In Ishverlal Thakorelal Almaula vs. Motibhai Nagjibhai [AIR 1966 SC 459], while dealing with the Bombay Tenancy and Agricultural Lands Act, 1948, this Court held, that a proper function of a proviso is to except or qualify something enacted in the substantive clause, which but for the proviso, would be within that clause. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. (f) The approach to the construction and interpretation of a proviso is enunciated in the following cases. (i) In M. Pentiah vs. Muddala Veeramallappa [AIR 1961 SC 1107], it was observed that while interpreting a section or a proviso, if the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, one should avoid a construction which would reduce the legislation to futility and should rather accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The aforesaid view has also been expressed by the Hon ble Apex Court in the case of Bharthidasan University v. All-India Council for Technical Education reported in (2001) 8 SCC 676, wherein it was held as under:- 14. The fact that the Regulations may have the force of law or when made have to be laid down before the legislature concerned does not confer any more sanctity or immunity as though they are statutory provisions themselves. Consequently, when the power to make Regulations is confined to certain limits and made to flow in a well- defined canal within stipulated banks, those actually made or shown and found to be not made within its confines but outside them, the courts are bound to ignore them when the question of their enforcement arises and the mere fact that there was no specific relief sought for strike down or declare them ultra vires, particularly when the party in sufferance is a respondent to the lis or proceedings cannot confer any further sanctity or authority and validity which it is shown and found to obviously and patently lack. It would therefore, be a myth to state that the Regulations made under Section 23 of the Act have constitutional and leg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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