TMI Blog2023 (12) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... s which might support it. The Supreme Court has further held that if a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation. From the principles laid down by their Lordships of the Supreme Court, it is quite vivid that that the power of the legislature especially in fiscal statute is very wide and can only be challenged on two counts being it lacks legislative competence and that it infringes or takes away any of the fundamental rights or any of the constitutional provisions. However, in the instant case, the petitioner has challenged the constitutional validity of Section 16(4) of the CGST Act on the ground that it is violative of Articles 14, 19(1)(g) 300A of the Constitution. The grant of ITC has been made subject to conditions and restrictions put thereunder. Thus, the registered person is entitled for ITC in respect of any invoice or debit note for supply of goods if the requisite conditions stipulated therein are fulfilled. The right of a registered person to take ITC under sub-section (1) of Section 16 would become th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution and the principles of law laid down by their Lordships of the Supreme Court, the petitioner herein, which has filed the present writ petition, is only a proprietorship firm and not a citizen and therefore cannot claim protection of Article 19(1)(g). It is held accordingly and this ground claiming protection of Article 19(1)(g) is not available to the petitioner, which is a proprietorship firm. The next ground that has been raised on behalf of the petitioner that Section 16(4) of the CGST Act is violative of Article 300A of the Constitution of India, is also not at all made out, as Article 300A is right to property which is the constitutional right and clearly provides that it cannot be taken away except in accordance with law. The provision contained in Section 16(4) of the CGST Act is violative of neither Article 14 of the Constitution nor Articles 19(1)(g) 300A of the Constitution, however, the ground under Article 19(1)(g) is not available to the petitioner, as the petitioner, in the instant case, is not a citizen and therefore Article 19(1)(g) is not available to the petitioner herein. Concludingly, the petitioner has failed to make out a case to question the constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2018-19 filed return under Section 39 of the CGST Act in Form GSTR-3B for the month of March, 2019 on 13-11-2019. Return was specifically filed for the specified period and late fees was also paid in accordance with Section 47 of the CGST Act for the period March, 2019 in Form GSTR-3B of April, 2019 and interest under Section 50 was also paid in the return for the period March, 2019. The ITC claimed in the return for the month of March, 2019 was eligible ITC for the specified period in terms of Section 16(2). Returns filed under Section 39 in Form GSTR-3B for the months of March, 2019 and April, 2019 have been annexed as Annexures P-2 P-3. Thereafter, the petitioner was served with a demand letter dated 6-2-2020 (Annexure P-4) by respondent No. 3 demanding an amount of ₹ 9,43,919/- to be paid alleging that Input Tax Credit (ITC), as specified above, is availed in contravention of Section 16(4) of the CGST Act along with interest under Section 50 of the said Act, which the petitioner replied vide Annexure P-5 and prayed for quashment of the proceedings and not to issue any further notice, but respondent No. 3 again issued a demand letter dated 28-1-2021 (Annexure P-6) rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ITC are binding on the tax payer. The availability of ITC is subject to the conditions and restrictions and if a tax payer has not fulfilled the said conditions including the conditions provided in Section 16(4), it cannot be allowed to avail the benefit of input tax credit. It has also been submitted that the grant of input tax credit under Section 16 of the CGST Act is a concession or relaxation and nobody can claim it as a matter of vested right. It is entirely for the legislature to make a provision and restrict the benefit or concession or relaxation either to a class of persons or even if it extends to all, it can restrict the term or period or limit up to which the concession can be availed of. Similar provision has been given in the CENVAT Credit Rules, 2004. Any registered person is eligible for taking input tax credit, only if such availment is not restricted by conditions laid down in the law in this regard. It has been further submitted that Section 16(4) of the CGST Act is neither violative of Article 14 nor violative of Articles 19(1)(g) 300A of the Constitution and the writ petition being premature is liable to be dismissed. 5. Respondents No. 3 to 5 though ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 16(4) of the CGST Act was enacted to only disallow the ITC where the ITC has been claimed after filing the return in Form GSTR-3B for September following the financial year to which such ITC pertains and not to disallow the ITC for a particular period if return for the period has been filed belatedly, this interpretation of disallowing the ITC for delay in filing of return and claiming ITC thereof, frustrates the object of GST. As such, sub-section (2) of Section 16 of the CGST Act is not subjected to sub-section (4). Therefore, in case of a conflict, if a person has satisfied all the conditions of Section 16(2) of the CGST Act but not within the time line provided by Section 16(4), Section 16(4) will be of no use and ITC has to be allowed. Mr. Soni, learned counsel for the petitioner, would also submit that Section 16(4) violates Article 14 of the Constitution in the sense that it is far beyond the scope and object of the Act, as one of the key features of the CGST Act is to have uninterrupted and seamless chain of ITC. It is an established principle of law that where a relation cannot be established to the object sought to be achieved by the statute, the same is in violati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m it as a matter of vested right. It is entirely for the legislature to make a provision and restrict the benefit or concession or relaxation either to a class of persons or even if it extends to all, it can restrict the term or period or limit up to which the concession can be availed of. It has also been submitted by Mr. Mishra that the petitioner has misinterpreted Sections 16(1) 16(2) of the CGST Act, as Section 16(4) lays down due date for claiming ITC which provides due date to avail ITC based on the date of invoice or debit note and not based on the return period. Since the petitioner has contravened the provision laid under Section 16(4), ITC is not available to it. Mr. Mishra would rely upon the decision of the Supreme Court in the matter of Kerala Hotel and Restaurant Association and others v. State of Kerala and others (1990) 2 SCC 502 to buttress his submission. He would further submit that the State enjoys the widest latitude where measures of economic regulation are concerned and it is for the State to decide what economic and social policy it should pursue. In view of the larger discretion of the legislature in matter of its preferences of economic and social policie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Parliament. He would further rely upon a recent decision of the Supreme Court in the matter of Union of India and others v. VKC Footsteps India Private Limited (2022) 2 SCC 603 which deals with refund of unutilised ITC to input goods alone. He would also submit that ground under Article 19(1)(g) of the Constitution would not be available to the petitioner, as it is available only to citizens and not to juristic persons like the petitioner in the instant case. Finally, the learned amicus curiae would contend that challenge on ground of Article 300A of the Constitution is also equally not available to the petitioner against an act of legislature as it can only be challenged on two counts; being it lacks legislative competence and that it infringes on Part XIII of the Constitution of India. 10. We have heard learned counsel for the parties as also the learned amicus curiae and considered their rival submissions made herein-above and also went through the records with utmost circumspection. 11. The question that arises for determination is, whether Section 16(4) of the CGST Act is violative of Articles 14, 19(1) (g) 300A of the Constitution of India, as by Section 16(4) time limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Promotions, (1969) 3 All ER 39, p 90 (HL)] 14. It has been further held as under in Principles of Statutory Interpretation at page 619: - The Supreme Court has enunciated in similar words the principle of interpretation of taxing laws. Bhagwati J stated the principle as follows: In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter. [AV Fernandez v State of Kerala, AIR 1957 SC 657, p 661] Shah J, has formulated the principle thus: In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring conflict of the experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. 16. Similarly, in the matter of Kailash Chandra v. Mukundi Lal [(2002) 2 SCC 678], the Supreme Court has held that a provision in the statute is not to be read in isolation, it has to be read with other related provisions in the Act itself and observed in paragraph 11 as under: - 11. A provision in the statute is not to be read in isolation. It has to be read with other related provisions in the Act itself, more particularly, when the subject-matter dealt with in different sections or parts of the same statute is the same or similar in nature. 17. Similarly, in The Twyford Tea Co. Ltd. (supra), the Supreme Court has held that in taxation even more than in other fields, Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. The Supreme Court has further held that if a State can validly pick and choose one commodity for taxation and that is not open to attack un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37; (b) he has received the goods or services or both. Explanation . For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services (i) where the goods are delivered by the supplier to a recipient or any other person on the direction 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. 21. Sub-section (62) of Section 2 of the CGST Act defines input tax , which states as under: - (62) input tax in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of subsections (3) and (4) of section 9; (c) the tax payable under the provisions of subsections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of subsections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of subsections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiary only as per the scheme of the statute. 25. In the matter of Godrej Boyce Mfg. Co. Pvt. Ltd. and others v. Commissioner of Sales Tax and others (1992) 3 SCC 624, their Lordships of the Supreme Court dealing with Rules 41 41- A of the Bombay Sales Tax Rules, 1959 held that the rulemaking authority can provide for a small abridgement or curtailment while extending a concession, and observed as under: - 9. Sri Bobde appearing for the appellants reiterated the contentions urged before the High Court. He submitted that the deduction of one per cent, in effect, amounts to taxing the raw material purchased outside the State or to taxing the sale of finished goods effected outside the State of Maharashtra. We cannot agree. Indeed, the whole issue can be put in simpler terms. The appellant (manufacturing dealer) purchases his raw material both within the State of Maharashtra and outside the State. Insofar as the purchases made outside the State of Maharashtra are concerned, the tax thereon is paid to other States. The State of Maharashtra gets the tax only in respect of purchases made by the appellant within the State. So far as the sales tax leviable on the sale of the goods man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal Form C to claim concessional rate of tax under Section 8(1) of the Central Sales Tax Act, 1956, held that the said requirement under the rule is mandatory and without producing specific documents, dealer cannot claim the benefits, and their Lordships observed as under: - 13. Under the Central Sales Tax (Karnataka) Rules, 1957, the dealer is required to submit along with his return the original of the prescribed forms. As could be seen from the rule extracted above, a registered dealer who claims that he has made a sale to another registered dealer is required to attach the original of the declaration forms on the certificate in the prescribed form received by him from the prescribed dealer along with his return filed by him. We have already extracted Section 13 of the Central Sales Tax Act, which deals with the power of the Central Government to make rules, the form and the manner for furnishing declaration under sub-section (8) of Section 8. Sub-section (3) of Section 13 provides that the State Government may make rules not inconsistent with the provisions of the Central Sales Tax Act, 1956 and the rules made under sub-section (1) to carry out the purposes of the Act. In exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied in that context. Sunflower oil cake is subject to input tax. The legislature, however, has incorporated the provision, in the form of Section 10, to give tax credit in respect of such goods which are used as inputs/raw material for manufacturing other goods. Rationale behind the same is simple. When the finished product, after manufacture, is sold, VAT would be again payable thereon. This VAT is payable on the price at which such goods are sold, costing whereof is done keeping in view the expenses involved in the manufacture of such goods plus the profits which the manufacturer intends to earn. Insofar as costing is concerned, element of expenses incurred on raw material would be included. In this manner, when the final product is sold and the VAT paid, component of raw material would be included again. Keeping in view this objective, the legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstances, is the domain of the legislature and the courts are not to tinker with the same. 28. In the matter of Jayam Co. v. Commr. (2016) 15 SCC 125, while interpreting the provisions of Sections 19(20), 3(2) 3(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordships of the Supreme Court held that input tax credit is admissible only as per the conditions of the T.N. Value Added Tax Act, 2006, and observed in paragraph 43 as under: - 43. Section 19(11) thus allowed an extended period for input credit which if not claimed in any month can be claimed before the end of the financial year or before the 90 days from the date of purchase whichever is later. The provision of Section 19(11) is thus an additional benefit given to dealer for claiming input credit in extended period. The use of the word shall make the claim needs no other interpretation. 30. In VKC Footsteps India Private Limited s case (supra), similar issue was considered with respect to refund of additional ITC as that rule limited the refund of unutilised ITC to input goods alone upholding the aforesaid rule. Their Lordships observed in paragraphs 88 90 as under: - 88. The jurisprudential basis furnishes a depiction of an ideal state of existence of GST legislation within the purview of a modern economy, as a destination-based tax. But there can be no gain saying the fact that fiscal legislation around the world, India being no exception, makes complex balances founded upon so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been imposed in clause (ii) of the proviso should be enacted, it lies within the realm of policy. 90. GST legislation in India is the product of hard constitutional and legislative work which stretched over several decades. Our fiscal regime is yet to arrive at an ideological position of one bundle for goods and services based on a single rate structure. Broadly speaking, goods and services are taxed at 5%, 12%, 18% and 40%. As on date, there is an absence of uniformity in rates and it is the multiplicity of rates which has given rise to an inverted duty structure. Registered persons with unutilised ITC may conceivably form one class but it is not possible to ignore that this class consists of species of different hues. Given these intrinsic complexities, the legislature has to draw the balance when it decides upon granting a refund of accumulated ITC which has remained unutilised. In doing so, Parliament while enacting sub-section (3) of Section 54 has stipulated that no refund of unutilised ITC shall be allowed other than in the two specific situations envisaged in clauses (i) and (ii) of the first proviso. Whereas clause (i) has dealt with zero-rated supplies made with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 60 has categorically held that a Company being a juristic person cannot be a citizen for the purpose of Article 19 of the Constitution. It has been observed by their Lordships as under: - 18. We find force in the objection taken on behalf of the Union of India that the appellant organisation is not entitled to invoke Article 19. No member of the appellant organisation is arrayed as a party. Article 19 guarantees certain rights to all citizens . The appellant, being an organisation, cannot be a citizen for the purpose of Article 19 of the Constitution. ( See State Trading Corpn. of India Ltd. v. CTO (1964) 4 SCR 99 : AIR 1963 SC 1811; Bennett Coleman Co. v. Union of India (1972) 2 SCC 788; TELCO Ltd. v. State of Bihar (1964) 6 SCR 885 : AIR 1965 SC 40 and Shree Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC 193 ). In the absence of any member of the association as a petitioner in the writ petition, the appellant organisation cannot enforce the rights guaranteed under Article 19 of the Constitution. 36. In Shree Sidhbali Steels Limited (supra), their Lordships of the Supreme Court have held that a Company not being a citizen has no fundamental right under Article 19 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing terms in the matter of Ashok Transport Agency v. Awadhesh Kumar (1998) 5 SCC 567 in which it has been held that a proprietary concern is only the business name in which the proprietor of the business carries on the business, and it has been observed as under: - 6. A partnership firm differs from a proprietary concern owned by an individual. A partnership is governed by the provisions of the Partnership Act, 1932. Though a partnership is not a juristic person but Order 30 Rule 1 CPC enables the partners of a partnership firm to sue or to be sued in the name of the firm. A proprietary concern is only the business name in which the proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business. In the event of the death of the proprietor of a proprietary concern, it is the legal representatives of the proprietor who alone can sue or be sued in respect of the dealings of the proprietary business. The provisions of Rule 10 of Order 30 which make applicable the provisions of Order 30 to a proprietary concern, enable the proprietor of a proprietary business to be sued in the business names of his propriet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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