SKH Sheet Metals Components Vs Union of India & Ors. (Delhi High Court)
Delhi High Court in its judgment pronounced today has held that judgment in Brand Equity will continue to apply in-spite of retrospective amendment to Section 140 by The Finance (Amendment) Act, 2020.
It is argued that in view of retrospective amendment to Section 140 of the CGST Act, 2017, introduced by the Finance (Amendment) Act, 2020, there has been a relevant change in circumstances and thus the above-said decision is no longer valid. The power to prescribe a time limit for filing TRAN-1 has been provided by the insertion of words ‘within such time´ in Section 140 with retrospective effect from 1st July, 2017. It has been argued that now that the amendment specifically provides for prescribing a time limit for filing TRAN- 1 Form, the period so provided under Rule 117 would have legal sanctity and therefore the factor which weighed with this Court to hold that the limitation period provided under Rule 117 for filing TRAN- 1 is merely directory and not mandatory, no longer holds good.
The above amendment to Section 140 came to be notified on 18th May 2020, vide notification No. 43/2020 dated 16th May 2020. Thus, the said amendment came into force after the date of the decision in Brand Equity (Supra). The said amendment was also not cited before the Court to contest the petitions. With that being said, since, there is no specific challenge to the amendment introduced by Section 128 of the Finance (Amendment) Act, 2020, we do not want to venture into legality of the said provision viz-a-viz the judgment of Brand Equity (Supra).
Nevertheless, all things considered, in spite of the amendment, we can say without hesitation that the said decision is not entirely resting on the fact that statute [CGST Act] did not prescribe for any time limit for availing the transition of the input tax credit. There are several other grounds and reasons enumerated in the said decision and discussed hereinafter, that continue to apply with full rigour even today, regardless of amendment to Section 140 of the CGST Act.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. The Petitioner has invoked Article 226 of the Constitution of India for seeking a writ of mandamus directing the Respondents to allow it to avail the short transitioning of Input Tax Credit ( ITC ) amounting to Rs. 5,51,33,699/- by either updating the electronic credit ledger at their back end,in accord with the details of credit submitted by the Petitioner or allowing them to revise the Form GST TRAN-1, in conformity with the returns filed under the existing laws that stand repealed b+y the Central Goods and Service Tax Act, 2017 ( CGST Act ).
BRIEF FACTUAL BACKGROUND
2. Petitioner- SKH Sheet Metals Components Private Limited, set up its unit at Pune, Maharashtra for manufacture of final products and sale to OEMs. The indirect tax structure prevailing in India, prior to 1st July, 2017, comprised of multifarious duties and taxes imposed by the Centre as well as States. Excise duty was levied under Central Excise Act, 1994 ( Excise Act ) on manufacture of excisable goods; service tax was imposed under Finance Act, 1994 ( Finance Act ) on provision of services in the taxable territory. Similarly, sale of goods was exigible to Value Added Tax( VAT ) imposed under respective State VAT enactments and Central Sales Tax ( CST ) under Central Sales Tax Act, 1956 ( CST Act ), depending on whether the goods were sold intra-state or inter-state. [hereinafter the legislations referred hereinabove are being collectively referred to as Existing Laws ]. In this regard, Petitioner obtained registration with the jurisdictional authorities under various legislations listed hereinabove. It also availed CENVAT credit of specified duties and taxes paid on inputs, capital goods and input services in terms of Cenvat Credit Rules, 2004 (‘Credit Rules’) and input tax credit of VAT paid on purchases in terms of Maharashtra VAT Act, 2002 ( MVAT Act ). Petitioner periodically filed returns by way of forms specified under the above-noted legislations, and declared the details of input balance of credit, credit availed during the return period, and closing balance of credit available for carry forward for the next period. For the period ending 30th June, 2017, the closing balance of credit available for carry forward, as declared by the Petitioner, reflects the figures tabulated hereunder:
