Case Law Details

Case Name : M/s Willowood Chemicals Pvt. Ltd. Vs Union of India (Gujarat High Court)
Appeal Number : Special Civil Application No. 4252 of 2018
Date of Judgement/Order :
Related Assessment Year :
Courts : All High Courts (4321) Gujarat High Court (370)

M/s Willowood Chemicals Pvt. Ltd. Vs Union of India (Gujarat High Court)

Constitutional validity and vires of Second proviso to Section 140(1) of the Gujarat Goods and Services Tax Act, 2017; Constitutional validity and vires of Rule 117 of the Gujarat Goods and Services Tax Rules, 2017 and Form GST Tran-1 issued in relation thereto vis-à-vis Section 140(3), Section 164 of the Central Goods and Services Tax Act, 2017;

Text of the Petition filed is as follows:-

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

DISTRICT: AHMEDABAD

SPECIAL CIVIL APPLICATION NO. 4252 OF 2018

In the matter of : Application under the Article 226 of the Constitution of India, 1950;

And

In the matter of : Article 14, Article 19(1)(g), Article 265, Article 300A, Article 246A, Article 269A and Article 279A and other relevant articles of the Constitution of India, 1950;

And

In the matter of : Constitutional validity and vires of Second proviso to Section 140(1) of the Gujarat Goods and Services Tax Act, 2017;

And

In the matter of : Constitutional validity and vires of Rule 117 of the Gujarat Goods and Services Tax Rules, 2017 and Form GST Tran-1 issued in relation thereto vis-à-vis Section 140(3), Section 164 of the Central Goods and Services Tax Act, 2017;

And

In the matter of : 1) M/s Willowood Chemicals Pvt. Ltd. having its registered office at 23 Chetla Central Road, 4th Floor, Kolkata- 700 027 and Principal place of Business at Block No. 69/P, Village Manjusar, Taluka Savli, Vadodara, Gujarat, 391775.

2) Shri Parikshit Mundhra, Director and  Shareholder of M/s Willowood Chemicals Pvt. Ltd. , S/o Gopal Das Mundhra, R/o 9A, Alipore Park Place, Belair, Flat No. 7A, Alipore, Kolkata – 700 027 aged about 41 years, who is a citizen of India

…Petitioners

Versus

1. Union of India,
through The Secretary
Ministry of Finance
(Department of Revenue) No.137,
North Block, New Delhi-110001.

2. Union of India,
Notice to be served upon
The Ld. Secretary
Ministry of Law & Justice
4th Floor, A Wing, Rajendra Prasad Road,
Shastri Bhavan, New Delhi – 110 001.

3. The Goods and Service Tax Council
(GST Council) Notice to be served upon
The Ld. Secretary
Office of the GST Council Secretariat,
5th Floor, Tower II, Jeevan Bharti
Building, Janpath Road,
Connaught Place, New Delhi-110 001.

4. GSTN (Goods and Service Tax
Network) Through its CEO, East
Wing, Worldmark 1, 4th Floor,
Tower B, Aerocity, New Delhi –
110037

5. The State of Gujarat
through the Chief Secretary,
Finance Department,
Sachivalaya, Gandhinagar.

…Respondents

MOST RESPECTFULLY SHEWETH THAT:-

1. The Petitioners in the present writ petition under Article 226 of the Constitution of India, 1950 are challenging the constitutional validity and vires of Second proviso to Section 140(1) of the Gujarat Goods and Services Tax Act, 2017 and Rule 117 of Gujarat Goods and Services Tax Rules, 2017 framed thereunder and Form GST Tran-1 issued thereunder on the grounds that the said provisions offends Article 14, Article 19(1)(g), Article 265 and Article 300A of the Constitution of India, 1950. The Petitioners by way present writ petition are further challenging the vires and constitutional validity of the Rule 117 of the Central Goods and Services Tax Rules, 2017 and Form GST Tran-1 issued thereunder on the ground that the said provisions are ultra vires of the enabling provisions of Section 140(3) of the Central Goods and Services Tax Act, 2017 and are in excess of rule making powers vested in the Central Government under Section 164 of the said Act;

2. The brief facts leading to the filing of the present Petition are stated as under:-

2.1 The Petitioner no. 1 is a company incorporated under the Companies Act, 1956 having its registered office at 23 Chetla Central Road, 4th Floor, Kolkata- 700 027, bearing CIN No. U24232WB2006PTC1 12085 and the Principal Place of Business at Block No. 69/P, Village Manjusar, Taluka Savli, Vadodara, Gujarat, 391775.

2.2 The Petitioner no. 2 is a citizen of India and shareholder and director of the Petitioner no. 1 company. In the instant case, by reasons of the wrongful and illegal actions of the Respondents, the rights of the Petitioner No. 2 to carry on business and/or hold property through the agency and/or instrumentality of the Petitioner No. 1 Company, has been seriously prejudiced and adversely affected.

2.3 The Petitioners state that the cause of action in the instant case has arisen within the territorial jurisdiction of this Hon’ble Court.

2.4 The Petitioners state that Petitioner No. 1 Company is registered under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central GST Act) and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the Gujarat GST Act), vide registration bearing no. 24AAACW6775D1ZA.

2.5 The Petitioners state that the Petitioner No. 1 Company was registered under the Gujarat Value Added Tax Act, 2003, vide TIN 24192101377 as retailer, wholesaler/Stockist of chemicals, pesticides, insecticides etc.

2.6 The Petitioners state that the Central Goods and Service Tax Act, 2017 is enacted by Parliament in exercise of powers conferred under Article 246A, 269A and 279A of the Constitution of India, 1950 for levy and collection of tax on intra State supply of goods or service or both by the Central Government and repeal of certain Central Act including the Central Excise Act, 1944 as set out under Section 174(1) of the said Act.

2.7 The Petitioners state that the said Articles are inserted in the constitution by Constitution (One Hundred and First Amendment) Act, 2016 which was assented by the President on 08-09-20 16. The said amendment further made corresponding and consequential amendments in Article 248, 249, 250, 268, 268A, 269, 270, 271, 286, 366 and 368, the Sixth Schedule and the Seventh Schedule (List I & List II) of the Constitution of India.

2.8 The provisions of Article 246A, Article 269A and Article 279A of the Constitution of India, as amended, are set out below:-

Article 246A of the Constitution (One Hundred and First Amendment) Act, 2016,

”246A. Special provision with respect to goods and service tax

(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.

(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.

Explanation.- The provision of this article, shall, in respect of goods and services tax referred to in clause (5) of article 2 79A, take effect from the date recommended by the Goods and Service Tax & Council”.

Article 269A

“269A. Levy and collection of goods and services tax in course of inter-State trade or commerce. –

(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and States in the manner as may be provided by the Parliament by law on the recommendations of the Goods and Services tax Council.

Explanation.- For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.

(2) The amount apportioned to a State under Clause (1) shall not form part of the Consolidated Fund of India.

(3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A such amount shall not form part of the Consolidated Fund of India.

(4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of State.

(5) Parliament may, by law, formulated the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.”

Article 279A

279A. Goods and Services Tax Council. –

(1). The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council.

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(4). The Goods and Services Tax Council shall make recommendations to the Union and the States on-

(a) the taxes, cesses and surcharges levied by the Uniion, the States and the local bodies which may be subsumed in the goods and services tax;

(b) the goods and services that may be subjected to, or exempted from the goods and services tax;

(c) model Goods and Services Tax Laws principles of levy, appointment of Goods and Services Tax levied on supplies in the course of Inter-State trade or commerce under article 269A and the principles that govern the place of supply;

(d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax;

(e) the rates including floor rates with brands of goods and services tax;

(f) any special rate or rates for a speciied period to raise additional resources during any natural calamity or disaster;

(g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand; and

(h) any other matter relating to the goods and services tax, as the Council may decide.

2.9 The provisions of Constitution (One Hundred and First Amendment) Act, 2016 is annexed hereto and marked as

Annexure-“ A”

2.10 The Petitioners state that the Legislature of the State of Gujarat in exercise of its concurrent powers conferred under Article 246A & 279A of the Constitution of India enacted the Gujarat Goods & Service Tax Act, 2017 (for short Gujarat GST Act” hereinafter) for levy and collection of tax on intra State supply of goods and services or both in the State of Gujarat. The said Gujarat GST Act came into force on the appointed day i.e. 01-07-20 17.

2.11 The Petitioners state that the State Government as a delegate, in exercise of the rule making power conferred under Section 164 of the Gujarat GST Act has framed Gujarat Goods & Service Tax Rules, 2017 (in short “the Gujarat Rules” hereinafter) which came into force w.e.f. 01-07-2017.

2.12 The Petitioners state that the appointed day for the purpose of Section 140 of the Central GST Act is 1st July’ 2017 as  notified by the Central Government vide Notification No. 9/2017-Central Tax dated 28-06-2017. It is stated that different provisions of the Central GST Act came into effect from different dates.

2.13 The Petitioners state that the Central Government in exercise of power conferred under Section 164 of the said Central GST Act framed the Central Goods & Service Tax Rules, 2017 “the Central Rules” in short) for carrying out the purpose of the  Central GST Act which came into force w.e.f. 01-07-20 17.

2.14 The Petitioners state that under the Central GST Act, a registered person who was not liable to be registered under the then existing law (the Central Excise Act, 1944 in the instant case) as defined under Section 2(48) of the said Act, is entitled to take credit of eligible duties in respect of inputs held in stock on the appointed day subject to fulfillment of the conditions set out under sub-Section (3) of Section 140 of the Central GST Act. Sub-Section (10) of Section 140 of the Central GST Act provides that the amount of credit available under section 140(3) shall be calculated in such manner as may be prescribed. The sub-Section (1) of Section 140 deals with entitlement to take credit of eligible duties by a person was registered under the then existing law.

2.15 The Petitioners state that the Section 140 of the Central GST Act is transitional provision to allow credit of CENVAT credit as available/admissible on the day immediately preceding the appointed day i.e. 01-07-2017.

2.16 The relevant provision of the Section 140 of the Central GST Act is set out below :

Section 140 of the Central GST Act, 2017

“Section 140(1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:

(i) where the said 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 manufactured and cleared under such exemption notifications as are notified by the Government.”

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“Section 140(3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:-

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said registered person is eligible for input tax credit on such inputs under this Act;

(iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;

(iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and

(v) the supplier of services is not eligible for any abatement under this Act: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.”

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(10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.”

Explanation 1.For the purposes of sub-sections (3), (4) and (6), the expression “eligible duties” means––

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;

(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975;

(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975;

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;

(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985;

(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985; and

(vii) the national calamity contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001)

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2.17 The Petitioners further state that the existing law is defined under Section 2(48) of Central GST Act which reads as follows:-

Section 2(48)

“existing law” mea s any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both passed or made before the commencement of this Act by such law, notification, order, rule or regulation;

2.18 The Petitioners state that Section 140(3) of the Central GST Act is a complete Code in itself with respect to determining eligibility to claim of credit of eligible duties in respect to goods held in stock by a person who is not liable to be registered under the existing law. Section 140(3) permits credit of eligible duties directly in electronic credit ledger subject to fulfillment of conditions (i) to (v) as mentioned therein. It does not provide for eligibility subject to any further conditions or procedures by way of Rules. Section 140(10) only envisages the manner in which credit under section 140 (3) is to be calculated which shall be prescribed. Precisely, Section 140(3) envisages rule of procedure only be with respect to manner of calculation of credit being carried forward and nothing else.

2.19 The Petitioners state that Section 140(1) of the Central GST Act which deals with person registered under the existing law to carry forward CENVAT credit as per last filed return under the existing law permits him to claim such credit in electronic credit ledger in such manner as may be prescribed in addition to conditions (i) to (iii) mentioned therein. However, under sub-section (3) of  Section 140 there is no enabling provision to prescribe manner by way of Rules.

2.20 The Petitioners state that as per Section 2(87) “prescribed means”prescribed by rule made under the Central GST Act on the recommendation of the GST Council.

2.21 The Petitioners state that the Section 164 of the Central GST Act deals with Rule making powers and empowers Central Government to frame rules for carrying the purpose of the Act. The provision of Section 164 is set out below:-

Section 164 of the Central GST Act, 2017

“164. Power of Government to make rules

(1) The Government may, on the recommendations of the Council, by notification, make rules for carrying out the provisions of this Act.

(2) Without prejudice to the generality of the provisions of sub-section (1), the Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be or may be made by rules.

(3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on which the provisions of this Act come into force. (4) Any rules made under sub-section (1) or sub-section (2) may provide that a contravention thereof shall be liable to a penalty not exceeding ten thousand rupees.”

2.22 The Petitioners state that the Central Government in exercise of said rule making power conferred under Section 164 read with Section 140 of the Central GST Act, framed Rule 117 of the Central Goods & Service Tax Rules, 2017 (in short “the Central Rules” hereinafter) to allow carry forward of CENVAT Credit available with the assessee on the day immediately preceding the appointed day (i.e. 1st Day of July’ 2017). The provisions of Rule 117 of the Central Rules is set out below:-

Rule 117(1) of the Central Goods & Service Tax Rules,  2017

“Rule 117. Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day.

(1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit to which he is entitled 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.

x x x x x x x

(3) The amount of credit specified in the application in FORM GST TRAN-1 shall be credited to the electronic credit ledger of the applicant maintained in GST PMT-2 on the common portal.

2.23 The Petitioners further state that the Central Government in purported exercise of powers conferred under Section 140(3) of the Central GST Act read with Rule 117 of the Central Rules further formulated Form GST TRAN 1 which was required to be filed/uploaded in the GSTN portal within 27th day of December’ 2017 as a condition precedent for being eligible to carry forward CENVAT Credit available with the assessee under the existing law on the day immediately proceeding the appointed day. A copy of GST Tran 1 is enclosed hereto and marked as Annexure B.

2.24 The Petitioners state that in terms of Section 140(3) of the Central GST Act they are entitled to CENVAT credit amounting to Rs.67,3 1,259/- as an unregistered person under the existing law in respect of inputs held in stock as on the day immediately preceding the appointed day. The Petitioners fully meets all the conditions set out under Section 140(3) of the Central GST Act.

2.25 The Petitioners further states that they being a registered person under the Gujarat Value Added Tax Act, 2003 and also under the Gujarat GST Act is also entitled to take credit of the amount of Value Added Tax etc. available with them on the day preceding the appointed day as per the last return filed under Gujarat Value Added Tax Act, 2003. The said credit is to be allowed in the electronic credit ledger of the Petitioners maintained with the GSTN portal.

2.26 Section 140(1) of the Gujarat GST Act, provides that a registered person, other than a person opting to pay tax under section 10 (i.e. composition levy), shall be entitled to take in his electronic credit ledger, credit of the amount of Value Added Tax, and Entry Tax, carried forward in the return relating to the period ending with the day immediately preceding the appointed day i.e. 1st Day of July’ 2017, furnished by him under the existing law in such manner as may be prescribed. Subject to certain condition set thereunder.

2.27 The relevant provision of Section 140(1) of the Gujarat GST Act is set out below :-

Section 140 of Gujarat GST Act

(1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the amount of Value Added Tax, and Entry Tax, if any, carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit in the following circumstances, namely: –

(i) where the said 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 no. (GHN-51) GST-2001 S.49 (355) TH, dated the 31st December, 2001, (GHN-24) VAT-2013/S.40 (1) (8) –TH, dated the 11th October, 2013 and any other notifications claiming refund of value added tax paid thereon:

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 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.

2.28 The Petitioners states that in terms of Section 140(1) they are entitled to carry forward Rs.7,07,530/-, being the credit of the amount of Value Added Tax, as per last return filed for the period June’2017, which was ending with the day immediately preceding the appointed day i.e. 1st day of July’2017. Copy of the VAT return for the month of June’2017 is annexed hereto and marked as Annexure-“ C”.

2.29 The Petitioners states that in compliance of the provisions of Rule 117 of the Central Rules, on dated 27-12-2017 they attempted to upload the GST Tran 1 in the GSTN portal, however, inspite of their best effort and due diligence they could not upload the same due to technical glitches in the GSTN portal. For reasons of the said technical snag, several assesses through the Country, could not file/upload their GST Tran 1 which would evident from snapshots taken official twitter handle of the GOI for queries on GST. Specimen copies of a few sample snapshots are annexed hereto and collectively marked as Annexure D.

2.30 The Petitioners further states that while uploading GST Tran 1 form on the GSTN portal, an error was being shown, if differential tax liability towards pending statutory declaration in Form C/F/H/I under the Central Sales Tax Act, 1956 exceeded Input Tax Credit of VAT being carried forward in terms of Section 140(1) of the Gujarat GST Act.

2.31 The Petitioners having no option available with them to lodge their claim of input credit under Rule 117 of the Central Rules/Gujarat Rules, forthwith approached the jurisdictional GST authorities i.e. Assistant Commissioner, Range: 12, Division:5, Commissionerate: Ahmedabad, Ghatak:7 with a physical copy of the GST Tran 1 dully filled in all respect claiming input credit of Rs.7,07,530/- and to CENVAT credit amounting to Rs.67,31,259/. However, the said authorities declined to accept the same on the ground that under the GST laws, they do not have any jurisdiction to accept any physical copies of GST Tran 1. It is stated that the Transitional Form GST TRAN 1 under the Central Rules and the Gujarat Rules are one and same. The petitioners state that the differential tax liability towards C & F forms as on 27th December’ 2017 i.e. the last date of filing GST Tran-1 form was Rs 1,97,58,914.11. Copy of the said GST Tran 1 is annexed hereto and marked as Annexure – E.

2.32 The petitioners further submit that in terms of the Gujarat Value Added Tax (Amendment) Act, 2017, the amendment shall not affect any right, privilege, obligation, or liability acquired, accrued or incurred under this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017. Provisions of Gujarat Value Added Tax (Amendment) Act, 2017 is annexed hereto and marked with  Annexure-F.

3. In the aforesaid background, the Petitioners being aggrieved beg to move this Petition under Article 226 of the Constitution of India before this Hon’ble Court on the following grounds which are urged in the alternative and without prejudice to each other.

GROUNDS

A. For that, the Petitioners most humbly submit that the second proviso to Section 140(1) of the Gujarat Goods and Services Tax Act, 2017 is unconstitutional and ultra vires of Article 14, Article 19(1)(g), Article 265, Article 279A and Article 300A of the Constitution of India. The said second proviso to Section 140(1) of the Gujarat GST Act is arbitrary, imposes unreasonable restriction to carry on trade and is confiscatory in nature. It is humbly submitted that right to property is a constitutional right.

(A1) For that, the Petitioners further submit that the provisions of Rule 117 of Gujarat Rules and Form GST Tran-1, both framed in purported exercise of rule making powers vested in the Government of Gujarat under Section 164 of the Gujarat GST Act are also unconstitutional and ultra vires of Article 14, Article 19(1)(g), Article 265, Article 279A and Article 300A of the Constitution of India.

(A2) For that, the Petitioners most humbly submit that Section 140(1) of the Gujarat GST Act entitles a registered person to take, credit of the amount of Value Added Tax, and Entry Tax, in his electronic credit ledger, which are carried forward in the return relating to the period ending with the day immediately preceding the appointed day i.e. 1st July 2017 furnished by him under the existing law in such manner as may be prescribed subject to the conditions as provided in 1st and 2nd proviso

(A3) For that, the Petitioners most humbly submit that the first proviso to Section 140(1) of the Gujarat GST Act envisages that the registered person shall not be allowed to take credit in the following circumstances, namely: –

(i) where the said 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

(A4) For that, the Petitioners most humbly submit that the impugned second proviso to Section 140(1) of the Gujarat GST Act provides that 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 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. Sub Section (3) of section 5 provides that the last sale or purchase of any goods preceding the sale or purchase occasioning the export shall be deemed to be in the course of such export or purchase occasioning the export shall be deemed to be in the course of such export and enjoy exemptionfrom tax subject to production of form ‘H’ in terms of rule 12 of  the Central Sales Tax (Registration and Turnover) Rules, 1957. Precisely Section 5(3) of the CST Act seeks to exempt indirect exports in hands of seller who supplies the goods for ultimate export to merchant exporters subject to production of form H prescribed under rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957. Section 6A provides tax is not liable to be paid in case of transfer of goods from one state to another otherwise than by way of sale subject to production of form ‘F’ in terms of rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957. Section 3 read with 8 seeks to provide concessional rate of tax to inter-state sale of goods subject to production of form ‘C in terms of rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957.

(A5) For that, the Petitioners most humbly submit that in terms of Section 11 of the Gujarat Value Added Tax Act, 2003 they became entitled to claim input tax credit (ITC) of Value Added Tax (VAT) after fulfilling the conditions as mentioned therein. As per Section 1 1(3)(a) of the Gujarat Value Added Tax Act, 2003, ITC was allowed to a purchasing dealer on his purchase of taxable goods made in the State of Gujarat, which were intended for the purpose of sale within the state or inter state sale or export or branch transfer or consignment of taxable goods to other The Petitioners further submits that under the value added tax mechanism no one to one co-relation was mandated between the inputs tax credit in the one hand and the type of sale/clearances/dispatches and output on the other tax liabilities under the Gujarat Value Added Tax Act, 2003/Central Sales Tax Act, 1956.

(A6) For that, the Petitioners further submit that none of the provisions of the Gujarat Value Added Tax Act, 2003 provided for attributing admissible input tax credit 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 which are not substantiated in the manner, and within the period, prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957. Precisely, the provisions under the Gujarat Value Added Tax Act, 2003 does not envisages denial of input tax credit for the contingencies set out under second proviso to Section 140(1) of the Gujarat GST Act.

(A7) For that, it is humbly submitted that under the unamended Central Sales Tax Act, 1956, for non-submission of the statutory declaration in Form C, F, H, I etc., the differential tax is demanded which further subject to appeal/revision. The input tax credit already earned under the unamended Gujarat Value Added Tax Act, 2003 is allowed to be retained and utilized for payment of VAT/CST and neither under the unamended Gujarat Value Added Tax Act, 2003 nor under unamended Central Sales Tax Act, 1956 there is any provision to deny input tax credit in case of failure to furnish statutory declaration.

(A8) For that, in the instant case the second proviso to Section 140(1) of the Gujarat GST Act seeks to deny input tax credit itself for any failure to furnish statutory declaration which are subject to further appeal/revision and does not become arrears and recoverable. The second proviso to Section 140(1) of the Gujarat GST Act treats a case of arrear and a case where no assessment is made and there is no determination of tax due and/or where the parties are in appeal/revision and the liability has not yet become arrear, one the other. The said second proviso to Section 140(1) of the Gujarat GST Act is discriminatory and offends Article 14 of the Constitution of India as it treats unequals equally. It is humbly submitted that treating equals unequally and treating unequals equally amounts to hostile discrimination. It is humbly submitted that the said second proviso to Section 140(1) of the Gujarat GST Act partakes the character of garnishee proceedings and seeks to attach the acquired Input Tax credit of VAT even without assessment proceedings having been commenced under the existing laws.

(A9) For that, the Petitioners most humbly submit that Section 140 of the Gujarat GST Act is a transitional provision. The function of a transitional provision is to make special provision for the application of Legislation to the circumstances which exist at the time when Legislation came into force. It is not a general As a matter of fact, a transitional provision must be read in consonance with the earlier Act/Rule., the existing law in the instant case.

(A10) For that, the Petitioners submit that there is absolutely no consonance between the provisions under Gujarat Value Added Tax Act, 2003 relating to admissibility or otherwise of Input Tax Credit and those of 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 or rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 which the said second proviso to Section 140(1) of the Gujarat GST Act seeks to create.

(A11) For that, the Petitioners further submit that it would also be evident from part III and part IV of Form 201, of monthly return prescribed under Rule 18 and sub-rule (2) of rule 19 of Gujarat Value Added Tax Rules, 2006, that the said form does not require or determine in any manner whatsoever, Input Tax 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 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.

(A12) For that, the Petitioners most submit that the Central Sale Tax Act, 1956 read with the Central Sales Tax (Gujarat) Rules, 1957 provides for the mechanism for assessment of tax etc. in the event of non compliance with provisions of Section 3, Section 5(3),Section 6, Section 6A or Section 8(8) and issuance of demand notice for the differential tax liability, if any, which are further subject to appeal and the said tax are required to be paid along with interest and penalty under Central Sales Tax Act, 1956, for non compliance of the said provisions or non-submission of form C/F/H/I as prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 with respect 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. It would be relevant here to mention that in terms of the existing jurisprudence, declaration forms C/F/H/I are allowed to be submitted and produced even at the appellate stage. The differential tax liability becomes fastened only after assessment proceedings attains finality after going through various appellate stages.

(A13) For that, the Petitioners further submit that, there is an inherent erroneous presumption in form GST Tran-1 framed by the Government of Gujarat in exercise of rule making powers under Section 164 of the Gujarat GST Rule in as much as it presumes that total Input Tax Credit of VAT being carried forward as per last return is first attributable towards pending C/F/H/I forms, if any and then only the balance credit can be allowed to be adjusted towards output GST liability. It is also evident from Sr. No.5(c) of form GST Tran-1 that differential tax liability attributable to pending declaration forms is being adjusted against tax carried forward ITC of VAT.

(A14) For that, the Petitioners further submits that as they will remain liable to pay differential tax, interest and penalty under Central Tax Act for non-submission of forms C/F/H/I, therefore disallowance of carry forward of acquired accrued/acquired right of input tax credit under VAT Act even before assessment under the Central Sales Tax Act, 1956, is wholly arbitrary and confiscatory. This will also result into double jeopardy and double taxation without any consequential remedy. It is humbly submitted that it is an established principle of law that taxing the same property or subject-matter twice, for the same purpose, for the same period and in the same territory is ultra vires to the constitution. This double taxation would result into unjust enrichment in favour of the Government.

(A15) For that the Petitioners most humbly submit that Section 142(8)(a) of the Gujarat GST Act provides that where before or on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall be recovered under the existing law and if it is not possible, under the Gujarat GST Act. A perusal of the said provision clearly shows that cases falling under Section 142(8)(a) shall and must receive different treat over cases where the tax liabilities under the existing laws, have become an arrear. It is humbly submitted that the second proviso to Section 140(1) of the Gujarat GST Act seeks to treat cases falling under Section 142(8)(a) as discriminatory.

(A16) For that, the Petitioners further submit that no mechanism has been provided under Gujarat GST Act or rules issued thereunder to enable calculation of Input Tax 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 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.

(A17) For that, the Petitioners further submit that due to technical problem with the GSTN portal, if the differential tax liability payable due to pending C/F/H/I forms exceeded available Input Tax Credit of VAT being carried forward than negative balance was also getting adjusted against credit of eligible duties being carried forward in respect of inputs held in stock in terms of Section 140(3) of the CGST Act.

(A18) For that, the Petitioners further submit that provision for facility of credit is as good as tax paid till tax is adjusted. The right to the credit has become absolute under the Value Added Tax Act once the goods purchased within the State were used for the purpose of Sale within the state or inter-state or export or stock transfer. Such credit is an accrued/acquired right vested under the scheme of Value Added Tax Act and it cannot be taken away for non-submission of declarations forms under Central Sales Act, 1956. The credit is, therefore, indefeasible and without a substantive provision in the Gujarat Value Added Tax Act, 2003, the same cannot be taken away. Gujarat GST Act interferes with vested accrued right to the input tax credit and the said provision thus offends Article 265 of the Constitution of India.

(A19) For that, the Petitioners further submit that the second proviso to Section 140(1) of the Gujarat GST Act also offends Article 279A of the Constitution of India in as much as the Article 279A of the Constitution of India does not empower the Goods and Services Tax Council to make recommendation for adjustment of differential tax liability which may arise in future under the Central Sales Tax Act against an accrued/acquired right acquired under the scheme of Value Added Tax Act.

(A20) For that, the Petitioners further submit that they have already reversed input tax credit at the rate of four per cent on the taxable turnover of purchases within the State which were consigned or dispatched for branch transfer outside the State in terms of Section 1 1(3)(b) of the Gujarat Value Added Tax Act, 2003. Therefore, further restricting the carried forward credit would be double jeopardy.

(A21) For that, the Petitioners submit that Second proviso to Section 140(1) of the Gujarat GST Act is ultra vires to the Article 279A of the Constitution of India inasmuch as the Article 279A of the Constitution of India does not empower the Goods and Services Tax Council to make recommendation for adjustment of a tax liability which may arise in future under Central Sales Tax Act, 1956, which is a Central legislation, against a accrued/acquired right acquired under the scheme of Value Added Tax Act, which is a state legislation.

(A22) For that, the Petitioners most humbly submit that a statute is deemed to be retrospective which takes away or impairs any accrued/acquired right acquired under the existing laws and creates a new obligation or imposes a new duty or attaches a new disability in respect of the transactions or considerations already Therefore, the operation of this provision is retrospective in nature which is beyond powers of the Goods and Services Tax Council under Article 279 of the Constitution of India.

(A23 For that, the Petitioners most humbly submit that adjusting differential tax liability under Central Sales Tax Act, 1956 due to pending declaration forms against vested indefeasible right acquired under the scheme of Value Added Tax Act amounts to illegal deprivation of the property, which is violative of Article 300A of the Constitution and is confiscatory in nature.

(A24) For that, the Petitioners further submit that the impugned provision of adjusting differential tax liability under Central Sales Tax Act, 1956 due to pending declaration forms against vested indefeasible right acquired under the scheme of Value Added Tax Act is wholly unreasonable, arbitrary and hence, offends Article 14 of the Constitution of India. The second proviso to Section 140(1) fails to draw a distinction between an arrear and a case where there is assessment of tax etc. and a case where assessment proceedings have not even begun and thus treats unequals equally which amounts to hostile discrimination and thus offends article 14 of the Constitution of India.

(A25) For that, the Petitioners most humbly submit that equality is antithetic to arbitrariness. In fact, equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic, while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non-arbitrariness pervades Article 14 like a brooding omnipresence. The true scope and ambit of Article 14 has been the subject matter of numerous decisions and it is not necessary to make any detailed reference to them. It is sufficient to state that the content and reach of Article 14 must not be confused with the doctrine of classification. Article 14 has highly activist magnitude and it embodies a guarantee against arbitrariness.

(A26) For that, the Petitioners most humbly submit that Section 15 of the Gujarat Value Added Tax (Amendment) Act, 2017 has amended section 100 of the Gujarat Value Added Tax Act, 2003 to provide for that the amendment of the Gujarat Value Added Tax (Amendment) Act, 2017 shall not affect any right, privilege, obligation, or liability acquired, accrued or incurred under this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017.

(A27) For that, the Petitioners in the above background of the case most humbly submit that the second proviso to Section 140(1) of the Gujarat GST Act is unconstitutional and ultra vires and violative of Articles 14, Article 19(1)(g), Article 265, Article 279A and Article 300A of the Constitution and is liable to be struck down and liable to be declared null and void and of no effect to the extent.

B. For That, the Petitioners state that the Rule 117 of the Central Goods and Services Tax Rules, 2017 and Form GST Tran-1 framed thereunder is Ultra Vires of Section 140(3) and in excess of rule making power under Section 164 of the Central Goods and Services Tax Act, 2017.

(B1) For that, the Petitioners most humbly submit that the provision of Rule 117 of the Central Rules is ultra vires of the Central GST Act to the extent that it provides for filing of Form GST Tran-1 as a condition precedent for carry forward of credit of eligible duties held on stock on 30-06-2017 even though there is no such requirement under Section 140(3) of the Central GST Act. Section 140(3) of the Central GST Act provides for both substantive as well as procedural conditions to be eligible to take credit of eligible duties in their electronic credit ledger in respect of goods held in stock and leaves nothing to be prescribed by the Central Government except calculation of the eligible credit.

(B2) For that, the Petitioners further submit that the Petitioners having fulfilled all the conditions as mentioned in clause (i) to (iv) of Section 140(3) of the Central GST Act is entitled to take, credit of eligible duties in respect of inputs held in stock in his electronic credit ledger. The condition set out under Clause (v) and proviso to Section 140(3) of the Central GST Act are not applicable to the Petitioners.

(B3) For that, the Petitioners further submit that in the “FAQ for Traders” issued by the Central Board of Excise & Customs and Commercial Taxes Department of States/Union Territories, in response to specific queries as regards claim of CENVAT Credit on the stock held on the appointed day i.e 0 1-07-2017 by a trader, it is clarified that the trader need to comply only with the conditions of Sec.140(3) of the Central Act. There is no mention about filing of any declaration in Form GST Tran 1 under Rule 117 of the Central Rule as condition precedent for claiming the said credit. The relevant provision of the said clarification under No.8 are set out below:-

Q8. Can a trader having duty paying documents (including a first stage dealer or a second stage dealer) claim the Cenvat credit on the stock held on the appointed date viz 1st July, 2017 ?

Ans. Yes, a trader having duty paying documents including a first stage dealer or second stage dealer can claim Cenvat  Credit as per section 140(3) of the CGST Act, 2017 subject to fulfilment of following conditions :

(a) Such inputs are used or intended to be used for making taxable supplies;

(b) The said taxable person is eligible for input tax credit on such inputs;

(c) The said taxable person is in possession of invoice and/or other prescribed documents evidencing payment of duty under the earlier law;

(d) Such invoices and/or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day;

(e) The supplier of services is not eligible for any abatement.

(B4) For that, the Petitioners further submit that it would be relevant here to mention that Section 140(1) of the Central GST Act which deals with person registered under the existing law to carry forward CENVAT credit as per last filed return under the existing law permits him to claim such credit in electronic credit ledger in such manner as may be prescribed in addition to the conditions (i) to (iii) mentioned therein. However, under sub-section (3) of Section 140 there is no enabling provision to prescribe manner by way of Rules.

(B5) For that, the Petitioners most humbly submit that Section 140(10) only envisages the manner in which credit under section 143 (3) is to be calculated shall be prescribed. Therefore, rule of procedure can only be prescribed with respect to manner of calculation of credit being carried forward.

(B6) For that, the Petitioners most humbly submit that the sub±Rule 3 of Rule 117 further provides that credit specified in application in form GST Tran-1 can only be credited to the electronic credit ledger of the applicant maintained in form GST PMT-2 on the common portal.

(B7) For that, it is humbly submitted that the said Section 140(3) is a complete Code in itself with respect to determining eligibility to claim credit of eligible in respect to goods held in stock. Section 140(3) permits credit of eligible duties directly in electronic credit ledger subject to fulfillment of conditions (i) to (v) as mentioned therein. It does not provide for determining of eligibility subject to any further conditions or procedures as it provides under sub-Section (1) of Section 140.

(B8) For that, the Petitioners most humbly submit that Rule 117(1) of Central Rules mandates that closing balance of CENVAT Credit as at 30-06-2017 can be carried forward only subject to filing/upload a declaration electronically in Form GST Tran-1 in the GSTN portal within the time limit prescribed a 90 days delay which is extended upto 27th December’ 2017 and  in the event said declaration is not filed the entitlement to said credit would

(B9) For that, it is humbly submitted that it is fairly well settled that power to make rule under an Act is derived from the enabling provisions found in such Act and the delegate on whom such power is conferred has to act within the limits of the authority conferred by the Act and it cannot extend or enlarge or override the scope of the parent Act as is attempted in the instant case.

(B10) For that, it is humbly submitted that a delegate cannot override the Act either by exceeding the authority or by making provision inconsistent with the enabling provision of the parent Act. Any rule made in exercise of such delegated power if goes beyond the contours of the parent Act, such exercise of power becomes in excess of the power delegated under the Act and thus ultra virus of the Act but Section 140(1) of the Act only.

(B11) For that, it is humbly submitted that in the instant case a perusal of Section 140(3) read with Section 164 of the CGST Act elsewhere it would be abundantly clear that the Central Government was never vested with powers to frame the impugned sub-Rule (1) and sub-Rule (3) of Rule 117 of the Central Rule for carrying out the purpose of Section 140(3) of the Act.

(B12) For that, the Petitioners most humbly submit that before a rule can have the effect of a statutory provision two conditions must be fulfilled, namely – (1) It must conform to the provisions of the statute under which it is framed and (2) It must also come within the scope and purview of the rule making power of the authority framing the rule. If either of these two conditions is not fulfilled, the rule so framed would be void.

(B13) For that, the Petitioners most humbly submit that the Constitution of India is the fundamental law followed by law of the Parliament/State Legislature followed by the delegated Legislation which may be in the form of rules regulation etc. followed by executive orders. It is fairly well settled that in case of conflict between a law in the higher layer and law in the lower layer, the law in the lower layer shall be read in consonance with the law in the higher layer. In the instant case the sub-rule (1) and sub-Rule (3) of Rule 117 of the Central Rules framed by the Central Government must be read in harmony with Section 140(3) of the Central GST Act and not dehors the same.

(B14) For that, the Petitioners submit that Section 164 of the Central GST Act confers general rule making power on the Government to make rules for carrying out the provisions of Central GST Act. It is humbly submitted that a delegated power to legislate by making rules “for carrying out the purposes of the Act” is ageneral delegation without laying down any guidelines; it cannot be so exercised as to bring into existence obligations or disabilities not contemplated by the provisions of the Act itself.

(B15) For that, it is humbly submitted that it is an accepted principle that delegated authority must be exercised strictly within the limits of the authority. The mere fact that a rule-making power is phrased in terms that indicates a general delegation of power, cannot lead to the inference that such power may be exercised to make rules that exceed the bounds of the statute.

(B16) For that, it is humbly submitted that a perusal of Section 140(3) of the Act makes it clear that cases falling under the said sub-Section (3), sub-Rule (1) and sub-Rule (3) of the Rule 117 does not and cannot carry out the purpose of the Act but on the contrary are dehorse the Act and hence, are ultra vires to that It is humbly submitted that a delegate cannot override the Act either by exceeding the authority or by making provision inconsistent with the Act and any rule made in exercise of such delegated power if goes beyond the contours of the Act, such exercise of power becomes in excess of the powers delegated under the Act and thus ultra vires of the Act.

(B17) For that, it is further submitted that the rules framed under the Act must be in conformity with the provision of the Act more particularly the enabling provision and the rule making powers under parent Act. In the instant case the Act itself does not envisage prescribing any further condition by way of rules by the Central Government but the mandate is limited to calculation of eligible duties under Section (10) of Section 140 of the Act, hence, the Central Government could not have framed the impugned sub-Rule (1) and sub-Rule (3) of Section 117 with respect to cases falling under sub-Section (3) of Section 140 of the Act. Thus, the impugned rules are framed by the Central Government cannot be related/co-related and the power and enabling provision cannot be traced to Section 140(3).

(B18) For that, the Petitioners most humbly submit that delegated legislations should be framed in consonance with the legislative policy of the Act. When any criterion is fixed by the statute or by a policy, an attempt should be made by the delegate to follow such policy formulation and legislative intent and to work in conformity therewith. While framing the rules for the purposes of the Act, the delegate must respect the legislative policy of the Act and should not frame rules which either abridges the legislative policy or is against such legislative policy. In the instant case the provisions of Rule 117 of the CGST Rule is patently against the legislative policy and intent of the Legislature.

(B19) For that, the Petitioners most humbly submit that in the instant case if the provisions of Rule 117(1) of the CGST Rules is implemented in its present form it will result in an anomalous and incongruous situation creating undue hardship without any rhyme or reason.

(B20) For that, the Petitioners in the above background of the case most humbly submit that provisions of sub-Rule (1) and sub-Rule (3) of Rule 117 of the Central Rules are therefore, ultra vires of Section 140(3) of the Central GST Act.

(B21) For that, the Petitioners most humbly submit that the said provision is not in conformity with the due process of law.

(B22) For that, the Petitioners most humbly submit that the provisions of sub-Rule (1) and sub-Rule (3) of Rule 117 of the Central Rules is ultra vires of Section 140(3) read with Section 164 of the Central GST Act and is violative of Articles 14, Article 19(1)(g), Article 265, Article 279A and Article 300A of the Constitution and is liable to be struck down and liable to be declared null and void and of no effect to the extent it mandatorily provides for filing Form GST Tran 1 as condition precedent for availing CENVAT Credit of lying unutilised as at 30th June under the existing law.

(B23) For that, the Petitioners alternatively submit that the wide, vague and unbridled delegation U/s 164 of the Central GST Act is unconstitutional in as much as it suffers from vice of excessive delegation of legislative powers in as much as the legislature has surrendered and abdicated it s essential Legislative functions in favour of the Central Government as the impugned rules infringes and taken away the right vested in the Petitioners. It is humbly submitted that deprivation of property which is also a human right, constitutes essential functions of the legislature and cannot be delegated to the Central Government.

(B24) For that, it is humbly submitted that the legislature must retain in it’s own hands the essential legislative functions which consists of declaring the legislative policies and laying down the standard with sufficient clarity and only task of ancillary nature should be delegated and left to the delegate. The Legislature in the instant case while enacting Sec.164 has surrendered and abdicated its essential functions. The act of interfering with right to property under Article 300A constitutes essential functions of the Legislature and can not be delegated to the executive. The contentions of the Petitioners on this count is in the alternative and without prejudice to the contentions on other counts.

(B25) For that, it is humbly submitted that powers conferred in the Central Government U/s 164 is arbitrary, unguided, unbridled and unchannelised and without any check and balance, in case delegation held to be within the framework of Section 164. For that, the wide, vague and unbridled delegation U/s 164 is unconstitutional in as much as it suffers from vice of excessive delegation of legislative powers in as much as the legislature has surrendered and abdicated it’s essential functions in favour of the Central Government for the said rules/notifications provides for infringing with accrued/acquired right of the assessee, constitutes essential functions of the legislature and cannot be delegated to the Central Government.

(B26) For that, the Petitioners most humbly submit that provision of sub-Rule (1) and sub-rule (3) of Rule 117 of the Central Rule is unreasonable and thus arbitrary and thus offends Article 14 of the Constitution of India.

(B27) For that, the Petitioners most humbly submit that the State action, executive or legislative, has to be tested for constitutional infirmities qua Article 14 of the Constitution. The act has to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of healthy competition and equitable treatment. It should conform to the norms and rationale, informed with reasons and guided by public interest, etc. This is the mandate of Article 14 of the Constitution of India.

(B28) For that, the Petitioners most humbly submit that the provisions of Rule 117(1) of the CGST Rules places an unreasonable and an unconscionable restrain on the freedom to carry on trade or business guaranteed under Article 19(1 )(g) of the Constitution.

(B29) For that, Petitioners further submit that the provision of sub-Rule (1) and sub-Rule (3) of Central Rules are confiscatory in nature and thus offends Article 3 00A of the Constitution of India.

(B30) For that, the Petitioners most humbly submit that if two interpretations of statutes are possible, one of which renders the statute unconstitutional and/or Ultra Vires and another saves it from unconstitutionality, the Courts would prefer the latter construction by resorting to process of ‘reading down’ or ‘reading up’.

(B31) For that, the Petitioners most humbly submit that the reading up of the second proviso from the stand point of any of the aforesaid tests cannot be said to be a case of the judiciary adding to the words of the statute but has to be treated as ironing out of creases. Further, Courts always avoid a construction which leads to injustice and in doing so alters in the language of the statute to some extent.

(B32) For that, even if it is accepted, for arguments sake, that impugned sub-Rule (1) and sub-Rule (3) of Rule 117 of the Central Rules which mandates filing/uploading of an application in the GSTN portal in form GST-Tran 1, is intra-vires to the Act, it is humbly submitted that credit of eligible duties in respect of goods held in stock is a substantive right in terms of Section 140(3) of the Central GST Act, whereas Rule 117 of Central Rules are procedural in nature and that being the case it is an established principle of law that substantive rights cannot be denied for procedural infractions.

(B33) For that, the Petitioners most humbly submit that in case of conflict between the substantive provisions of the Act in one hand and the procedural provision under the rules on the other an attempt must be made to reconcile the conflicting provisions by declaring such rule as directory and not mandatory.

(B34) For that, it is humbly submitted that in the case of Sambhaji and Other Vs Gangabai and Others reported in (2008) 17 SCC 117 it is held by the Hon’ble Supreme Court that procedures cannot be tyrant but only a servant, it is not an obstruction in the implementation of the provisions of the Act, but an aid, the procedures are hand maid and not the mistress, it is a lubricant and not a resistance. The relevant portion of the said judgment is set out below:-

12. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in the Judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. Justice is the goal of jurisprudence, processual, as much as substantive. …

13. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the time being by or for the court in which the case is pending, and if, by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode. … A procedural law should not ordinarily be I construed as mandatory; the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed.

14. Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice.

(B35) For that, the Petitioners most humbly submit that in compliance of the provisions of Rule 117 of the Central Rules, on dated 27-12-2017 they attempted to upload the GST Tran 1 in the GSTN portal, however, inspite of their best efforts they could not upload the same due to technical glitches in the GSTN portal. For reasons of the said technical snag, several assesses throughout the territory of India, could not file/upload their GST Tran 1 which would be evident from the snapshots taken from the official twitter handle of the Government of India for answering queries on GST.

(B36) For that, the Petitioners having no other option available with them to lodge their claim of input credit under Rule 117 of the Central Rules, forthwith approached the jurisdictional GST authorities i.e. Assistant Commissioner, Range: 12, Division:5, Commissionerate: Ahmedabad, Ghatak:7, with a physical copy of the GST Tran 1 dully filled. However, the said authorities declined to accept the same on the ground that under the GST laws, they do not have jurisdiction to accept physical copies of GST Tran 1.

(B37) For that, the Petitioners most humbly submit that the aforesaid technical glitches have seriously affected their rights, caused serious prejudices and are without authority of law, hence, violates Article 14, Article 19(1)(g) and Article 300A of the Constitution of India.

(B38) For that, it is humbly submitted that the Petitioners in view of the technical glitches for reasons of which they could not file their GST Tran 1 on 27th day of December, 2017 and after that date they were not allowed to upload the said return in the GSTN Portal, should be allowed to upload/file GST Tran 1 and in terms of Section 140(3) of the Central GST Act credit of eligible duties lying unutilized as per returns filed under the existing laws as at 30-06-2017, be allowed to claim credit in the electronic credit ledger maintained on Goods and Services Tax portal.

(B39) For that, the Petitioners most humbly submit that the Hon’ble Allahabad High Court taking cognizance of the technical glitches in the GSTN Portal while uploading GST Tran 1 in the case of Continental India Pvt. Ltd. Vs UOI [W.P. (T) No 67 of 2018] has directed the GST council to make recommendations to the State Government to extend the time period for filing of GST Tran-1 considering that assessee had made several attempt on the last date of filing Form GST Tran 1 but the electronic system did not respond for filing of the application, the electronic system  of the respond The Hon’ble High Court directed the respondents to reopen the portal and in the event they do not do so, they will entertain the application of the Petitioners manually and pass orders on it after due verification of the credits as claimed by the Petitioners.

(B40) For that, the Hon’ble Bombay High Court taking serious note of several glitches in the GSTN Portal in the case of Abicor and Binzel Technoweld Pvt. Ltd. Vs UOI [W. P. (L) No. 2230 of 2018] and following the judgment of the +Rn’JLeOALL1 $aJOD High Court in the case of Continental India Pvt. Ltd. Vs UOI cited supra has held in the following lines-

10. We do not think that these are satisfactory state of A tax like Goods and Services Tax was highly publicised and termed as popular. We had yet not seen a celebration of New Tax regime, but that has followed with great hue and cry. These celebrations mean nothing. The special sessions of Parliament or special or extraordinary meetings of Council would mean nothing to the assessees unless they obtain easy access to the website and portals. The regime is not tax friendly. We hope and trust that those in charge of implementation and administration of this law will at least now wake up and put in place the requisite mechanism. This is necessary to preserve the image, prestige and reputation of this country, particularly when we are inviting and welcoming foreign investment in the State and the country. We hope and trust that such petitions are rarity and the Court will not be called upon to administer the implementation of the law, leave alone monitoring and supervising the working of the individual officials, howsoever high ranking he may be.

11. We would record that similar grievances have been raised before the Allahabad High court in Writ (Tax) No. 67 of 2018 and the order of the Division Bench of that Court dated 24th January 2018 directs the respondents before it to reopen the portal and in the event it is not done, there is further direction to entertain the application of the petitioner before the Allahabad High Court manually and pass orders on it after due verification of the credits as claimed by the petitioner before the Allahabad High Court. We would also be constrained to pass such order and that would not be restricted to the petitioner before us alone.

C. For that, the Petitioners craves leave to urge further grounds at the time of hearing of the case which are not taken herein.

D. For that, the Petitioners submit that it has no other equally efficacious adequate alternate remedy than to approach this Hon’ble Court under Article 226 of the Constitution of India. The remedy by way of writ(s), direction(s) and/or order(s) as prayed for herein, if granted will be adequate and complete.

E. For that, the subject matter out of which this writ application arises including the grounds as mentioned herein above, were  never before this Hon’ble Court in any manner whatsoever.

F. For that, this petition is made bonafide and in the interest of

G. For that, this petition is made bonafide and in the interest of natural justice.

In the aforesaid circumstances, the Petitioners most humbly pray before your Lordship:

a. To issue writ of declaration and/or any other appropriate writ(s) declaring the Second proviso to Section 140(1) of the Gujarat Goods and Services Tax Act, 2017 as unconstitutional and ultra vires Article 14, Article 19(1)(g), Article 265,  Article 279A and Article 300A of the Constitution of India;

b. To issue writ of declaration and/or any other appropriate writ(s) declaring the provisions of Rule 117 of Gujarat Goods and Services Tax Rules, 2017 and Form GST Tran-1 as unconstitutional and ultra vires of Article 14, Article 19(1)(g), article 265, article 279A   and Article 300A of the Constitution of India;

c. To issue writ of declaration and/or any other appropriate writ(s) declaring Rule 117 of the Central Goods and Services Tax Rules, 2017 and Form GST Tran-1 as ultra vires to Section 140(3) and Section 164 of the Central Goods and Services Tax Act, 2017;

d. To issue writ of declaration and/or any other appropriate writ(s) declaring Section 164 of the Central Goods and Services Tax Act, 2017 as unconstitutional as it suffers from vice of excessive delegation;

e. To issue necessary writ(s), direction(s) and/or pass necessary order(s) directing the Respondents to allow credit of carry forward of CENVAT Credit in electronic credit ledger as available on 30-06-2017 in terms of Section 140(3) of the Central Goods and Services Tax Act, 2017 and allow filing/uploading of Form GST-TRAN- 1;

f. To issue necessary writ(s), direction(s), and/or pass necessary order(s) directing the Respondents to allow eligible credit of carry forward of State tax under the existing law in the Electronic Credit Register as available on 30-06-2017 and allow filing/uploading of Form GST-TRAN- 1;

g. To issue writs(s) and/or direction(s) in the nature of prohibition commanding the Respondents, their servants agents and/or subordinates from resorting to any coercive measure during the pendency of the writ petition before this Hon’ble Court;

h. To issue order(s), direction(s), writ(s) or any other relief(s) as this Hon’ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;

i. To issue Rule Nisiin terms of prayers (a) to (h) above;

j. To Grant ad-interim reliefs in terms of prayer under Para (g) above;

k.To award Costs of and incidental to this application be paid by the Respondents; And for this act of kindness, the Petitioners shall, as in duty bound, ever pray.

And for this act of kindness, the Petitioners shall, as in duty bound, ever pray.

Place: Ahmedabad
Date:

[VISHAL J. DAVE & NIPUN SINGHVI]
Advocates for the Petitioners

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