The Madras High Court issued the notice to the Commissioner and Assistant Commissioner of GST for various issues related to Input Tax Credit, its transitional provisions and concern time limit.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
In these writ petitions, the constitutional validity of the retrospective amendment to Section 140 of the Central Goods and Services Tax Act, 2017 (in short, “CGST Act”) and Rule 117 of the Central Goods and Services Rules, 2017 (in short “CGST Rules”) are under challenge.
2. By our earlier judgment in M/s.P.R.Mani Electronics v. Union of India and others in W.P.No.8890 of 2020, decided on 13.07.2020, we had upheld the validity of Rule 117 of the CGST Rules.
3. Learned counsel for the petitioner has sought to distinguish the said judgment on the following grounds:
(i) The availment of Input Tax Credit should be distinguished from the transition and utilization of the Input Tax Credit.
(ii) Once an assessee avails of the Input Tax Credit by complying with all conditions relating thereto, a vested right accrues in favour of such assessee. Consequently, such vested right of Input Tax Credit cannot be divested by a subsequent enactment.
4. In this connection, learned counsel for the petitioner further contends that Section 174(2)(c) of the CGST Act protects such vested right. In support of his submissions, he relied upon the CENVAT Rules, 2004 and in particular Rule 14, which provides that CENVAT credit can only be taken away when it has been wrongly availed as per the said Rule 14. Learned counsel for the petitioner has also relied upon the judgments of the Apex Court and other High Courts in the cases of Eicher Motors Limited v. Union of India, reported in 1999 (106) ELT 3 (SC); Collector of Central Excise, Pune v. Dai Ichi Karkaria Limited, reported in 1999 (112) ELT 353 (SC); Malladi Drugs and Pharmaceuticals Limited v. Union of India, reported in 2015 (323) ELT 489 (Mad.); Siddharth Enterprises v. Nodal Officer, reported in 2019 (29) GSTL 664 (Guj.); Adfert Technologies Private Limited v. Union of India, reported in 2020 (32) GSTL 726 (P&H) and Union of India and others v. Adfert Technologies Private Limited, S.L.P.(C) No.4408 of 2020, dated 28.02.2020, which arose out of the judgment of the Punjab and Haryana High Court in Adfert Technologies Private Limited (supra). He also referred to the judgment of the Apex Court in the case of Jayam and Company v. Assistant Commissioner, reported in 2018 (19) GSTL 3 (SC) and in particular, pointed out that paragraph 8 thereof was not brought to the attention of this Court on the earlier occasion. In addition, he adverted to the statement of objects and reasons of the CGST Act in order to contend that the primary object was to prevent the cascading of taxes and that the relevant provisions viz., Section 140 of the CGST Act and Rule 117 of the CGST Rules should be interpreted by keeping in mind the said object and purpose.
5. Shri R.Sankaranarayanan, learned Additional Solicitor General, in response, referred to the judgments of the Apex Court in the case of Osram Surya (P) Limited v. Commissioner of Central Excise, Indore, reported in (2002) 9 SCC 20 and Samtel India Limited v. Commissioner of Central Excise, Jaipur, reported in (2003) 11 SCC 324 to contend that conditions may be imposed for availing a vested right. He also requested time to obtain instructions in this matter and file a counter-affidavit.
6. Upon consideration of the submissions of the learned counsel for the appellant, we are of the opinion that the following questions arise for consideration in these writ petitions:
(1) Whether Input Tax Credit is a vested right and therefore, whether the imposition of a time limit for transitioning or utilisation thereof is constitutionally impermissible?
(2) Whether the time limit imposed in Rule 117 of the CGST Rules is mandatory or directory?
(3) Whether Section 140 of the CGST Act read with Rule 117 of the CGST Rules divests the assessee of an alleged vested right or whether it prescribes conditions relating to the enforcement of such right?
(4) Whether the assessee has a legitimate expectation that the Input Tax Credit availed under the erstwhile tax regime should be permitted to be transitioned to the new tax regime without imposing a time limit?
(5) Whether the deprivation of the benefit of transitional Input Tax Credit would amount to double taxation of the assessee as alleged?
As prayed for, list on 18.09.2020. Issue notice to the second and third respondents returnable by then.