Introduction: This analysis delves into the alignment of Input Tax Credit (ITC) claiming processes under the TNVAT Act and the CGST Act, asserting the concept’s uniformity. Key legal questions regarding the nature of provisions, the validity of notifications affecting forms, and conditions for ITC entitlement are scrutinized. The issues discussed include the status of Form GSTR-2, Form GSTR-3, and the significance of Sections 38(2), 41(1), 42, and 43 in the CGST Act. The essay employs the ‘Mischief Rule’ from Heydon’s Case and draws parallels between TNVAT Act provisions pre-2016 and the CGST Act from July 2017 to September 2022.
The concept for Claim the ITC under the TNVAT Act and the CGST Act are one and the same.
The ‘Question of law’ stands on the following issues,:
(a) whether the provisions prescribed in Section 38(2); Section 41(1) ; section 42 and 43 are substantive provisions or procedural provisions ?.
(b) Till 30.09.2022 the Form GSTR-2 is in force. As against the Notification No.18/2022 CT dated 28.09.2022 attempts were made to burial the Form GSTR-2 by notification No.82/2020 CT dated 10.11.2020 w.e.f. 01.01.2021. Whether such action is legally valid.?
(c) Till 30.09.2022, the provisions in Section 38 of the CGST Act, stands with the Marginal Heading “furnishing Details of Inward Supplies”, is prior to substituted by Section 104 in Finance Act No.6 of 2022 and by Notification No.18/2022 CT dated 28.09.2022,. Sub rule (8) of rule 60 of the CGST Rules 2017 is explain the meaning for ‘details of inward supply’.
Whereas against the explanation given, attempts were made to burial the provisions prescribed in rule 60(8) of the CGST Rules, by notification No.82/2020 CT dated 10.11.2020 w.e.f. 01.01.2021. Whether such action is legally valid?
(d) Till 30.09.2022 the Form GSTR-3 is in force. As against the Notification No.18/2022 CT dated 28.09.2022 attempts were made to burial the Form GSTR-3, prescribed in subrule(1) of rule 61 and its functions were prescribed in sub rule(2) to (4) are taken away, without providing any alternative machinery provisions, by notification No.82/2020 CT dated 10.11.2020 w.e.f. 01.01.2021. Whether such action is legally valid.?
(e) Subject to Section 41(1) read with Section 38(2) entitled to take the eligible ITC for Claim. The Rights given to every registered person, in Sub rule (6) of rule 61 of the CGST Rules 2017, for rectify the error or omission in his return under the marginal headings “where a return in form GSTR-3B has been furnished after the due date for furnishing of details in Form GSTR-2”, has been bring into force with effect from 01.07.2017 by Notification No.17/2017 dt 27.07.2017. Whereas attempts were made to burial the provisions prescribed in rule 61(6) of the CGST Rules by notification No.49/ 2019 CT dated 09.10.2019 with retrospective effect from 01.07.2017 Whether such action is legally valid?.
(f) As evidence by Notification No.18/2022 CT dated the Form GSTR-3 is in force till 30.09.2022, whereas attempts were made to burial the validity of Form GSTR-3 by inserting proviso to sub rule (5) of rule 61 of the CGST Rules, by Notification notification No.49/ 2019 CT dated 09.10.2019 with retrospective effect from 01.07.2017 Whether such action is legally valid?.
(g) Under the CGST Act, every registered person, who intends to Claim ITC, he shall furnish the details of (inward supply) purchase of goods or receipt of services or both at invoice wise, as required under rule 36(2) and rule 69 of the CGST Rules, in a Annexure is called Form GSTR-2, is mandatory under section 38(2) of the CGST Act and based on such information/ particulars, the statement in the return furnished under section 39 shall be mandatory under section 41(1) of the CGST Act, being such amount shall be credited to his electronic credit ledger. Under Such circumstances, the Assessing authority denied, to provide, opportunity to furnish the details of inward supplies and in his return, instead, applied the provisions in Section 16(4) of the CGST Act. Whether such action is legally valid?.
INTERPRETATION OF MISCHIEF RULE (Heydon’s Case) :-
The English theory of interpretation was fully expounded in Heydon’s case (1584 3 Co Rep7a) where all the Barons of the Exchequer declared:-
“That for the sure and true interpretation of all statutes in general… four things are to be discerned and considered:
(1) What was the Common law before making of the Act.
(2) What was the Mischief and defect for which the Common Law did not provide.
(3) What remedy parliament had resolved and appointed to cure the disease of the Commonwealth.
(4) The true reason of the remedy.”
The rule in the Heydon’s case, which is well know as the “ Mischief Rule” has been adopted verbatim by the Supreme Court in Bengal Immunity Co Ltd Vs State of Bihar , AIR 1955 (SC) 661.
Some other relevant Case Laws for Mischief Rule :-
1. R.M.D. Chambarbaugwalla Vs Union of India – AIR 1957 (SC) 628
2. CIT Vs Shahzada Nand & Sons [1966] 60 ITR 392 (SC)
3. Dr. Baliram Waman Hiray Vs Mr. Justice B. Lentin [1989] 176 ITR1 (SC)
4. Sevantilal Maneklal Sheth Vs CIT [1968] 68 ITR 503 (SC)
5. CIT Vs B N Bhattachargee [1979] 118 ITR 461 (SC)
What was the Common law before making of the Act:-
Under the TNVAT Act 2006:-
A dealer who intent to claim the ITC under the TNVAT Act, ,the sub rule 7(1)(a) and the Form I has been substituted by the G.O. Ms No.18, CT &RD (b1) dated 29.01.2016, brings mandatory for
(a) filing Electronic return and in his Electronic return in Form-I
(b) In the return in Form I, he shall give a declaration that “ I/ we ….. declare that to the best of my/ our knowledge and belief the information furnished in the above statement is true, correct and complete as per the Annexures filed to this return.”
(c) sub rule (10) of rule 7 of the TNVAT Rules 2007
Added by By G.O. Ms 18 CT & R (b1) dated 29.01.2016 :-
“(10) Notwithstanding anything contained in sub rule (9), if a dealer having filed a return has failed to claim input tax credit in respect of any transaction of taxable purchases in any month, other than as a result of an inspection or audit or receipt of any other information or evidence by the assessing authority he can claim the same by filing revised returns before the end of the financial year in which the purchases were made or before ninety days from the date of purchases, whichever is later.
(d) Sub section (11) of Section 19 of the TNVAT Act prescribed that
“(11) In case any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before end of the financial year or before ninety days from the date of purchase, whichever is later.”
Under the Goods and Services Tax Acts 2017: ( for the period from 01.07.2017 to 30.09.2022)
(a) Legislatures’ same policy, Scheme and the same concept is continue and emphasis at present under the CGST Act for the period from 01.07.2017 to 30.09.2022 that every registered person, who intends to claim ITC u/s 41 of the CGST Act, has entitled to take the eligible input tax credit. But subject to the condition that before furnish his return u/s 39, he shall furnish his details of inward supply (purchase-Invoice-wise details) under Section 38(2) of the CGST Act, electronically on the GST Common portal, within the stipulated time, for every tax periods (month/ quarterly), Rule 61(2) prescribed that Part A of the return shall be electronically generated on the basis of information furnished through Form GSTR-1 and GSTR-2 and based on other liabilities of preceding tax periods. Rule 61(2) is amended by Notif.82/2020CT 10.11.2020 wef 1.1.2021.
(b) Sub section (2) of Section 38 of the CGST Act prescribed that “ Every registered person, other than….. shall furnish, electronically, the details of inward supplies of taxable goods or Services or both including reverse charge basis under this Act and inward supplies of goods or services or both taxable under the IGST Act or on which IGST is payable under Section 3 of the Customs Tariff Act 1975 [51 of 1975] and credit and Credit or debit notes received in respect of such supplies during a tax period after the tenth day but on or before the fifteenth day of the month succeeding the tax period in such form and manner as may be prescribed,
(c) Prior to substituted by Notification No. 82/2020 CT dated 10.11.2020 w.e.f. 01.01.2021 the sub rule (2) of rule 61 of the CGST Rule is prescribed that
“(2) Part A of the return under sub rule (1) shall be electronically generated on the basis of information furnished through Form GSTR-1 , Form GSTR-2 and based on the other liabilities of preceding tax periods.”
(d) Sub Section (1) of Section 41 of the CGST Act is prescribed that
“Claim of input tax credit and provisional acceptance thereof:-
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed , be entitled to take the credit of input tax, as self assessed, in his return and such amount shall be on a provisional basis to his electronic credit ledger.”
CONDITIONS AND RESTRICTION ENTITLED TO TAKE THE CRDIT OF INPUT TAX FOR CLAIM ( 01.07.2017 to 30.09.2022) :
In addition to the provisions prescribed in Section 16 of the CGST Act, we have to refer the following Rules and Sections.
(a) Sub section (9) of Section 39 of the CGST Act prescribed that
“ Subject to the provisions of Section 37 and 38, if any registered person after furnishing a return under sub-Section (1) or sub-section (2) or sub-section(3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny , audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars [ in such form or manner as may be prescribed] subject to payment of interest under this Act:”
(b) Sub rule (2) of rule 36 of the CGST Rules prescribed that
“Documentary requirement and conditions for Claiming input tax credit:-
(2) Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI are contained in the said document and the relevant information, as contained in the said document, is furnished in Form GSTR-2 by such person.
Provided that if the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-state supply, input tax credit may be availed by such registered person.”
(c) Rule 69 of the CGST Rules prescribed that
“Matching of Claim of input tax credit:- The following details relating to the claim of input tax credit on inward supplies including imports, provisionally allowed under section 41, shall be matched under Section 42 after the due date for furnishing the return in form GSTR-3 –
-
-
- Goods and Services Tax Identification Number of the supplier;
- Goods and Services Tax Identification Number of the recipient;
- Invoice or debit note number;
- Invoice or debit note dater; and
- Tax amount:
-
Provided that where the time limit for furnishing Form GSTR-1 specified under Section 37 and Form GSTR-2 specified under Section 38 has been extended the date of matching relating to claim of input tax credit shall also be extended accordingly:…”
(d) Sub rule (6) of rule 61 of the CGST Act prescribed that “(6) Where a return in form GSTR-3B has been furnished , after the due date for furnishing of details in form GSTR-2 –
(a) Part A of the return in Form GSTR-3 shall be electronically generated on the basis of information furnished in form GSTR-1, form GSTR-2 and based on other liabilities of preceding tax periods and Part B of the said return shall be electronically generated on the basis of the return in Form GSTR-3B furnished in respect of the tax period:
(b) the registered person shall modify Part B of the return in Form GSTR-3 based on the discrepancies , if any between the return in Form GSTR-3B and the return in Form GSTR-3 and discharge his tax and other liabilities, if any;
(c) where the amount of input tax credit in form GSTR-3 exceeds the amount of input tax credit in terms of Form GSTR-3B the additional amount shall be credited to the electronic credit ledger of the registered person.:”
(e) Sub section (2) of Section 42 of the CGST Act prescribed that “Marching, reversal and reclaim of input tax credit.-
(2) The claim of input tax credit in respect of invoices or debit notes relating to inward supply that match with the details of corresponding outward supply or with the integrated goods or services tax paid under section 3 of the Customs Tariff Act 1975 [51 of 1975] in respect of goods imported by him shall be finally accepted and such acceptance shall be communicated in such manner as may be prescribed, to the recipient.
(f) Sub section (4) of Section 16 of the CGST Act prescribed that
“(4) A registered person shall not be entitled to take the input tax credit in respect of any invoice or debit note for supply of goods or services or both after the [30th of November] following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the sections for the month of March 2019 in respect of any invoice or 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 section (1) of the said section for the month of March 2019.”
Conclusion: The examination concludes by asserting the legislative coherence between TNVAT Act and CGST Act in ITC claiming processes. It emphasizes the importance of understanding the legal nuances, adherence to procedural requirements, and compliance with changing forms and rules. The ‘Mischief Rule’ aids in contextualizing legislative intent, ensuring a comprehensive understanding of the evolution of ITC claiming mechanisms, ultimately guiding businesses in navigating the complexities of tax regimes.
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