Sri Sasthaa Constructions Vs Assistant Commissioner (ST) (Madras High Court)
Madras High Court held that valid ITC availed on purchase tax which remained unutilized is entitled for the transitional credit under section 140 of TNGST Act, 2017
Facts- The petitioner is a Works Contractor. The employer who had employed to the petitioner as a Works Contractor had deducted Tax Deducted at Source (TDS) amount u/s. 13 of the Tamil Nadu Value Added Tax Act, 2006 and this Tax Deducted at Source was transitioned under Section 140 of the TNGST Act, 2017, along with the “purchase tax” paid by the petitioner, which was availed as Input Tax Credit. Petitioner mainly alleged that tax transmitted was wrongly denied by the respondent vide the impugned Assessment Order dated 27. 04.2021.
Conclusion- If ITC was validly availed by the petitioner on “purchase tax” paid by the petitioner under Section 12(1) of the TNVAT Act, 2006 and same was remaining un-utilized, the petitioner was entitled to transition the same under Section 140 of the TNGST Act, 2017 as transitional credit.
Held that the petitioner therefore deserves a chance to defend the case as the impugned Assessment Order has been passed during the period when the country was under semi-lock down mode. If the VAT-TDS had indeed remained unutilized for discharging tax liability under TNVAT Act, 2006, there should be a fresh adjustment of the amount out of VAT-TDS towards tax liability of the petitioner and thereafter ITC which would have remained unutilized ought to have allowed to be transitioned under Section 140 of the Act or refunded to the petitioner under Section 54 of the TNGST Act, 2017 read with TNVAT Act, 2006.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Mr .C. Harsharaj, learned Additional Government Pleader takes notice on behalf of the respondent.
2. The petitioner has challenged the impugned Assessment Order dated 04.2021 for the Assessment Year 2017-2018 bearing Reference:No.GSTIN33ABWPN4200E1ZV and the consequential demand notice dated 21.06.2023.
3. The impugned Assessment Order dated 04.2021 precedes notices dated 26.09.2017, 31.07.2020 and 22.01.2021. The petitioner also has replied to the last mentioned notice on 14.08.2020. The impugned Assessment Order dated 27.04.2021 has also referred to the third notice dated 22.01.2021 in DRC-02 issued under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (hereinafter referred to as TNGST Act, 2017).
4. The specific case of the petitioner is that the petitioner is a Works Contractor, who had rendered Works Contract It is submitted that the employer who had employed to the petitioner as a Works Contractor had deducted Tax Deducted at Source (TDS) amount under Section 13 of the Tamil Nadu Value Added Tax Act, 2006 (In short TNVAT Act, 2006) and this Tax Deducted at Source was transitioned under Section 140 of the TNGST Act, 2017, along with the “purchase tax” paid by the petitioner, which was availed as Input Tax Credit (In short ITC).
5. It is further submitted that tax transmitted was wrongly denied by the respondent vide the impugned Assessment Order dated 27. 04.2021.
6. The petitioner has now filed this writ petition after the petitioner received the second mentioned final demand notice/final order dated 06.2023, calling upon the petitioner to pay the amount confirmed vide the impugned Assessment Order dated 27.04.2021 towards arrears of tax.
7. The learned counsel for the petitioner submits that the law on the subject is clear. He further submits that the petitioner was entitled to transition the credit of ITC lying unutilized in the VAT Account on 06.2017 and the impugned Assessment Order dated 27.04.2021 which has been passed without following the principles of natural justice is therefore liable to be quashed.
8. That apart, the learned counsel for the petitioner further submits that the petitioner has not received the third mentioned notice dated 01.2021 in DRC-02 which is said to have been issued under Section 73 of the TNGST Act, 2017.
9. The learned counsel for the petitioner has placed reliance on the decision of the Hon’ble Division Bench of this Court in M/s. Mahindra and Mahindra Limited The Joint Commissioner (CT) Appeals, Chennai – 6 and others, [2021] 89 GSTR 269 (Mad.), wherein, the Hon’ble Division Bench of this Court in Paragraph 6 has held as under:-
“6. On a reading of the above extracted paragraphs, it is seen that the Hon’ble Supreme Court, after referring to the decision of the Constitution Bench in the case of Thansingh Nathmal, held that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition. Further, in paragraph 15, the Hon’ble Supreme Court observed that the High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. In addition, in paragraph 19, the Hon’ble Supreme Court took note of the fact that when the High Court refuses to exercise the jurisdiction under Article 226 of the Constitution of India, it would be necessary for the Court to record that there was no case of violation of the principles of natural justice or non compliance of statutory requirements in any manner.”
10. A further reference is made to another decision of the Hon’ble Division Bench of this Court in M/s. J.P.R. Textiles The Deputy Commercial Tax Officer, Palladam, [2022] 97 GSTR 73 (Mad.) wherein, once again the decision of the Hon’ble Supreme Court in Glaxo Smith Kline Consumer Health Care Limited case has been referred to and the Division Bench of this Court has given a similar conclusion as M/s. Mahindra and Mahindra Limited case referred to supra.
11. The learned counsel for the petitioner has also relied on the following decisions of the Hon’ble Apex Court:-
i. The State of Uttar Pradesh Mohammad Nooh, [1958] 1 SCR 595;
ii. Oil & Natural Gas Corporation Limited Gujarat Energy Transmission Corporation Limited and others, (2017) 5 SCC 42;
iii. Assistant Commissioner of State Tax Commercial Steel Limited, (2021) 88 GST 799 (SC);
iv. Godrej Sara Lee Limited The Excise and Taxation Officer-cum-Assessing Authority and others, [2023] 109 GSTR 402(SC).
v. State of Tamil Nadu M/s. Everest Industries Limited, the Division Bench of this Court in W.A.No.1260 of 2017 dated 31.03.2022.
12. A specific reference is made to Paragraphs 148 to 150 in State of Tamil Nadu M/s. Everest Industries Limited, which reads as under:-
“148. Insofar as W.A Nos.1446 and 1447/2021 are concerned, the same have been preferred against the orders of the learned Judge dismissing the writ petitions as barred by limitation, based on the decision of the Apex Court in Glaxo Smith Kline Consumer Health Care Pvt ITD.
149. It is brought to the knowledge of this court, a subsequent judgment of a Co-ordinate Bench of this court in W.A No.493/2021, wherein after considering the observations of the Hon’ble Apex Court, it was held that “no bar has been imposed by the Apex Court in entertaining a writ petition under Article 226 of the Constitution of India? and the same is quoted below for ready reference:
5. In our respectful view, the decision of the Hon’ble Supreme Court in the said decision has not held that a writ petition under Article 226 of the Constitution of India is an absolute bar. We are of the said view after noting the observations/findings rendered by the Hon’ble Supreme Court in the following paragraphs :
11. In the backdrop of these facts, the central question is: whether the High Court ought to have entertained the writ petition filed by the respondent? As regards the power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra. Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law (see Baburam Prakash Chandra Maheshwari vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar [AIR 1969 SC 556] and also Nivedita Sharma vs. Cellular Operators Association of India & Ors. [2011 (14) SCC 337]. In Thansingh Nathmal & Ors. vs. Superintendent of Taxes, Dhubri & Ors. [AIR 1964 SC 1419], the Constitution Bench of this Court made it amply clear that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition, if an alternative effective remedy is available to the aggrieved person…..
15. …….. The High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. However, if the writ petitioner chooses to approach the High Court after expiry of the maximum limitation period of 60 days prescribed under Section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three Judge Bench of this Court in Oil and Natural Gas Corporation Limited (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose. ……
19…….. Pertinently, no finding has been recorded by the High Court that it was a case of violation of principles of natural justice or non compliance of statutory requirements in any manner. Be that as it may, since the statutory period specified for filing of appeal had expired long back in August, 2017 itself and the appeal came to be filed by the respondent only on 24.9.2018, without substantiating the plea about inability to file appeal within the prescribed time, no indulgence could be shown to the respondent at all.
6. On a reading of the above extracted paragraphs, it is seen that the Hon’ble Supreme Court, after referring to the decision of the Constitution Bench in the case of Thansingh Nathmal, held that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ Further, in paragraph 15, the Hon’ble Supreme Court observed that the High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. In addition, in paragraph 19, the Hon’ble Supreme Court took note of the fact that when the High Court refuses to exercise the jurisdiction under Article 226 of The Constitution of India, it would be necessary for the Court to record that there was no case of violation of the principles of natural justice or non-compliance of statutory requirements in any manner.
7. Therefore, there are certain broad parameters, within which, the Court has to exercise its jurisdiction under Article 226 of The Constitution of India, which read as hereunder :
i. if there is unfairness in the action of the Statutory Authority;
ii. if there is unreasonableness in the action of the Statutory Authority;
iii. if perversity writs large in the action taken by the Authority;
iv. if the Authority lacks jurisdiction to decide the issue and
v. if there has been violation of the principles of natural justice,
the Court will step in and exercise its jurisdiction under Article 226 of The Constitution of India.
8. Further, it would be highly beneficial to refer to the celebrated decision of the Constitution Bench of the Hon’ble Supreme Court in the case of Mafatlal Industries Vs. Union of India [reported in 1997 (5) SCC 536] wherein it was held that the jurisdiction of the High Courts under Article 226 and that of the Hon-ble Supreme Court under Article 32 of The Constitution of India could not be circumscribed by the provisions of the Enactment (Central Excise Act) and they would certainly have due regard to the legislative intent evidenced by the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the Act. Further, the Court directed that the writ petition would be considered and disposed of in the light of and in accordance with the provisions of Section 11B of the Central Excise Tax Act and for such a reason, the power under Article 226 of The Constitution of India has to be exercised to effectuate rule of law and not for abrogating it.
9. In the light of the above, we have no hesitation to hold that the observation of the learned Single Judge to the effect that there is absolute bar for entertaining a writ petition does not reflect the correct legal Hence, we are inclined to interfere with the observation made in the impugned order.?
150. With utmost respect, the Hon’ble Supreme Court has held that such writs should not be entertained as a matter of course, even though, the court has wide powers under Article 226 of the Constitution. The writ court ought to have seen that the High Court under Article 226 of Constitution is rather circumscribed by the theory of laches and not by limitation, because the Constitution is above a statute as held by the Apex Court in the Judgment in the matter of Samjuben Gordhanbhai Koli Vs State of Gujarat, reported in MANU/SC/0826/2010. The effect of ?laches? depends upon the facts of each case and is left to the discretion of the court to either reject or entertain a writ petition. In taxing matters, whenever a levy or demand is made without authority of law, the court would be within its power to set aside the same, because any illegality cannot be perpetuated on technicalities. Further, as per the provisions of the TNVAT Act, Section 84 empowers rectification of orders within five years from the date of any order passed by the assessing officer. It is settled law that the error contemplated therein is not just factual, but also legal error. When the power to the statutory authority is granted upto five years to modify the order, it cannot be said that the constitutional authorities would not have power to review the action. Therefore, concurring with the Division Bench, we do not concur with the decision of the Learned Judge to dismiss the writ petitions on the technicality of limitation, that too, when the batch was pending. We set aside the said order of the learned Judge and dispose of the writ appeals in WA.Nos.1446 and 1447/2021 accordingly.
13. It is submitted that although the petitioner failed to file an appeal, the question of denying the aforesaid credit which was validly availed, transitioned and utilized cannot be countenanced.
14. Defending the stand of the respondent, the learned Additional Government Pleader for the respondent submits that the writ petition is barred in favour of the recent decision of the Hon’ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others Glaxo Smith Kline Consumer Health Care Limited, (2020) 19 SCC 631.
15. The Hon’ble Supreme Court in Glaxo Smith Kline Consumer Health Care Limited case, referred to supra, held as follows:-
“15. ………. It is not a matter of taking away the jurisdiction of the High Court. In a given case, the Assessee may approach the High Court before the statutory period of appeal expires to challenge the assessment order by way of writ petition on the ground that the same is without jurisdiction or passed in excess of jurisdiction-by overstepping or crossing the limits of jurisdiction including in flagrant disregard of law and Rules or procedure or in violation of principles of natural justice, where no procedure is specified. The High Court may accede to such a challenge and can also non- suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. However, if the writ petitioner chooses to approach the High Court after expiry of the maximum limitation period of 60 days prescribed under Section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three-Judge Bench of this Court in Oil and Natural Gas Corporation Limited (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose.”
16. A further reference is also made to Paragraph 17 in Glaxo Smith Kline Consumer Health Care Limited, wherein, the decision of the Hon’ble Supreme Court in M/s. ITC Limited and another Union of India and others, (1998) 8 SCC 610, has been distinguished.
17. It is further submitted that in Paragraph 18 of the aforesaid case, the Hon’ble Supreme Court has clarified the position that the writ petition cannot be entertained assailing the Assessment Order beyond the statutory period of limitation prescribed for filing an appeal.
18. The learned Additional Government Pleader for the respondent submits that the writ petition challenging the impugned order on the ground of principles of natural justice or any other grounds viz., lack of jurisdiction etc., is available to the petitioner only if the writ petition was filed within the period of limitation.
19. I have heard the learned counsel for the petitioner and the learned Additional Government Pleader for the respondent.
20. The decision of the Hon’ble Supreme Court in Glaxo Smith Kline Consumer Health Care Limited, referred to supra, which was cited by the learned Additional Government Pleader for the respondent indicates that even under Article 142 of the Constitution of India, the Court cannot extend the period of limitation.
21. The Hon’ble Supreme Court in M/s. Glaxo Smith Kline Consumer Health Care Limited referred to supra, it has further observed as under:-
“15. …… To put in a different way, the prescription of limitation in a case of present nature, when the statute commands that this Court may condone the further delay not beyond 60 days, it would come within the ambit and sweep of the provisions and policy of legislation. It is equivalent to Section 3 of the Limitation Act. Therefore, it is uncondonable and it cannot be condoned taking recourse to Article 142 of the Constitution.”
22. In Paragraph 22 of the aforesaid decision, again the Hon’ble Supreme Court has reiterated the position, which reads as follows:
“22. Suffice it to observe that this decision is on the facts of that case and cannot be cited as a precedent in support of an argument that the High Court is free to entertain the writ petition assailing the assessment order even if filed beyond the statutory period of maximum 60 days in filing appeal. The remedy of appeal is creature of statute. If the appeal is presented by the assessee beyond the extended statutory limitation period of 60 days in terms of Section 31 of the 2005 Act and is, therefore, not entertained, it is comprehensible as to how it would become a case of violation of fundamental right, much less statutory or legal right as such.”
23. There is no dispute that the impugned Assessment Order was passed during the period when the second wave of Covid-19 (Omicron) was at its peak during April 2021. The explanation of the petitioner is that the petitioner had engaged an aged accountant as a tax consultant to take care of the petitioner case and that the said accountant also died due to Covid-19 Pandemic. Thus, the statutory appeal could not be filed under Section 107 of the TNGST Act, 2017.
24. There is reasonable case for accepting the explanation of the petitioner for not having filed an appeal in time under Section 107 of the TNGST Act, 2017. The decision of the Hon’ble Supreme Court in the above case was rendered before the outbreak of Covid-19 Pandemic and therefore, statutory appeal cannot be applied for the orders passed during pandemic.
25. On perusing the records, there is also no doubt that the petitioner was entitled to ITC on Section 12(2) of the TNVAT Act, 2006. To that extent, there is merits in the submission of the petitioner.
26. If ITC was validly availed by the petitioner on “purchase tax” paid by the petitioner under Section 12(1) of the TNVAT Act, 2006 and same was remaining un-utilized, the petitioner was entitled to transition the same under Section 140 of the TNGST Act, 2017 as transitional credit.
27. The petitioner is therefore justified in assailing the impugned Assessment Order although the limitation to file an appeal had expired long back.
28. In so far as transition of Tax Deducted at Source (TDS) under Section 13 of the TNVAT Act, 2006, on Works Contract rendered is concerned, there is no scope for transmitting the credit under Section 140 of the TNGST Act, Section 140 of the TNGST Act, 2017 is applicable only to ITC.
29. As per Section 13(3) of the TNVAT Act, 2006 read with Rule 9 of TNVAT Rules, 2007, the person employing a Works Contractor has to deduct and deposit the tax within fifteen (15) days and issue a Certificates Work to the contractor in the prescribed form for each deductions separately and send a copy of the Certificate of Deduction in Form S to the Assessing Authority having jurisdiction over the petitioner together with such documents as may be prescribed under the provisions of TNVAT Rules 2007.
30. As per Sub-Section 4 to Section 13 of the TNVAT Act, 2006, on furnishing a statement, a Tax deduction referred to in Sub-Section (3) to Section 13 of the TNVAT Act, 2006, the amount deposited under Sub-Section (2) to Section 13 is to be adjusted by the Assessing Authority towards the Tax liability under Section 5 or 6 of the Act, as the case may be, which is to constitute a good and sufficient discharge of the tax liability of the person deducting tax to the extent of the amounts Section 13 of the TNVAT Act, 2006 reads as under:-
“13. Deduction on of tax at source in works contract:-
(1) Notwithstanding anything contained in this Act, every person responsible for paying any sum to any dealer for execution of works contract shall, at the time of payment of such sum, deduct an amount calculated, at the following rate, namely:-
