[CASE NUMBER] IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 10828 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE MR.JUSTICE [ENTITY] 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the [ACT] or any order made thereunder ? [ENTITY] Versus [ENTITY] Appearance: [ENTITY], ADVOCATE with [ENTITY]), [ENTITY], [ENTITY], [ENTITY], ADVOCATES for the PETITIONER(s) No. 1,2 MR [ENTITY]) for the RESPONDENT(s) No. 1,2,3 CORAM: HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE MR.JUSTICE [ENTITY] Date : 11/10/2018 ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE [ENTITY])
1. Petitioner has made following substantive prayersinthispetition:
"(a) YourLordshipsmaybepleasedtoissue [CASE NUMBER] writ of declaration and/or any other appropriate writ(s) declaring Rule 117 of the Central Goods and Services Tax Rules, 2017andFormGSTTran1asultraviresto [SECTION](5) and Section 164 of the CentralGoodsandServicesTaxAct,2017and also offends Article 14, Article 19(1)(g), Article 265 and Article 300A of the ConstitutionofIndia,1950;
(b) YourLordshipsmaybepleasedtoissue writ of declaration and/or any other appropriatewrit(s)declaringSection164of theCentralGoodsandServicesTaxAct,2017 asunconstitutionalasitsuffersfromvice ofexcessivedelegation;
(c) YourLordshipsmaybepleasedtoissue writ(s),direction(s)and/orpassnecessary order(s)directingtherespondentstoallow rectification of GST - Tran1, to enable credit of carry forward of Credit on eligible duties of goods and services in transitinelectroniccreditledgerinterms ofSection140(5)oftheCentralGoodsand ServicesTaxAct,2017,eitherbyopeningof GSTN portal or to allow it to be filed manually;"
2. In view of the judgment of Division Bench of [PRECEDENT] dated 12th/19th September 2018, in [CASE NUMBER], learned counsel for the petitioners stated that he is not pressingprayers(a)and(b)notedabove.
3. He however pressed prayer(c) which arises in followingfactualbackground.
[CASE NUMBER]
4. Petitioner no.1 is a company registered under the [ACT] ('[ACT] ('[ACT]' for short). With the advent of Goods and Service Tax regime, certain transitionalarrangementsweremadeunderthestatute requiring the dealers and manufacturers to make declarationsoftheunutilisedpasttaxcredits,only upon which, the same would be migrated to the new regime. Oneofthemwasadeclarationinterms of [SECTION] of [ACT] which is referred to as TRAN1.Initialtimegrantedunderthesaidprovision formakingsuchdeclarationwasthreemonthsfromthe date of bringing the statute into existence i.e. 01.07.2017. Under representations, this time limit wasextendedfromtimetotime.Finalextensionwas grantedtill27.12.2017.
5. Thetimelimitprovisionscontainedinrule117 oftherespectiverulescametobechallengedbefore thisCourtincaseof [PRECEDENT] (supra). Petitioner therein had challenged [SECTION] Boththesechallenges wererepealedbytheHighCourtbythesaidjudgment.
[CASE NUMBER] Insuchjudgment,itwasnoticedthattheGovernment hadamendedrule117providingforlimitedextension of time for filing TRAN1 declarations with the permission of the concerned Commissioner if previously within the time granted, the same could notbedoneonaccountoftechnicalglitchesonthe officialportal.
6. CaseofthepetitioneristhatsuchTRAN1was actuallyfiledwithinthetimeoriginallypermitted. Afterthetimelimitwasover,thepetitionernoticed certain errors in the declaration made. Three transactionswhichwereinpipelinewhentheGSTwas brought into force, due to oversight, were not included in such declaration. The petitioner thereforedesiresthatsuchdeclarationTRAN1maybe permittedtobecorrected.
7. Counsel for the petitioner submitted that the statutoryprovisionsconcerningfilingofthereturns envisage scope for correction of the returns, for which,timeisgranteduptotheduedateforfiling thereturns.Hesubmittedthatduringthetransitory period, number of changes took place. It was [CASE NUMBER] legitimate that some of the transactions may have been overlooked by the assessees. Not granting opportunity to correct the declaration would result intosubstantialfinanciallosstothepetitionerand othersimilarlysituateddealers.Counselreliedon the decisions of Supreme Court in case of [PRECEDENT] and in case of [PRECEDENT] contendthatthestatutemustbereadasawholeand harmoniousinterpretationoftheprovisionshouldbe granted.Hisattemptwasthereforetopersuadeusto applytheprovisionsforcorrectionofreturnstothe situation where TRAN1 declaration may have been incorrectlyfiled.Healsodrewourattentiontoan interim order passed by the Bombay High Court on [CASE NUMBER] of O/E/NIndiaLtd.&Anr.v.UnionofIndia&Ors. inwhich,variousrecommendationsweremadetoenable the petitioner to correct TRAN1 declaration where the figure of CENVAT credit available was shown as Rs.11,10,555/ instead of Rs.1,11,05,550/ in [CASE NUMBER] exerciseofpowersundersection172oftheCGSTAct.
8. On the other hand, learned counsel Shri [ENTITY] for the department opposed the petition contending that this Court in case of Willowood Chemicals Pvt. Ltd.(supra) has examined the time limit provisions contained in the transitional chapter and found that the same cannot be lightly extended.Hesubmittedthatthepetitionerhadtime upto 27.12.2017 to make a declaration which would include the opportunity to correct a declaration alreadymadeifanyerrorwasspotted.
9. This Court incase of Willowood Chemicals Pvt. Ltd.(supra)hadoccasiontoexaminetheschemeunder the [ACT] and [ACT]. The transitional provision and in particular of filing TRAN1 declarationsandthetimelimitprovisionscontained inrespectthereof.Thechallengeofthepetitioner in the said case to the time limit provision was mainly twofold. Firstly, that the subordinate legislaturedidnothavetheauthoritytoprescribe timelimitwhichwasnotenvisagedintheparentAct and secondly, that in any case such time limit [CASE NUMBER] provision should be seen as directory and not mandatory. TheCourtrejectedboththecontentions andupheldthetimelimitprescribedunderrule117 oftheRules.
10. The Court, in the process, made following observations:
"24. It is in exercise of this rule making power, the Government has framed the [ACT][SECTION] has prescribed, besides other things, the time limit for making declarationintheprescribedformforevery dealerentitledtotakecreditofinputtax underSection140.Subrule[1]ofRule117 thus applies to all cases of credits which maybeclaimedbyaregisteredpersonunder [SECTION] of the Act and is not confined to subsection [3]. This plenary prescription of time limit within which necessary declarations must be made is, in our opinion, neither without authority nor unreasonable.
25.Section140oftheActenvisagescertain benefits to be carried forward during the regime change. As is wellsettled, the reduced rate of duty or concession in payment of duty are in the nature of an exemption and is always open for the legislaturetograntaswellastowithdraw suchexemption.Asnotedincaseof Jayam& Company [Supra], the Supreme Court had observedthatinputtaxcreditisaformof concession provided by the legislature and canbemadeavailablesubjecttoconditions. Likewise,inthecaseofRelianceIndustries Limited [Supra], it was held and observed thathowmuchtaxcredithastobegivenand underwhatcircumstancesisadomainofthe [CASE NUMBER] legislature.Incaseof Godrej&BoyceMfg. Co.Pvt. Limited [Supra], theSupreme Court hadupheld a rulewhich restricts availment ofMODVATcredittosixmonthsfromthedate of issuance of the documents specified in the proviso. The contention that such amendment would take awayan existing right wasrejected.
26. While the entire tax structure within thecountrywasthusbeingreplacedbyanew framework, it was necessary for the legislaturetomaketransitionalprovisions. [SECTION] of the [ACT], which is a transitional provision, essentially preserves all taxes paid or suffered by a dealer. Credit thereof is to be given in electronic credit register under the new statute, only subject to making necessary declarationsinprescribedformatwithinthe prescribedtime.Asnoted,[SECTION] of the [ACT] authorizes the Government to make rules for carrying out theprovisionsoftheActonrecommendations of the Council. [SECTION] further provides that without prejudice to the generality of the provisions of subsection [1], the Government could also make rules for all, or any of the matters, whichbythisActarerequiredtobeormay be prescribed or in respect of which, provisions are tobeormay bemade bythe rules. Combined effect of the powers conferred to subordinate legislature under [SECTION] of the [ACT] would convince us that the prescriptionoftimelimitundersubrule[1] ofRule 117of [ACT] isnot ultra vires the Act. Likewise, such prescription oftimelimitcannotbestatedtobeeither unreasonable or arbitrary. When the entire tax structure of the country is being shiftedfromearlierframeworktoanewone, there has to be a degree of finality on claims, credits, transfers of such credits and all issues related thereto. The [CASE NUMBER] petitioners cannot argue that without any reference to the time limit, such credits should be allowed to be transferred during the process of migration. Any such view wouldhampertheeffectiveimplementationof thenewtaxstructureandwouldalsoleadto endless disputes and litigations. As noted incaseofUSAAgencies[Supra],theSupreme Court had upheld the vires of a statutory provision contained inthe [ACT] The vires was upheld observing that the legislature consciously wanted to set up the time frame for availment of the input tax credit. Such conditions therefore mustbestrictlycompliedwith.Thus,merely because the rule in question prescribes a time frame for making a declaration, such provision cannot necessarily be held to be directory in nature and must depend on the contextofthestatutoryscheme.
27. Issue can be looked at from slightly different angle. Granting tax credit is an integral part of computation and collection of tax. Tax collection is an important element of budgetary allocations and estimationoftheUnionandtheStates.Such consideration of tax credits at such large scale cannot be allowed to linger on indefinitely which would have a direct effect onthe taxcollection, estimates and budgetary allocations and in turn, revenue deficit.
32. Thus, in the economic matters of such vast scale, thewider considerations ofthe State exchequer, while interpreting a statutory provisions cannot be kept out of purview. Quite apart from independently finding that the time limit provisions containedinsubrule(1)ofRule117ofthe [CASE NUMBER] CGSTRulesisnotultravirestheActorthe powers of the rule making authority, interpretingsuchpowersasmerelydirectory would give rise to unending claims of transferofcreditoftaxoninputsandsuch other claims from old to the new regime. Under the new [ACT], the existing tax structurewasbeingreplacedbythenewset of statutes, through an exercise which was unprecedented in the Indian context. The claims of carry forward of the existing duties and credits during the period of migration, therefore, had to be within the prescribed time. Doing away with the time limit for making declarations could give risetomultiplelargescaleclaimstrickling in for years together, after the new tax structure is put in place. This would besides making the task of matching of the credits impractical if not impossible, also impact the revenue collection estimates. It isinthiscontextthattheSupremeCourtin the case of Mafatlal Industries Limited (Supra),afterrejectingthecontentionthat a person can move proceedings for recovery of tax paid upon success of some other person before the Tribunal or Court in getting such tax collection declared illegal, wasfurther influenced bythe fact thatanysuchsituationcouldleadtoutter chaos, if the claims are large. Under the circumstances, wedo notfind anysubstance in the petitioners' challenge to [SECTION] of the [ACT] as well as [ACT]."
11. Underthecircumstances,wedonotseeanyscope fordirectingtherespondentstoallowthepetitioner tocorrecttheTRAN1declarationalreadymade. We mayrecall,suchtimelimitinitiallyprovidedinthe ruleswasextendedfromtimetotimeandlastlyupto [CASE NUMBER] 27.12.2017. Further, limited extension has been grantedtocovercaseswheregenuinehardshipswere feltinuploadingsaiddeclarationsduetotechnical glitches.
12. ThecaseofBombayHighCourtincaseof O/E/N India Ltd. & Anr. (supra) was very different. The petitionerhadpointedoutatypographicalerrorin fillingupfigureofunused CENVATcreditavailable, the Court was of the opinion that said mere typographical error should not be the governing factor for deciding substantive rights. The Court primafacie felt that [SECTION] of the Act which enablestheGovernmenttotakenecessarydecisionto avoid hardships could be utilized. The present situationisentirelydifferent.
13. Intheresult,petitionisdismissed.
([ENTITY], J) ([ENTITY], J) [ENTITY]