The time limit of availing transitional credit seems to be a unending saga with the litigation continuing on the issue. Further in past we have seen contrary judgments of various High Court on the matter and also retrospective amendment of Section 140 of the CGST Act,2017.
The Madras High Court in respect of writ filed by M/s.Amplexor India Private Limited has issued the notice to the Commissioner and Assistant Commissioner of Central Excise and GST for various TRAN issues.
In the instant writ petition, the constitutional validity of the retrospective amendment to Section 140 of the CGST Act,2017 and Rule 117 of the CGST Rules were challenged.
As per Rule 117(1), a registered person is required to submit a declaration, electronically, in Form GST TRAN-1 on the common portal within 90 days or, if applicable, the extended period not exceeding 180 days from the appointed date in order to make a claim for Transitional ITC. Upon recognizing that there were technical difficulties on the common portal, the last date for submitting Form GST TRAN-1 was extended and fixed as 27.12.2017.
The time limit was subsequently extended by inserting Sub Rule 1-A in Rule 117 whereby the Commissioner was permitted, subject to the recommendation of the GST Council, to extend the date for submitting the declaration electronically by a further period up to 31.03.2020.
Madras High Court had earlier upheld Rule 117:
It is pertinent to mention here that in the case of M/s. P. R. Mani Electronics v. Union of India and others, the Madras High Court has upheld the validity of Rule 117 of the CGST Rules and had held Transitional Credit is eligible only when claimed within time as the time limit prescribed under Rule 117 is mandatory and not directory.
Arguments of petitioner for instant writ petition:
The Counsel for the instant writ petition has sought to distinguish the judgment of M/s. P. R. Mani Electronics v. Union of India and others, on the following two grounds.
- The availment of Input Tax Credit should be distinguished from the transition and utilization of the Input Tax Credit.
2. 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.
It was further contended by the petitioner that Section 174(2)(c) of the CGST Act protects such vested rights. 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.
Notice issued by Madras High Court:
Upon consideration of the submissions of the learned counsel for the appellant, the division bench led by Chief Justice A.P. Sahi was 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?
Accordingly the High Court issued the notice to the Commissioner and Assistant Commissioner of Central Excise and GST in this regard and the matter is listed on September 18, 2020 for the next hearing.
READ ORDER:
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