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Willowood Chemicals Pvt. Ltd. vs Union Of India on 19 September, 2018

C/SCA/4252/2018 JUDGMENT

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION No. 4252 of 2018
FOR APPROVAL AND SIGNATURE :
HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Mr. JUSTICE B.N. KARIA

1 Whether Reporters of Local Papers may be allowed to see the Yes
judgment ?

2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the judgment ? No
4 Whether this case involves a substantial question of law as to the No
interpretation of the Constitution of India or any order made
thereunder ?

WILLOWOOD CHEMICALS PVT. LTD.
Versus
UNION OF INDIA

Appearance :
Mr. VINAY SHRAFF, Sr Advocate with Mr. NIPUN SINGHVI; Mr. VISHAL J DAVE;
Mr. PRATEEK GATTANI Ms. HIRAL U MEHTA, Advocates for the PETITIONER
Mr. KAMAL TRIVEDI, Advocate General with Mr. PRANAV TRIVEDI, AGP for the
RESPONDENT(s) No. 4, 5
Mr. NIRZAR S DESAI, Advocate for the RESPONDENT(s) No. 3,4
NOTICE SERVED(4) for the RESPONDENT(s) No. 1,2

CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Mr. JUSTICE B.N. KARIA
12th / 19th September 2018

ORAL JUDGMENT

(PER : HONOURABLE Mr. JUSTICE AKIL KURESHI)

The petitioners have challenged constitutionality of   second 

proviso  to Section 140 [1] of the Gujarat Goods and Services Tax 

Act,   2017   [“GGST   Act”   for   short].   The   petitioners   have   also 

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challenged the vires of Rule 117 of the Central Goods and Services 

Tax   Rules,   2017   [“CGST   Rules”   for   short]   and   Rule   117   of   the 

Gujarat   Goods  and   Service Tax Rules, 2017 [“GGST Rules” for 

short].     The   petitioners   have   prayed   that   the   respondents   be 

directed to allow the petitioners to carry forward CENVAT credit 

in   the   electronic   credit   ledger,   available   as   on   30th  June   2017   in 

terms of Section 140 [3] of the Central Goods and Services Tax Act, 

2017   [“CGST   Act”   for   short].   Similar   direction   is   sought   in 

connection with the carry forward of eligible credit of State tax ie., 

the Value Added Tax [“VAT” for short] available as on 30th  June 

2017. We may record that the petitioners have also in the prayer 

clause,   included   the   challenge   to   the  vires  of   Section   164   of   the 

CGST Act.   However, no contentions were raised with respect to 

this   last   challenge.   We   would,   therefore,   not   elaborate   on   this 

aspect in the judgment. 

2. The petitioners’ prayers arise in the following background :

2.1 Petitioner   no.   1   is   a   company   registered   under   the 

Companies   Act,   1956.   The   petitioner   no.   2   is   a   Director   of   the 

company. The petitioner no. 1 is   registered under the CGST as 

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well as GGST Acts. Previously, the petitioner no. 1­Company was 

registered under the Gujarat Value Added Tax Act, 2003 [“GVAT” 

for short]. With the advent of GST regime with effect from 1st July 

2017, the company had to migrate to the new tax structure. The 

newly   framed   statutes   for   such   purpose   include   transitional 

provisions, enabling dealers to carry forward tax credits available 

to  them   as  on  30th  June 2017. Section 140 of  the CGST  Act  lays 

down conditions for carry forward of such tax credit.  Section 164 

of   the   CGST   Act   is   a   rule   making   provision   empowering   the 

Government to frame   the rules for the purpose of carrying out 

provisions   of   the   Act.   In   exercise   of   such   powers,   the   Central 

Government has framed CGST Rules. Rule 117 contained therein 

pertains   to   carry   forward   of   tax   credits   under   the   existing   law. 

Sub­rule [1] thereof envisages that every registered person entitled 

to   take   credit   of   input   tax   under   Section   140,   shall   submit   a 

declaration electronically in Form GST Tran­1 within ninety days 

of the appointed day. This time limit was extended from time to 

time.   The   final   extension   was   granted   upto   27.12.2017,   beyond 

which the respondents did not accept any further  declarations. 

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2.2 Likewise, Section 140 of the GGST Act also envisages carry 

forward of the tax credits available to a dealer as on 30th June 2017; 

subject   to   certain   conditions.   Rule   117   of   the   GGST   Rules   also 

contains a provision for filing declaration electronically of the tax 

credit which, as initially prescribed, had to be within ninety days 

from the appointed day. This was also extended simultaneously 

with the CGST  finally upto 27th December 2017 and beyond which 

there was no further extension.

2.3   Case   of   the   petitioners  is  that  in  terms  of  Rule 117  of  the 

CGST   Rules,   the   petitioners   tried   to   upload   the   declaration   in 

TRAN­1   on   the   official   portal   on   27.12.2017,   however,   due   to 

technical glitches in the portal, the petitioners could not upload the 

declaration. Similar difficulties were experienced by dealers across 

the country. The petitioners, therefore, approached the concerned 

authorities on 28.12.2017 and submitted physical declaration in the 

proper format. The authorities, however, conveyed that they have 

no power to accept physical declarations. 

3. In   this   background,   broadly   stated,   the   petitioners’ 

grievances are as under :

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[i] On account of technical glitches in the Government portal, 

despite efforts made  by the petitioners  for filing the declaration 

electronically, the same could not be done within extended time 

for no fault of the petitioners. Thus, the tax credit available in the 

accounts   as   on   30th  June   2017   would   be   lost   for   ever,   since   in 

absence of such declaration within the time envisaged, tax credit 

would not be transferred to the GST regime; 

[ii] Second  proviso  to   Section   140   [1]   of   the   CGST   Act   is 

unconstitutional. This  proviso  limits the right of a dealer to claim 

carry  forward of  the  tax credit in relation to inter­State sales as 

well   as   branch   transfers   or   export   sales,   unless   necessary 

declarations in Forms­C, F  H are produced.

[iii] Rules   117   of   the   CGST   Rules   and   GGST   Rules   which 

prescribe the time for making a declaration of available tax credits 

as on 30th  June 2017 are  ultra vires  the Act and the rule making 

powers of the authority. Such time limit in any case should be read 

as directory and not mandatory.

4. Appearing   for   the   petitioners,   learned   counsel   Shri   Vinay 

Shraff raised the following contentions :

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[i] Second  proviso  to Section 140 [1]  of the GGST Act  is  ultra  

vires the Constitution which imposes unreasonable restrictions on 

enjoyment   of   the   petitioners’   property   rights.   It   creates   hostile 

discrimination   between   two   classes   of   dealers   who   form   a 

homogeneous   group.   The   assesses   are   saddled   with   liability   to 

produce   declarations   from   the   purchasers,   dealers   and   other 

agencies,   failing   which the benefit of reduced tax would not  be 

available, though the sales may have been made in the course of 

inter­State sell, by way of branch transfer, or for exports. In this 

context, our attention was drawn to the provisions of GVAT Act; 

and in particular, Section 11 thereof, which pertains to tax credit 

which   a   registered   dealer   could   avail   under   the   said   Act.   Our 

attention was also drawn to Section 100 of the GVAT Act which 

pertains to “Repeal and Savings”. Sub­section [2A] was inserted 

in Section 100 of the GVAT Act by the Gujarat Value Added Tax 

[Amendment]   Act,   2017   which  inter   alia  provides   that   nothing 

done in the amendment of the GVAT Act shall affect any right, 

privilege,   obligation   or   liability   acquired,   accrued   or   incurred 

under   the   Act   prior   to   the   coming   into   force   of   the   said 

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amendment.  On this basis, it was argued that the tax credit at the 

disposal of the petitioners as on 30th  June 2017 is in the nature of 

accrued or vested right which could not be taken away by putting 

restrictions in enjoyment thereof, as was done through the second 

proviso to Section 140 [1] of the GGST Act. In this context, reliance 

was placed on the following judgments :

[a] In   case   of  Eicher   Motors   Limited   v.   Union   of   India., 

reported in 1999 [106] ELT 3 [SC] in which the Supreme Court, in 

the context of MODVAT credit, had observed as under :

“6.    We may look at the matter from another angle. 
If  on   the  inputs,   the  assessee   had  already   paid  the 
taxes on the basis that when the goods are utilized in 
the manufacture of further products as inputs thereto 
then the tax on these goods gets adjusted which are 
finished   subsequently.  Thus   a   right   accrued   to  the 
assessee on the date when they paid the tax on the 
raw   materials   or   the   inputs   and   that   right   would 
continue   until   the   facility   available   thereto   gets 
worked out or until those goods existed. Therefore, 
it becomes clear that Section 37 of the Act does not 
enable   the   authorities   concerned   to   make   a   rule 
which   is   impugned   herein   and,   therefore,   we   may 
have   no   hesitation   to   hold  that   the  Rule  cannot  be 
applied to the goods manufactured prior to 16­3­1995 
on   which   duty   had   been   paid   and   credit   facility 
thereto   has   been   availed   of   for   the   purpose   of 
manufacture of further goods.”

[b] In   case   of  Collector   of   Central   Excise,   Pune   v.   Dai   Ichi 

Karkaria Limited, reported in 1999 [112] ELT 353 [SC], in which 

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the   Supreme   Court   referring   to   the   decision   in   case   of  Eicher  

Motors Limited [Supra] had observed as under :

“17. It is clear from these Rules, as we read them, 
that a manufacturer obtains credit for the excise duty 
paid   on   raw   material   to   be   used   by   him   in   the 
production   of   an   excisable   product   immediately   it 
makes   the   requisite   declaration   and   obtains   an 
acknowledgment   thereof.   It   is   entitled   to   use   the 
credit at any time thereafter when making payment 
of excise duty on the excisable product. There is no 
provision in the Rules which provides for a reversal 
of the credit by the excise authorities except where it 
has been illegally or irregularly taken, in which event 
it stands cancelled or if utilized, has to be paid for. 
We   are   here   really   concerned   with   credit   that   has 
been validly taken, and its benefit is available to the 
manufacturer   without   any   limitation   in   time   or 
otherwise unless the manufacturer itself chooses not 
to use the raw material in its excisable product.  The 
credit   is,   therefore,   indefeasible.   It   should   also   be 
noted that there is no co­relation of the raw material 
and   the   final   product;   that   is   to   say,   it   is   not   as   if 
credit   can   be   taken   only   on   a   final   product   that   is 
manufactured   out   of   the   particular   raw   material   to 
which the credit is related. The credit may be taken 
against   the   excise   duty   on   a   final   product 
manufactured   on   the   very   day   that   it   becomes 
available.”

4.1 It was further contended that the second  proviso  to Section 

140   [1]   of   the   GGST   Act   is   a   charging   provision   but   without 

machinery for computation of credit which would be denied. In 

absence   of   any   machinery   for   such   computation,   the   charging 

provision would fail. In this respect, reliance was placed on the 

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decision  of Supreme  Court  in case of  Commissioner of Income 

Tax, Bangalore vs. B.C Srinivasa Setty, reported in 128 ITR 294. 

For the same purpose, reliance was also placed on the decision of 

the   Supreme   Court   in   case   of  Govind   Saran   Ganga   Saran  vs. 

Commissioner of Sales Tax  Ors., AIR 1985 SC 1041 and in case 

of Mathuram Agrawal vs. State of Madhya Pradesh, [1999] 8 SCC 

667.

4.2 It was further contended that there was no allegation of the 

Department that there has been any default in payment of tax by 

the   petitioners.   Obtaining   necessary   forms   from   the   purchasers 

and exporters often take a long time and only on this count, the 

assessee would suffer  higher tax; as if the sales were made intra­

State.

4.3 Our   attention   was   also   drawn   to   a   decision   of   Allahabad 

High Court in the case of Yamaha Motor Escorts Limited v. State 

of U.P  Ors., reported in [2011] 38 VST 115 in which the Division 

Bench had observed that non production of form C or D would not 

make inter­State transaction illegal or void. It would only result in 

denying the manufacturer, the benefit of reduced rate of tax.

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          C/SCA/4252/2018                                            JUDGMENT

4.4 In   this   context,   reliance   was   placed   on   the   decision   of 

Division   Bench   of   this   Court   in   the   case   of  Indusur   Global 

Limited v. Union of India, reported in 2014 [310] ELT 833 [Guj] in 

which,   the   Court   struck   down   sub­rule   [3A]   of   Rule   8   of   the 

CENVAT   Credit   Rules   which   provides   for   withdrawal   of   the 

CENVAT   credit   facility   for   paying   the   duty   in   case   of 

manufacturers who had not paid the duty in time. It was held that 

in such cases to insist that the assessee must pay such duty in cash 

without using Cenvat credit imposed unreasonable restriction. 

4.5 Reliance was also placed on a decision of the Calcutta High 

Court in the case of Shiv Kumar Jain v. Union of India, reported 

in   2004   [168]   ELT   158   [Cal.],   in   which,   it   was   held   that   the 

Government   cannot   deprive   the   enjoyment   of   the   property 

without due recourse to law.

4.6 In   the   context   of     time   limit   provided   in   Rule   117   of   the 

GGST Rules and CGST Rules, counsel vehemently contended that 

the said provision is  ultra vires  the Act and is also arbitrary and 

unreasonable,   and   therefore,  ultra   vires  Article   14   of   the 

Constitution   of   India.   It   was   contended   that   the   provisions 

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contained in the parent Act pertaining to transfer of un­utilized tax 

credits did not envisage any time limit for making a declaration for 

such purpose. Such time limit cannot be introduced through the 

rules unless specific powers for such purpose have been granted. 

Neither Section 140 of the parent Act nor the rule making powers 

envisage any authority in the delegated legislation to impose  such 

condition.

4.7 In   the   alternative,   it   was   contended   that   such   time   limit 

should   be   construed   as   directory   and   not   mandatory.   Any 

procedural   provision   which   is   framed   for   implementing   the 

substantive provisions should ordinarily be directory in nature. By 

insisting on rigid time frame for making declaration, procedural 

provision   is   being   given   primary   over   substantive   provision 

thereby a vested right is sought to be taken away merely because 

due   to   genuine   reasons,   declaration   could   not   be   made   within 

time.

4.8 In the context of this contention, counsel relied on decision of 

the Supreme Court in case of State of Mysore  Ors. vs. Mallick 

Hashim  Co., AIR 1972 SC 1449 in which the validity of the time 

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limit for filing revision applications contained in Rule 18 framed 

under the Mysore Sales Tax Act, 1957 came up for consideration. 

The Court was of the opinion that such rule is an attempt to deny 

the dealers, the refund to which they are entitled under the law or 

at any rate to make the enforcement of such right unduly difficult. 

4.9 Reference was also made to a decision of the Supreme Court 

in the case of Sambhaji  Ors. vs. Gangabai  Ors., reported in 

[2008]   17   SCC   117,   in   which,   referring   to   a   three­Judge   Bench 

decision   of   the   Supreme   Court   in   case   of  Salem   Advocate   Bar 

Association   v.   Union   of   India,   reported   AIR   2003   SC   189   and 

holding that time limit of ninety days provided in Rule 1 of Order 

VIII   of   CPC   is   directory   in   nature,   it   was   observed   that   the 

procedural   law   is   not   to   be   a   tyrant   but   a   servant,   not   an 

obstruction but an aid to justice.

4.10 Reliance was also placed on the decision of Supreme Court 

in   the   case   of  Mangalore   Chemicals     Fertilizers   Limited   v. 

Deputy   Commissioner,   reported   in   1991   [55]   ELT   437   [SC]   in 

which   it   was   observed   that   while   interpreting   condition   for 

exemption, a distinction had to be made between the procedural 

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condition of a technical nature and a substantive condition. For the 

same   purpose,   reference   was   also   made   to   the   decision   of   the 

Supreme  Court  in case of  Commissioner of Customs  Excise, 

Madras   v.   Home   Ashok  Leyland  Limited, 2007 [2010]  ELT  178 

[SC]. In this context, reliance was placed on a decision of Supreme 

Court in case of  State of Himachal Pradesh  Ors. vs. Gujarat 

Ambuja Cement Limited  Anr., [2005] 142 STC 1 [SC]. 

5. On   the   other   hand,   learned   Advocate   General   led   the 

arguments   on   behalf   of   the   respondents.   In   the   context   of 

challenge to the second proviso to Section 140 [1] of the GGST Act, 

he   submitted   that   there   is   no   lack   of   competence   in   the   State 

legislature   in   framing   the   said   statutory   provisions.   The   further 

proviso  merely   imposes   a   condition   for   transfer   of   existing   tax 

credit in the hands of a dealer from the old regime to new regime 

of furnishing necessary forms establishing the factum of inter­State 

sales, branch transfer or export sales. He drew our attention to the 

third  proviso  to Section 140 [1] and submitted that as and when 

such   forms   would   be   submitted   by   the   dealer,   the   amount   of 

excess tax would be refunded. Thus, all that this proviso does is to 

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defer   the   right   of   a   dealer   to   claim   benefit   of   reduced   tax   till 

necessary   declarations   are   produced   before   the   authorities.   This 

was   also   the   situation   in   the   earlier   statutory   scheme.   Our 

attention was drawn to the provisions of the Central Sales Tax Act 

and the rules framed thereunder to highlight that in the earlier tax 

structure also, in absence of such forms, the dealer would suffer 

tax on the sale; as if it was an intra­State sale. As and when such 

forms   are   produced;   even   during   the   course   of   assessment,   the 

benefit of concessional rate of tax would be available.   

5.1 With respect to challenge to the time limit provided under 

Rules 117 of the CGST and GGST Rules, it was contended that the 

said   rules   were   framed   in   exercise   of   rule   making   powers   and 

were   in   consonance   with   the   scheme   of   Section   140   of   the   Act. 

Right to enjoy tax credit is a kind of concession. Such concession 

can always be made subject to conditions. Initial time limit of 90 

days   was   extended   from   time   to   time.   All   dealers   across   the 

country got time upto 27th December 2017 ie., nearly six months to 

manage their affairs and make necessary declarations. When the 

entire   tax   structure   was   being   changed   in   order   to   bring 

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uniformity, simplicity and common tax rates across the country, 

certain transitional difficulties are bound to surface. It was for such 

purpose that the migrating dealers were granted the benefit of left 

over   tax   credits.   Interpreting  the time limit  provision  as merely 

directory would not be conducive of efficient tax mechanism. 

5.2 In support of his contentions, learned AG has relied on the 

following decisions :

[i] In case of  Jayam  Company v. Assistant Commissioner  

Anr.,  reported in [2016] 15 SCC 125 in which   sub­section (20) of 

Section   19   of   the   Tamil   Nadu   Value   Added   Tax   Act,   2006   was 

challenged.   This   provision   provided   that   notwithstanding 

anything contained in the said section, where any registered dealer 

has   sold   goods   at   a   price   lesser   than   the   price   of   the   goods 

purchased   by  him,  the amount  of the input tax credit over and 

above   the   output   tax   of   those   goods   shall   be   reversed.   In   this 

context, while rejecting  challenge, the Court observed as under:

"11. From   the   aforesaid   scheme   of   section   19 
following significant aspects emerge :

(a)   ITC   is   a   form   of   concession   provided   by   the 
Legislature. It is not admissible to all kinds of sales 
and certain specified sales are specifically excluded.

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(b)   Concession   of   ITC   is   available   on   certain 
conditions mentioned in this section.

(c) One of the most important condition is that in 
order   to   enable   the   dealer   to   claim   ITC   it   has   to 
produce original tax invoice, completed in all respect, 
evidencing the amount of input tax.

12. It   is   a   trite   law   that   whenever   concession   is 
given   by   statute   or   notification,   etc.,   the   conditions 
thereof are to be strictly complied with in order   to 
avail of such concession. Thus, it is not the right of 
the   "dealers"   to   get   the   benefit   of   ITC   but   its   a 
concession   granted   by   virtue   of   section   19.   As  a  
fortiorari, conditions specified in section 10 must be 
fulfilled. In that hue, we find that section 10 makes 
original   tax   invoice   relevant   for   the   purpose   of 
claiming tax. Therefore, under the scheme of the VAT 
Act, it is not  permissible for the dealers to argue that 
the price as indicated in the tax invoice should not 
have   been   taken   into   consideration   but   the   net 
purchase price after discount is to be the basis. If we 
were dealing with any other aspect de hors the issue 
of ITC as per section 19 of the VAT Act, possibly the 
arguments of Mr. Bagaria would have assumed some 
relevance. But, keeping in view the scope of the issue, 
such   a  plea  is   not   admissible   having   regard   to   the 
plain language of sections of the VAT Act, read along 
with other provisions of the said Act, as referred to 
above."

5.3 In   the   case   of  State   of   Gujarat   v.   Reliance   Industries 

Limited, reported in [2017] 16 SCC 28, in which, in the context of 

provisions   contained   in   the   Gujarat   Value   Added   Tax   Act 

reducing the tax credit that has to be availed by the dealer, it was 

observed that how much tax credit has to be given and under what 

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circumstances is the domain of the legislature and the courts are 

not to linker with the same. The Court noted with approval, the 

observations in the case of  Godrej  Boyce Mfg. Company Prvt. 

Limited vs. Commissioner of Sales Tax  Ors.,  reported in [1992] 

3 SCC 624 to the effect that it is only by virtue of the rules that the 

assessee was entitled to a set off. It is really a concession and an 

indulgence. 

5.4 In   case   of  Osram   Surya   [P]   Limited   v.   Commissioner   of 

Central Excise, Indore, reported in [2002] 9 SCC 20, in which, the 

Supreme Court considered the challenge to the substituted second 

proviso to Rule 57 [4] of the MODVAT Rules which provided that 

the manufacturer shall not take credit after six months from the 

date of issuance of any documents specified in the first  proviso to 

the said sub­rule. Relying on decision of the Supreme Court in the 

case   of  Eicher   Motors   Limited  v.  Union   of   India   [Supra]   and 

Collector of Central Excise, Pune  v.  Dai Ichi Karkaria Limited 

[Supra], it was argued that this provision took away the existing 

rights.  Rejecting  such contention, it was observed  that the plain 

reading of the said provision shows that it applies to those cases 

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where   the   manufacturer   is   seeking   to   take   the   credit   after 

introduction of the rules, and the cases where the manufacturer is 

seeking to do so after a period of six months from the date when 

the   manufacturer   receives   input.   This   rule   does   not   operate 

retrospectively nor does it in any manner affect the right of those 

persons who have already taken credit before coming into force of 

the rule in question. It operates prospectively in regard to those 

manufacturers who seek to take credit after coming into force of 

the rule.

5.5 In  case   of  USA   Agencies [Represented by its Proprietrix, 

Attur Town, Salem District v. The Comercial Tax Officer, Attur 

[Rural] Assessment Circle, Attur., reported in [2013] 5 CST 63 in 

which validity of sub­section 11 of Section 19 of the Tamil Nadu 

Value   Added   Tax   Act   came   up   for   consideration.   Section   19 

pertains to input tax credit in respect of any transaction of taxable 

purchases in any month and provides that the dealer shall make a 

claim before the end of financial year or before ninety days from 

the   date   of   purchase;   whichever   is   later.   In   the   context   of   this 

challenge, the Court considered whether section was inconsistent 

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with the charging section and whether the same was directory and 

not mandatory. While upholding the validity of the section, it was 

further held that the legislature consciously wanted to set up the 

time frame for availment of the input tax credit. Such conditions 

therefore must be strictly complied with.

5.6 In case of JCB India Limited v. Union of India., reported in 

[2018] 53 GSTR 197, in which Division Bench of the Bombay High 

Court had upheld vires of Clause (iv) of sub­section [3] of Section 

140 of the CGST Act imposing a condition on the first stage dealers 

to avail tax credit, that such credit should be in relation to invoice 

which is dated not earlier then 12 months preceding the appointed 

day. We may, however, record that in case of Filco Trade Centre 

Private Limited  vs.  Union of India  [SCA No. 18433 of 2017 with 

SCA   20185/2017   ::   decided   on   5th  September   2018],   the   Gujarat 

High Court has taken a different view.

5.7 In case of  R.K Garg v. Union of India  Ors., reported in 

[1981]   4   SCC   675   to   contend   that   in   the   taxing   statutes,   the 

legislature enjoys greater latitude.

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         C/SCA/4252/2018                                              JUDGMENT

5.8 In the  context of petitioners'  grievance regarding technical 

glitches in the official portal preventing making of declaration, the 

Union of India has filed an additional affidavit of one Dr. Ashir 

Tyagi,   Commissioner,   CGST dated  11th  September 2018. In such 

affidavit, it is stated that the Government of India has come out 

with a Circular dated 3rd April 2018 providing certain guidelines to 

see   that   genuine   cases   of   difficulties   faced   are   resolved. 

Thereafter,   sub­rule   1A   is   inserted   in   Rule   117   by   Notification 

dated 10th September 2018, which reads as under :­

"[1A]     Notwithstanding anything contained in sub­rule 
[1], the Commissioner may, on the recommendations  of 
the Council, extend the date for submitting the declaration 
electronically in FORM GST TRAN­1 by a further period 
not   beyond   31st  March   2019,   in   respect   of   registered 
persons who could not submit the said declaration by the 
due   date   on   account   of   technical   difficulties   on   the 
common portal and in respect of whom the Council has 
made a recommendation for such extension."

5.9 It is stated that corresponding amendment is made in sub­

rule [4], wherein below Clause (b) in sub­clauses (iii), the following 

proviso is inserted :

"Provided that the registered persons filing the
declaration in FORM GST TRAN-1 in accordance with

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sub-rule [1A], may submit the statement in FORM GST
TRAN-2 by 30th April 2019."

6. Before examining rival contentions, we may recall that the 

Government of India has amended Rule 117 of the CGST Rules by 

inserting   sub­rule   [1A]   which   provides   that   notwithstanding 

anything   contained   in   sub­rule   [1],   the   Commissioner   may   on 

recommendation   of   the   Council,   extend   the   date   of   submitting 

declaration   electronically   in   FORM   GST   TRAN­1   by   a   further 

period not beyond 31st March 2019, in respect of registered persons 

who   could   not   submit   the   said   declaration   by   the   due   date   on 

account   of  technical   difficulties on the common portal. Thus,  in 

genuine   cases   of   inability   of   a   dealer   to   submit   the   declaration 

within   the   time   originally   permitted   on   account   of   technical 

difficulties on the common portal, powers have been vested in the 

Commissioner to extend the time maximum upto 31st March 2019. 

The petitioners' grievance of not being able to file declaration on 

account   of   technical   glitches   in   the   portal;   if   genuine   therefore, 

could be addressed under this rule. This would take care of the 

petitioners' one of the grievances. This   however   does   not   mean 

that the petitioners' challenge to  vires  of the statutory provisions 

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does not survive. We would, therefore, address such issues raised 

by the petitioners.

7. Before taking up challenge to the vires of different statutory 

provisions,   we   may   broadly   state   the   powers   of   constitutional 

courts   to   annual   a   statute   framed   by   the   Union   or   the   State 

legislature.   It   is   well   settled   that   there   is   a   presumption   of 

constitutionality of a statute. In case of State of Jammu  Kashmir 

vs. Triloki Nath Khosa  Ors., reported in AIR 1974 SC 1, the 

Constitution Bench of the Supreme Court upheld the legislation 

classifying Assistant Engineers into Degree­holders and Diploma­

holders for the purpose of promotion. It was observed that there is 

a presumption of constitutionality of a statute and the burden is on 

one  who canvasses that certain statute is unconstitutional  to set 

out   facts   necessary   to   sustain   the   plea   of   discrimination   and   to 

adduce cogent and convincing evidence to prove those facts.

8. It   is   equally   well   settled   that   the   presumption   of 

constitutionality   would   touch   even   the   subordinate   legislation. 

However,   the   grounds   on   which   a   statute   framed   by   the 

Parliament or the State legislature are limited, as compared to the 

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subordinate   legislation.   While   a   legislation   framed   by   the 

subordinate legislature can also be questioned on the ground that 

the same is ultra vires the Act, or is beyond the rule making powers 

of   the   authority   or   that   the   same   is   wholly   arbitrary   and 

unreasonable,   the   law   framed   by   the   Parliament   and   the   State 

legislature, it was held and observed in the case of State of A.P vs. 

Mc   Dowell     Company     Ors.,   reported   in   [1963]   3   SCC   709 

could be struck down only on two grounds viz., lack of legislative 

competence, or violation of the fundamental rights or any other 

constitutional   provisions.   It   was   further   observed   that   no 

enactment can be struck down by just saying that it is arbitrary or 

unreasonable. In the later judgment in the case of Shayra Bano v. 

Union of India  Ors., reported in [2017] 9 SCC 1,  Rohinton Fali  

Nariman, J., expressed a view in the following terms :

"101. It will be noticed that a Constitution Bench of 
this   Court   in  Indian   Express   Newspaper   v.   Union   of  
India, [1985] 1 SCC 641, stated that it was settled law 
that subordinate legislation can be challenged on any 
of the grounds available for challenge against plenary 
legislation.   This   being   the   case,   there   is   no   rational 
distinction between the two types of legislation when 
it comes to this ground of challenge under Article 14. 
The   test   of   manifest   arbitrariness,   therefore,   as   laid 
down   in   the   aforesaid   judgments   would   apply   to 

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invalidate   legislation   as   well   as   subordinate 
legislation   under   Article   14.   Manifest   arbitrariness, 
therefore, must be something done by the legislature 
capriciously,   irrationally   and/or   without   adequate 
determining principle. Also, when something is done 
which   is   excessive   and   disproportionate,   such 
legislation   would   be   manifestly   arbitrary.  We   are, 
therefore, of the view that arbitrariness in the sense 
of manifest arbitrariness as pointed out by us above 
would   apply   to   negate   legislation   as   well   under 
Article 14."

9. In recent judgment in case of Navtej Singh Johar  Ors. vs. 

Union   of   India,   [W.P   (Cri.)   No.   76   of   2016],   the     Constitution 

Bench of the Supreme Court struck down a portion of Section 377 

of the Indian Penal Code to the extent it criminalized consensus 

gay sex.  Dipak Mishra, CJ., noted with approval, the above quoted 

observations made in the case of Shayra Bano [Supra] and held that 

Section 377 IPC so long as it criminalizes consensual sexual act of 

whatever nature between competent adults is manifestly arbitrary. 

Rohinton Fali Nariman,   J.,  in his separate but concurring opinion 

also referred to the observations made in the case of  Shayra Bano 

[Supra]   that   a   statutory   provision   can   be   struck   down   on   the 

ground of manifest arbitrariness. It was observed that Section 377 

IPC in penalizing consensual gay sex is manifestly arbitrary.  

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10. Keeping in mind these principles, we may take closer look at 

the relevant provisions. As is well known, the  GST statutes were 

activated  w.e.f  1st  July 2017. These statutes envisage uniform tax 

structure and subsume range of existing taxes such as Excise duty, 

Central   Sales   Tax   and  the  Value   Added  Tax.  Chapter  20  of  the 

CGST Act pertains to transitional provisions. Section 139 contained 

in   the   said   chapter   envisages   migration   of   registration   of   the 

persons who were registered under the existing laws. Section 140 

pertains   to   transitional   arrangements   for   input   tax   credits. 

Relevant portion of which reads as under :

"140. (1) A registered person, other than a person
opting to pay tax under section 10, shall be entitled to
take, in his electronic credit ledger, the amount of
CENVAT credit carried forward in the return relating
to the period ending with the day immediately
preceding the appointed day, furnished by him under
the existing law in such manner as may be
prescribed:

Provided that the registered person shall not be
allowed to take credit in the following circumstances,
namely:--

(i) where the said amount of credit is
not admissible as input tax credit under this
Act; or

(ii) where he has not furnished all the
returns required under the existing law for
the period of six months immediately
preceding the appointed date; or

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(iii) where the said amount of credit relates
to goods manufactured and cleared under
such exemption notifications as are notified
by the Government."

"140. (3) A registered person, who was not liable to
be registered under the existing law, or who was
engaged in the manufacture of exempted goods or
provision of exempted services, or who was providing
works contract service and was availing of the benefit
of notification No. 26/2012--Service Tax, dated the
20th June, 2012 or a first stage dealer or a second
stage dealer or a registered importer or a depot of a
manufacturer, shall be entitled to take, in his
electronic credit ledger, credit of eligible duties in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the
appointed day subject to the following conditions,
namely:--

(i) such inputs or goods are used or
intended to be used for making taxable
supplies under this Act;

(ii) the said registered person is eligible for
input tax credit on such inputs under this Act;

(iii) the said registered person is in possession
of invoice or other prescribed documents
evidencing payment of duty under the
existing law in respect of such inputs;

(iv) such invoices or other prescribed
documents were issued not earlier than twelve
months immediately preceding the appointed
day; and

(v) the supplier of services is not eligible for
any abatement under this Act:

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140. (10) The amount of credit under sub-sections
(3), (4) and (6) shall be calculated in such manner as
may be prescribed.

9. Section   164   of   the   CGST   Act   pertains   to   power   of   the 

Government to make rules. We would refer to this provision at an 

appropriate   stage.   In   exercise   of   such   rule   making   powers,   the 

Central Government framed CGST Rules. Chapter 14 of the CGST 

Rules contains transitional provisions. Rule 117 contained in the 

said Chapter pertains to tax or duty credit carried forward under 

any existing law or on goods held in stock on the appointed day. 

Relevant portion of this rule reads, thus­

"117 (1) Every registered person entitled to take
credit of input tax under section 140 shall, within
ninety days of the appointed day, submit a
declaration electronically in FORM GST TRAN-1,
duly signed, on the common portal specifying
therein, separately, the amount of input tax credit
[of eligible duties and taxes, as defined in
Explanation 2 to Section 140] to which he is entitled
under the provisions of the said section.

(3) The amount of credit specified in the
application in FORM GST TRAN-1 shall be credited
to the electronic credit ledger of the applicant
maintained in FORM GST PMT-2 on the common
portal."

10. The   GGST   Act   also   contains   Chapter   20   pertaining   to 

"Transitional Provisions". Section 139 contained therein pertains to 

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migration   of   existing   taxpayers.   Section   140   pertains   to 

"transitional arrangements for input tax credit". Relevant portion of 

which reads as under :

"140. Transitional arrangements for input tax credit.

(1) A registered person, other than a person opting 
to pay tax under section 10, shall be entitled to take, 
in his electronic credit ledger,  the amount of Value 
Added Tax, and Entry Tax, if any, carried forward in 
the return relating to the period ending with the day 
immediately preceding the appointed day, furnished 
by him under the existing law in such manner as may 
be prescribed.

Provided that the registered person shall not be 
allowed to take credit in the following circumstances, 
namely :

[i] where   the   said   amount   of   credit   is   not 
admissible as input tax credit under this Act, or

[ii] where   he   has   not   furnished   all   the   returns 
required under the existing law for the period of six 
months   immediately   preceding   the   appointed   date; 
or

[iii] where the said amount credit relates to goods 
sold   under   notification   no.   [GHN­51   GST­2001   S.49 
[355]   TH,   dated   the   31st  December   2001,   [GHN­24] 
VAT   20123/S.40   [1](8)­TH,   dated   the   11th  October 
2013 and any other notifications claiming refund of 
value added tax thereon :

Provided   further   that  so   much   of   the   said 
credit   as   it   attributable   to   any   claim   related   to 
Section   3,   sub­section   [3]   of   Section   5,   Section   6, 
Section   6A   or   sub­section   [8]   of   Section   8   of   the 
Central   Sales   Tax   Act,   1956   which   is   not 

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substantiated in the manner and within the period 
prescribed   in   rule   12   of   the   Central   Sales   Tax 
[Registration  Turnover] Rules, 1957 shall not be 
eligible   to   be   credited   to   the   electronic   credit 
ledger :

Provided   also  that   an   amount   equivalent   to 
the credit specified in the second  proviso  shall be 
refunded   under   the   existing   law   when   the   said 
claims are substantiated in the manner prescribed 
in rule 12 of the Central Sales Tax [Registration and 
Turnover] Rules, 1957."

11. Section 164 of the GGST Act gives rule making power to the 

Government, to which we would advert to at an appropriate stage. 

In   exercise   of   such   powers,   the   State   Government   framed   the 

GGST Rules. Rule 117 contained in the Rules, contain "Transitional  

Provisions". Sub­rule [1] thereof reads as under :

"117.   Tax or duty credit carried forward under any  
existing   law   or   on   goods   held   in   stock   on   the  
appointed day :

(1) Every registered person entitled to take credit 
or input tax under Section 140 shall,  within ninety 
days   of   the   appointed   day,   submit   a   declaration 
electronically in FORM GST TRAN­1, duly signed, 
on the common portal specifying therein, separately, 
the amount of input tax credit to which he is entitled 
under the provisions of the said section:

      Provided   that   the   Commissioner   may,   on   the  
recommendation   of   the   Council,     extend   the   period   of  
ninety days by a further period not exceeding ninety days.

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          Provided further  that  in the  case  of  a  claim  under  
Section   (1)   of   Section   140,   the   application   shall   specify  
separately­

(i)   the value of claim under Section 3, sub section (30 of  
the   section   5   Section   6   and   6A   and   sub   section   (8)   of  
section 8 of the Central Sales Tax Act, 1956 made by the  
applicant; and

(ii)    the serial number and value of declaration in Form C  
or F and certificates in Forms E or H or Form I specified in  
Rule   12   of   the   Central   Sales   Tax   (Registration   and  
Turnover)   Rules,   1957   submitted   by   the   applicant   in  
support of the claims referred to in sub Clause (I)."

12. In the background of such statutory provisions, we may first 

examine   petitioners'   challenge   to   the  vires  of   second  proviso  to 

Section 140 [1] of the GGST Act.  Under sub­section [1] of Section 

140,   a   registered   person,   other   than   a   person   opting   to   pay   tax 

under   Section   of   the   Act,   would   be   entitled   to   take,   in   his 

electronic credit ledger, credit of the amount of Value Added Tax 

and Entry Tax; if any, carried forward in the return relating to the 

period ending with the day immediately preceding the appointed 

day, furnished by him under the existing law, in the manner as 

may be prescribed.   First  proviso  to sub­section [1] of Section 140 

lays   down   circumstances   under   which   such   credit   shall   not   be 

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allowed.   A   further  proviso  which   is   referred   to   as   the   second 

proviso and which is under challenge provides that so much of the 

said credit; as is attributable to any claim relating to Section 3, sub­

Section (3) of Section 5, Section 6, Section 6A or sub­section (8) of 

Section 8 of the Central Sales Tax, 1956 which is not substantiated 

in the manner and within the period prescribed in Rule 12 of the 

Central Sales Tax [Registration and Turnover] Rules, 1957 shall not 

be   eligible   to   be   credited   to   the   electronic   credit   ledger.   In   the 

simple   terms,   this   further  proviso  provides   that   whenever   the 

dealer   has   not   furnished   necessary   forms   supporting   the   inter­

State sales, branch transfers or export sales, the credit related to 

such   sales   would   not   be   available.     The  proviso,   following   this 

further proviso, however provides that an amount equivalent to the 

credit specified in the second  proviso  shall be refunded under the 

existing law, when the said claims are substantiated in the manner 

prescribed in Rule 12 of the   Central Sales Tax [Registration and 

Turnover] Rules, 1957.

13. The   combined   effect   of   further  proviso  and   the  proviso 

following such further  proviso  to sub­section (1) of Section 140 of 

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the   GGST   Act   is   that   a   dealer   who   fails   to   issue   necessary 

prescribed forms in support of inter­State sales, branch transfers or 

export   sales   would   not   be   able   to   claim   credit   of   the   taxes. 

However,   as   and   when   such   forms   are   furnished,   the   amount 

would   be   refunded   to   the   dealer.   In   essence,   thus,   these   two 

provisos  bring about a situation under which, till necessary forms 

in the prescribed format and in the prescribed manner under rule 

12 of the Central Sales Tax [Registration and Turnover] Rules, 1957 

[hereinafter   to   be   referred   to   as,   "the   Registration     Turnover 

Rules"] are furnished, the credit equivalent to reduced tax would 

not be available, but as and when prescribed forms are furnished, 

the amount would be refunded to the dealer. 

14. We may compare this position with the erstwhile position 

obtaining under the earlier statute  ie., the Central Sales Tax Act, 

1956   [to   be   hereinafter   referred   to   as,   "the   CST   Act,   1956"]. 

Section 8 of the CST Act, 1956 pertains to "rates of tax on sales in  

the   course   of   inter­State   trade   or  commerce."  Sub­section   [1]   of 

Section 8 provides that every dealer, who in the course of inter­

State trade or commerce, sells to a registered dealer, goods of the 

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description referred to in sub­section (3), would be liable to pay 

tax,   which   shall   be   two  per   cent  of   his   turnover,   or   at   the   rate 

applicable   to   the   sale   or   purchase   of   such   goods   inside   the 

appropriate State under the sale tax law of that State; whichever is 

lower.     Sub­section   [4]   of   Section   8,   however,   provides   that   the 

provisions   of   sub­section   [1]   shall   not   apply   to   any   sale   in   the 

course of inter­State trade or commerce unless the dealer selling 

the goods furnishes to the prescribed authority in the prescribed 

manner,   a   declaration   duly   filled   and   signed   by   the   registered 

dealer to whom goods are sold containing prescribed particulars 

in the prescribed form obtained from the prescribed authority.

15. In exercise of powers under sub­section [1] of Section 13 of 

the CST Act, 1956, the Central Government has framed the Central 

Sales Tax [Registration and Turnover] Rules, 1957.  Sub­rule (1) of 

Rule   12   contained   therein   provides   that   a   declaration   and   the 

certificate   referred   to   in   sub­section   [4]   of   Section   8   shall   be   in 

Forms C and D respectively. Sub­rule (5) of Rule 12 provides that 

the declaration referred to in sub­section (1) of Section 6A shall be 

in Form­F. This rule, thus, prescribes the forms in which necessary 

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declarations   of   inter­State   sales   would   be   made.   Sub­rule   (7)   of 

Rule  12 provides that declaration in Form­C or Form­F shall be 

furnished to the prescribed authority within three months after the 

end of the period to which the declaration or the certificate relates. 

Proviso  to sub­rule (7) provides that if the prescribed authority is 

satisfied   that   the   person   concerned   was   prevented   by   sufficient 

cause   from   furnishing   such   declaration   or   certificate   within   the 

aforesaid   time,   that   authority   may   allow   such   declaration   or 

certificate   to   be   furnished   within   such   further   time   as   that 

authority may permit. Thus, combined reading of the provisions 

contained in the CST Act, 1956 and the Registration and Turnover 

Rules of 1957  which held the field during the earlier regime would 

show that the requirement of issuing necessary declarations in the 

prescribed   forms   establishing   inter­State   sales   and   other   similar 

transactions   inviting   reduced   tax,     existed   even   then.   As   noted, 

sub­section [1] of Section 8 of the CST Act, 1956 envisaged tax at a 

reduced rate on the inter­State sales. Sub­section [4] of Section 8 of 

the CST Act, however, provided that sub­sec. [1] shall not apply to 

any sale in the course of inter­State trade or commerce unless the 

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dealer   selling   the   goods   furnishes   to   the   prescribed   authority 

necessary declarations in the prescribed forms. These forms have 

been prescribed under rule 12 of the Rules.

16. We are conscious of judicial trend that the benefit of reduced 

tax   was   made   available   even   when   such   forms   were   furnished 

beyond   the   prescribed   time,   during   the   course   of   assessment 

proceedings   or   sometimes   even   at   the   appellate   stage.   In   this 

respect, we may refer to judgment of the Supreme Court in case of 

Sales Tax Officer, Ponkunnam  Anr. vs. K.I Abraham, reported 

in   AIR   1967   SC   1823,   wherein,   referring   to   the   provisions 

contained in Sections 8 and 13 of the Central Sales Tax Act,  1956 

and the Registration and Turnover Rules of 1957, it was held that 

the   assessee   was   not   bound   to   furnish   declaration   in   Form­C 

before 16th February 1961; in the said case. In absence of any such 

time­limit,   it   was   the   duty   of   assessee   to   furnish   declaration   in 

Form­C within a reasonable time, and it was noted that in the said 

case, the assessee had furnished the declaration before the order of 

assessment was made by the Sales Tax Officer. It was, therefore, 

held that the benefit   of such declaration had to be given to the 

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assessee. In the case of Yamaha Motor Escorts Limited v. State of 

Uttar   Pradesh     Ors.,   [Supra],   the   High   Court   held   that   non 

production   of   Form­C   or   D   would   not   make   the   inter­State 

transaction   illegal   or   void.   It   would   only   result   in   denying   the 

manufacturer the benefit of reduced rate of tax. Thus, even in the 

erstwhile statutory provisions, the benefit of reduced rate of tax on 

inter­State   sales,   etc.,   was   not   taken   away   permanently   for   the 

failure of the dealer to produced necessary forms in the prescribed 

manner. The same was nevertheless delayed, till such forms and 

declarations were produced. The combined reading of sub­section 

(1) of Section 7 and sub­section (4) of Section 8 of the CST Act, 1956 

and interpretation given to such provisions by the Courts ensured 

that even if such declarations were supplied at the later point of 

time, the benefit would not be denied permanently.

17. Effectively and essentially, this is what the present provisos of 

sub­section [1] of Section 140 of the GGST Act do.  As per the main 

provision,   credit   would   be   available   on   the   amount   of   Value 

Added Tax and Entry Tax carried forward in the return. As per the 

further  proviso  or   the   second  proviso,   such   credit   to   that   extent 

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would   not   be   transferred     when   necessary   declarations   are   not 

furnished   by   the   dealer.  The  proviso  thereafter  however  ensures 

that as and when declarations are filed, the amount equivalent to 

credit specified in the second schedule would be refunded to the 

dealer.   We   do   not   find   any   major   change   in   the   effect   of   late 

production   of   the   forms   by   a   dealer   in   the   present   statutory 

provisions; as compared to the earlier position, nor the statutory 

provisions deny the benefit of such credit, even where necessary 

declarations are furnished. Thus, no existing or vested right can be 

said to have been taken away. 

We do not think Section 140 [c] is a charging provision or 

that   for   want   of   mechanism   for   computing   such   charge,   the 

provision   itself   would   fail.     The   provision   is   in   the   nature   of 

enabling  the dealers to take credit of existing taxes paid by them 

but   not   utilized   for   discharging   their   tax   liabilities.   It   contains 

conditions subject to which the benefit can be enjoyed. 

18. This brings us to the petitioners' challenge to rule 117 of the 

CGST Rules and GGST Rules. The statutory provisions being pari  

materia in both the Act and the Rules, in so far as this challenge is 

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concerned, we may refer to provisions contained in the CGST Act. 

19. As noted, under sub­section [1] of Section 140 of the CGST 

Act,   a   registered   person,   other   than   one   who   had   opted   for 

composition of tax would be entitled to take credit of the amount 

of   CENVAT   credit   carried  forward  in  the return  relating  to the 

period ending with the day immediately preceding the appointed 

day, furnished by him under the existing law in such manner as 

may   be   prescribed.   Under   sub­section   [3]   of   Section   140,   a 

registered person, who was not liable to be registered under the 

existing   law   and   other   category   of   persons   mentioned   therein, 

would be entitled to take, in his electronic credit ledger, credit of 

eligible   duties   in   respect   of   inputs   held   in   stock   and   inputs 

contained in semi­finished or finished goods held in stock on the 

appointed day; subject to conditions contained in clauses [i] to [v] 

therein. Sub­section [10] of Section 140 provides that the amount of 

credit under sub­sections [3], [4] and [6] shall be calculated in such 

manner   as   may   be   prescribed.   Counsel   for   the   petitioners   had 

compared the language used by the legislature in sub­sections [1] 

and [3] of Section 140 to argue that the expression "in such manner  

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as may be prescribed" used in sub­section [1] was missing in sub­

section [3]. 

20. In  his   contention,  therefore,   the  rules  that  the  subordinate 

legislature   framed   could   not   have   prescribed   a   time   limit   for 

making necessary declarations; as referred to under sub­section [3] 

of Section  140. Rule  117 of the CGST Rules pertains to taxes or 

duty credit carried forward under any existing law or on goods 

held   in   stock   on   the   appointed   day.   Sub­rule   (1)   of   Rule   117 

provides that every registered person entitled to take credit of the 

input   tax   under   Section   140,   shall   within   ninety   days   of   the 

appointed   day,   submit   a   declaration   electronically   in   the 

prescribed format, duly signed, on the common portal specifying 

separately the amount of input tax credit to which he is entitled 

under   the   provisions   of   the   said   section.  Proviso  to   sub­rule   [1] 

envisages extension of period for making the said declaration on 

the   recommendations   of   the   Council.   We   have   noted   that   such 

time limit was extended from time to time and finally upto 27th 

December 2017. A limited extension has thereafter been granted by 

the   Government   by   inserting   sub­rule   [1A]   in   Rule   117, 

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authorizing the Commissioner to extend the date for submitting 

the declaration electronically by a further period not beyond 31st 

March 2019, in respect of registered persons who could not submit 

the   said   declaration   by   the   due   date   on   account   of   technical 

difficulties on the common portal   and in   respect of whom, the 

Council has made recommendation for such extension.  Effectively 

thus, the last date for filing the declaration under sub­rule [1] of 

Rule 117 in general class of persons remained  27th December 2017. 

For cases falling under sub­rule [1A] of Rule 117, the same could 

be   extended   maximum   upto   31st  March   2019.   As   per   the 

petitioners, this prescription of time limit  per se  is  ultra vires  the 

provisions of the Act and the Constitution of India. 

21. In essence, sub­rule [1] of Rule 117 lays down a time­limit for 

making declaration only upon making of which, a person could 

take benefit of tax credit in terms of Section 140 of the CGST Act. 

We are conscious that sub­sections [1] and [3] of Section 140 of the 

CGST Act use somewhat different phraseology. Under sub­section 

[1]   the   legislature   has   provided  that   the benefit  of   credit   in the 

electronic credit ledger would be available to a registered person 

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in such manner; as may be prescribed. In contrast, sub­section [3] 

of Section 140 grants facility of credit in electronic ledger of the 

specified   duties   to   the   specified   class   of   persons;   subject   to 

conditions   laid   down   under   clauses   (i)   to   (v)   of   the   said   sub­

section. It is only in the proviso below clause (v) of sub­section [3] 

that the legislature has provided that where a registered person, 

other   than   a   manufacturer   or   a   supplier   of   services,   is   not   in 

possession   of   an   invoice   or   any   other   documents   evidencing 

payment of duty in respect of inputs, then, such registered person 

shall; subject to such conditions, limitations and safeguards as may 

be prescribed, including that the said taxable person shall pass on 

the benefit of such credit by way of reduced prices to the recipient, 

be allowed to take credit at such rate and in such manner as may 

be prescribed. For apparent reasons, this proviso does not apply to 

all cases and its effect is local, to cover cases where a person is not 

in   possession   of   an   invoice   or   any   other   documents   evidencing 

payment of duty in respect of inputs. 

22. We can however not be oblivious to Section 164 of the CGST 

Act, which is the rule making power and reads as under : 

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"164. Power of Government to make rules :

[1] The   Government   may,   on   the 
recommendations   of   the   Council,   by   notification, 
make rules for carrying out the provisions of this Act.

[2] Without  prejudice  to   the   generality   of   the 
provisions   of   sub­section   (1),   the   Government   may 
make rules for all or any of the matters which by this 
Act are required to  be, or may be, prescribed  or in 
respect of which provisions are to be or may be made 
by rules.

[3] The   power   to   make   rules   conferred   by   this 
section shall include the power to give retrospective 
effect   to   the   rules   or   any   of   them   from   a   date   not 
earlier than the date on which the provisions of this 
Act comes into force.

[4] Any rules made under sub­section (1) of sub­
section (2) may provide that a contravention thereof 
shall   be   liable   to   a   penalty   not   exceeding   ten 
thousand rupees."

23. Under sub­section [1] of Section 164 of the CGST Act, thus, 

the   Government   on   recommendations   of   the   Council,   by 

notification, could make rules "for carrying out the provisions of the  

Act".   This   rule   making   power  is   thus   couched  in   the  widest   possible  

manner empowering the Government to make the rules for carrying out  

the provisions of the Act." Sub­section [2] to Section 164 is equally 

widely   worded,   when   it   provides   that,   "without   prejudice   to   the  

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generality of the provisions of sub­section (1), the Government may make  

rules for all or any of the matters which by this Act are required to be, or  

may be, prescribed or in respect of which provisions are to be, or may be  

made by the rules." Sub­section [3] of Section 164, to which we are 

not   directly   concerned,   nevertheless   provides   that   the   power   to 

make rules conferred in the said section would include the power 

to give retrospective effect to such rules.

24. It is in exercise of this rule making power, the Government 

has framed the CGST Rules, 2017 in which; as noted, sub­rule (1) 

of Rule 117 has prescribed, besides other things,  the time limit for 

making declaration in the prescribed form for every dealer entitled 

to take credit of input tax under Section 140. Sub­rule [1] of Rule 

117 thus applies to all cases of credits which may be claimed by a 

registered person under section 140 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. Section 140 of the Act envisages certain benefits to be carried 

forward during the regime change. As is well­settled, the reduced 

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rate of duty or concession in payment of duty are in the nature of 

an exemption and is always open for the legislature to grant as 

well as to withdraw such exemption.  As noted in case of Jayam   

Company [Supra], the Supreme Court had observed that input tax 

credit is a form of concession provided by the legislature and can 

be made available subject to conditions. Likewise, in the case of 

Reliance Industries Limited  [Supra], it was held and observed that 

how   much   tax   credit   has   to   be   given   and   under   what 

circumstances   is a domain of the legislature. In case of  Godrej   

Boyce Mfg. Co. Pvt. Limited [Supra], the Supreme Court had upheld 

a rule which restricts availment of MODVAT credit to six months 

from   the   date   of   issuance   of   the   documents   specified   in   the 

proviso. The contention that such amendment would take away an 

existing right was rejected.

26. While the entire tax structure within the country was thus 

being   replaced   by   a   new   frame­work,   it   was   necessary   for   the 

legislature   to   make   transitional   provisions.     Section   140   of   the 

CGST Act, which is a transitional provision, essentially preserves 

all taxes paid or suffered by a dealer. Credit thereof is to be given 

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in electronic credit register under the new statute, only subject to 

making   necessary   declarations   in   prescribed   format   within   the 

prescribed   time.   As   noted,   sub­section   [1]   of   Section   164   of   the 

CGST Act authorizes the Government to make rules for carrying 

out the provisions of the Act on recommendations of the Council. 

Sub­section   [2]   of   Section   164   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, 

which by this Act are required to be or may be prescribed or in 

respect of which, provisions are to be or may be made by the rules. 

Combined   effect   of   the   powers   conferred   to   subordinate 

legislature   under   sub­sections   [1]   and   [2]   of   Section   164   of   the 

CGST Act would convince us that the prescription of time limit 

under sub­rule [1] of Rule 117 of the CGST Rules is not ultra vires 

the Act. Likewise, such prescription of  time limit cannot be stated 

to   be   either   unreasonable   or   arbitrary.   When   the   entire   tax 

structure of the country is being shifted from earlier framework to 

a new one, there has to be a degree of finality on claims, credits, 

transfers   of   such   credits   and   all   issues   related   thereto.   The 

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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 would hamper the effective 

implementation of the new tax structure and would also lead to 

endless disputes and litigations. As noted in case of USA Agencies 

[Supra],   the   Supreme   Court   had   upheld   the  vires  of   a   statutory 

provision   contained   in   the   Tamil   Nadu   Value   Added   Tax   Act 

which provided that the dealer would have to make a claim for 

input   tax   credit   before   the   end   of   the   financial   year   or   before 

ninety days of purchase; whichever is later. 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 must be strictly complied with. 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 context of the statutory scheme.  

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 

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and estimation of the Union and the States. Such consideration of 

tax   credits   at   such   large   scale   cannot   be   allowed   to   linger   on 

indefinitely which would have a direct effect on the tax collection, 

estimates and budgetary allocations and in turn, revenue deficit.

28. In   this   context,   we   may   refer   to   the   Constitution   Bench 

decision of the Supreme Court in the case of  Mafatlal Industries 

Limited  Ors. vs. Union of India  Ors., reported in [1997] 5 

SCC 536. In such judgment, various issues concerning the refund 

applications   under   the   Central   Excise   and   Customs   and   other 

taxing statutes came up for consideration before the Nine­Judge 

Bench   of   the   Supreme   Court.   Before   adverting   to   the   majority 

opinion   expressed   by  B.P   Jeevan  Reddy,  J.,  we  may  note   a  short 

precursor to this judgment.  In case of  Sales Tax Officer, Banaras 

 Ors. vs. Kanhaiya Lal Mukundlal Saraf, [AIR 1959 SC 135],  the 

Constitution   Bench   of   the   Supreme   Court   considered   the   term 

"mistake"   used   in   Section   72   of   the   Contract   Act,   1872   in   the 

context   of   payment   of   tax.   It   was   held   and   observed   that   true 

principle is that if one party under mistake - whether of fact or 

law, passed to another party money which is not due by contract 

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or   otherwise,   that   money   must   be   repaid.   The   mistake   lies   in 

thinking that the money paid was due when in fact it was not due 

and   that   mistake   if   established   entitles   the   party   who   paid   the 

money to recover it back from the party receiving the same. It was 

further observed that once it is established that the payment; even 

though it be of the taxes has been made by the party labouring 

under a mistake of law, the party is entitled to recover the same 

and no distinction can be made in respect of the tax liability and 

other   liabilities.   Merely   because   the   State   has   not   retained   the 

monies paid as Sales tax by the assessee but merely expended it in 

ordinary course of business of the State will make no difference to 

the position under Section 72 of the Contract Act.

29. With the aid of this judgment in the case of re­Kanhaiya Lal  

Mukundlal   Saraf  [Supra],   often   times,   the   parties   would   bring   a 

proceeding   before   the   Court   of   law   for   refund   of   tax   after   a 

number of years of collection on the ground that some other party 

had challenged the levy before Court  and succeeded therein. In 

case of   Tilokchand Motichand v. H.B Munshi, CST, reported in 

[1969] 1 SCC 110, the Constitution Bench of the Supreme Court, 

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however,   expressed   somewhat   different   view.     It   was   a   case   in 

which the Sales Tax Officer had forfeited a sum of Rs. 26,563/ of 

the petitioner, who thereupon had filed a writ petition before the 

High Court challenging such order. The petition was dismissed on 

28th November 1958. The appeal was dismissed by Division Bench 

of the High Court on 7th July 1959. Later on, by a judgment dated 

2nd  December 1963, the Gujarat High Court held that the relevant 

provision of the Bombay Sales Tax Act under which the amount 

was   collected   was   valid.   The   Supreme   Court,   however,   by 

judgment   dated   29th  March   1967   struck   down   the   provision   as 

being infringement of  Article  19 [1] of the Constitution of India. 

The   petitioner   thereupon   filed   a   petition   directly   before   the 

Supreme Court under Article 32 of the Constitution. The Supreme 

Court dismissed the petition.   Hidayatulla CJ., observed that, "the  

utmost expedition is the sine quo non for a claim under Article 32. The  

party aggrieved must move the Court at the earliest possible time and  

explain satisfactorily all semblance of delay." It was further observed 

that, "..there is no question of a mistake of law entitling the petitioner to  

invoke analogy of the Article in the Limitation Act".

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30. Both these judgments of the Supreme Court in the case of 

Kanhaiya Lal Mukundlal Saraf  [Supra] and  Tilokchand Motichand v. 

H.B Munshi, CST  [Supra] came up for consideration before the 9­

Judge   Bench   in   the   case   of  Mafatlal   Industries   Limited     Ors., 

[Supra].  Mr.   Justice   B.P   Jeevan   Reddy  speaking   for   the   majority, 

summarized the conclusions in para 108 of the judgment. Portions 

relevant for our purpose, read as under :­

"108. [i] Where   a   refund   of   tax/duty   is   claimed 
on   the   ground   that   it   has   been   collected   from   the 
petitioner/plaintiff   -   whether   before   the 
commencement   of   the   Central   Excise   and   Customs 
Laws   [Amendment]   Act,   1991   or   thereafter   -   by 
misinterpreting or misapplying the provisions of the 
Central Excises and Salt Act, 1944 read with Central 
Excise   Tariff   Act,   1985   or   Customs   Act,   1962   read 
with   Customs   Tarrif   Act   or   by   misinterpreting   or 
misapplying   any   of   the   rules,   regulations   or 
notifications issued under the said enactments, such a 
claim   has   necessarily   to   be   preferred   under   and   in 
accordance   with   the   provisions   of   the   respective 
enactments   before   the   authorities   specified 
thereunder   and   within   the   period   of   limitation 
prescribed   therein.   No   suit   is   maintainable   in   that 
behalf.   While   the   jurisdiction   of   the   High   Courts 
under Article 226 - and of this Court under Article 32 

-   cannot   be   circumscribed   by   the   provisions   of   the 
said enactments, they will certainly have due regard 
to the legislative intent evidenced by the provisions of 
the   said   Acts   and   would   exercise   their   jurisdiction 
consistent   with   the   provisions   of   the   Act.   The   writ 
petition will be considered and disposed of the Act. 
The writ petition will be considered and disposed of 
in the light of and in accordance with the provisions 

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of Section 11B. This is for the reason that the power 
under Article 226 has to be exercised to effectuate the 
rule of law and not for abrogating it.

The said enactments including Section 11­B of 
the Central Excises and Salt Act and Section 27 of the 
Customs Act do constitute "law" within the meaning 
of Article 265 of the Constitution of India and hence, 
any   tax   collected,   retained   or   not   refunded   in 
accordance with the said provisions must be held to 
be   collected,   retained   or   not   refunded,   as   the   case 
may   be,   under   the   authority   of   law.   Both   the 
enactments   are   self­contained   enactments   providing 
for  levy,   assessment,  recovery  and  refund   of  duties 
imposed   thereunder.   Section   11­B   of   the   Central 
Excises and Salt Act and Section 27 of the Customs 
Act, both before and after  the 1991 [Amendment] Act 
are constitutionally valid and have to be followed and 
given effect to. Section 72 of the Contract Act has no 
application to such a claim of refund and cannot form 
a basis for maintaining a suit or a writ petition.  All 
refund   claims   except   those   mentioned   under 
Proposition (ii) below have to be and must be filed 
and adjudicated under the provisions of the Central 
Excise and Sale Act or the Customs Act, as the case 
may be. It is necessary to emphasize in this behalf 
that   Act   provides   a   complete   mechanism   for 
correcting any errors whether or fact or law and that 
not   only   an   appeal   is   provided   to   a   Tribunal   - 

which   is   not   a   departmental   organ   -   but   to   this 
Court, which is a civil court.

[ii] Where,   however,   a   refund   is   claimed   on   the 
ground that the provisions of the Act under which it 
was levied is or has been held to be unconstitutional, 
such a claim, being a claim outside the purview of the 
enactment, can be made either by way of a suit or by 
way   of   a   writ   petition.   This   principle   is,   however, 
subject to an exception. Where a person approaches 
the High Court or the Supreme Court challenging the 
constitutional   validity   of   a   provision   but   fails,   he 

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cannot   take   advantage   of   the   declaration   of 
unconstitutionality   obtained   by   another   person   on 
another ground; this is for the reason that so far as he 
is   concerned,   the   decision   has   become   final   and 
cannot   be   reopened   on   the   basis   of   a   decision   on 
another person's case; this is the ratio of the opinion 
of  Hidayatullah,   CJ.,   in  Trilokchand   Motichand 
[Supra] and we respectfully agree with it.

Such a claim is maintainable both by virtue of 
the   declaration   contained   in   Article   265   of   the 
Constitution of India and also by virtue of Section 72 
of the Contract Act. In such cases, period of limitation 
would naturally be calculated taking into account the 
principle   underlying   clause   (c)   of   sub­section   [1]   of 
Section 17 of the Limitation Act, 1963. A refund claim 
in   such   a   situation   cannot   be   governed   by   the 
provisions of the Central Excises and Salt Act or the 
Customs   Act,   as   the   case   may   be,   since   the 
enactments   do   not   contemplate   any   of   their 
provisions   being   struck   down   and   a   refund   claim 
arising on that account. In other words, a claim of this 
nature   is   not   contemplated   by   the   said   enactments 
and is outside their purview. 

[iii] xx  xx  xx

[iv] It is not open to any person to make a refund 
claim on the basis of a decision of a court or tribunal 
rendered   in   the   case   of   another   person.   He   cannot 
also claim that the decision of the Court/Tribunal in 
another   person's   case   has   led   him   to   discover   the 
mistake of law under which he has paid the tax nor 
can   he   claim   that   he   is   entitled   to   prefer   a   writ 
petition   or   to   institute   a   suit   within   three   years   of 
such alleged discovery of mistake of law.  A person, 
whether a manufacturer or importer, must fight his 
own   battle   and   must   succeed   or   fail   in   such 
proceedings.   Once   the   assessment   or   levy   has 
become final in his case, he cannot seek to reopen it 
nor   can   he   claim   refund   without   reopening   such 

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assessment/order   on   the   ground   of   a   decision   in 
another   person's   case.   Any   proposition   to   the 
contrary not only results in substantial prejudice to 
public   interest   but   is   offensive   to   several   well 
established principles of law. It also leads to grave 
public mischief. Section 72 of the Contract Act, or for 
that   matter   Section   17   [1](c)   of   the   Limitation   Act, 
1963, has no application to such a claim for refund. 

[v] Article   265   of   the   Constitution   has   to   be 
construed in the light of the goal and the ideals set 
out   in   the   Premable   to   the   Constitution   and   in 
Articles 38 and 39 thereof. The concept of economic 
justice demands that in the case of indirect taxes like 
Central   Excises   duties   and   Customs   duties,   the   tax 
collected   without   the   authority   of   law   shall   not   be 
refunded to the petitioner­plaintiff unless he alleges 
and establishes that he has not passed on the burden 
of duty to a third party and that he has himself borne 
the burden of the said duty.

[vi] xx  xx  xx  xx

[vii] While   examining   the   claims   for   refund,   the 
financial   chaos   which   would   result   in   the 
administration of the State by allowing such claims 
is   not   an   irrelevant   consideration.   Where   the 
petitioner­plaintiff   has   suffered   no   real   loss   or 
prejudice, having passed on the burden of tax or duty 
to   another   person,   it   would   be   unjust   to   allow   or 
decree   his   claim   since   it   is   bound   to   prejudicially 
affect the public exchequer. In case of larger claims, it 
may   well   result   in   financial   chaos   in   the 
administration of the affairs of the State.

[viii] The decision of this Court in STO v. Kanhaiya  
Lal Mukundlal Saraf  [Supra]   must be held to have 
been wrongly decided in so far as it lays down or is 
understood to have laid down proportions contrary 
to the propositions enunciated in (i) and (vii) above. 

It   must   equally   be   held   that   the   subsequent 

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decisions of this Court following and applying the 
said propositions in Kanhaiya Lal [Supra] have also 
been   wrongly   decided   to   the   above   extent.  This 
declaration - or the law laid down in Propositions (i) 
to (vii) above - shall not however entitle the State to 
recover   the   taxes/duties   already   refunded   and   in 
respect   whereof   no   proceedings   are  pending   before 
any authority or Tribunal or Court as on this date. All 
pending matters shall, however, be governed by the 
law declared herein notwithstanding that the tax or 
duty has been refunded pending those proceedings, 
whether under the orders of an authority, Tribunal or 
Court or otherwise."

31. As   per   this   decision,   thus,   the   time   limit   provisions 

contained   in   the   Central   Excise   and   Customs   laws   for   seeking 

refund of excess duty were held to be sacrosanct and were seen as 

constituting   law   within   the   meaning   of  Article  265   of   the 

Constitution.   Consequently,   the   tax   collected,   retained   or   not 

refunded   in   accordance   with   such   provisions   would   be   seen   as 

collected, retained and not refunded under the authority of law. 

The   view   expressed   by   the   Supreme   Court  in  Trilokchand  

Motichand  [Supra] was affirmed. It was emphatically stated that it 

was not open to any person to make refund claim on the basis of a 

decision   of   the   Court   or   Tribunal   rendered   in   case   of   another 

person.  Such a person cannot claim that the decision of the Court 

or   Tribunal   in   another   person's   case   has   led   him   to   discover   a 

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mistake of law under which he had paid the tax. In this context, it 

was observed that any proposition to the contrary not only results in  

substantial prejudice to the public interest, but is offensive to several well  

established principles of law. It also leads to grave public mischief.   In 

this context, it was also observed that while examining the claims 

for   refund,   the   financial   chaos   which   would   result   in   the 

administration of the State by allowing such claims would not be 

an irrelevant consideration. In case of large claims, the same may 

result in financial chaos in the administration of the affairs of the 

State. The decision in the case of  STO vs. Kanhaiya Lal Mukundlal  

Saraf  [Supra] to the extent "it lays down or is understood to have laid  

down   proposition   contrary   to   these   propositions"   was   held   to   have 

been wrongly decided.

32.   Thus,  in the economic matters of such vast scale, the wider 

considerations   of   the   State   exchequer,   while   interpreting   a 

statutory provisions cannot be kept out of purview. Quite apart 

from   independently   finding   that   the   time   limit   provisions 

contained in sub­rule (1) of Rule 117 of the CGST Rules is not ultra  

vires  the   Act   or   the   powers   of   the   rule   making   authority, 

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interpreting such powers as merely directory would give rise to 

unending   claims of  transfer  of  credit of tax on inputs and  such 

other claims from old to the new regime. Under the new GST laws, 

the  existing   tax  structure  was  being  replaced  by  the new  set  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  rise to multiple large­scale claims 

trickling 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 is in this context that the Supreme Court in 

the   case   of  Mafatlal   Industries  Limited  (Supra),  after   rejecting   the 

contention that 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, was further 

influenced by the fact that any such situation could lead to utter 

chaos, if the claims are large. Under the circumstances, we do not 

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find any substance in the petitioners' challenge to rule 117 (1) of 

the CGST Rules as well as GGST Rules.

33. The   contention   of   the   counsel   for   the   petitioners   that   the 

saving clause inserted in the Gujarat Value Added Tax Act would 

protect   and   preserve   the   tax   credits   of   the   past   regime,   after 

introduction of the Goods and Service tax is to be noted only for 

rejection.   The   saving   clause   provided   that   nothing   done   in   the 

amendment of the Gujarat Value Added Tax Act shall affect any 

right,   privilege,   obligation   or   liability   acquired,   accrued   or 

incurred   under   the   Act   prior   to   coming   into   force   of   the   said 

amendment. Such saving has to be read and appreciated in tune 

with the specific provisions made in the CGST  GGST Acts. Any 

interpretation of such provisions cannot run counter to the express 

legislative intent of restricting or limiting enjoyment of the existing 

rules, or in other wise to make continuous enjoyment of the rights, 

subject to certain safe guards and conditions. 

34. Before   closing,   we   would   refer   to   some   of   the   judgments 

relied upon by counsel for the parties and which we felt must be 

explained. 

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C/SCA/4252/2018 JUDGMENT

35. In the case of Eicher Motors Ltd [Supra] and Dai Ichi Karkaria 

[Supra], essentially, the conclusion of the Supreme Court, was that 

the  MODVAT   credit   in the  account   of  a  manufacturer   is in  the 

nature of duty already paid and which cannot be taken away by 

retrospective rules. 

36. Reference to a decision of the Supreme Court in the case of 

CIT v. B.S Srinivasa Setty [Supra] is of no avail. The ratio of the said 

decision   can   be   seen   as   holding   that   there   cannot   be   taxing 

provision without mechanism having been provided by the statute. 

We   do   not   see   Section   140   (1)   of   the   GGST   Act   is   a   charging 

provision. It, in fact, enables a registered person who has not opted 

for composition of tax to take credit in his electronic credit ledger, 

the   credit   of   the   amount   of   value   added   tax   and   entry   tax   in 

relation to the period ending immediately preceding the appointed 

day. This section further provides for conditions; subject to which, 

the same could be claimed.

37. The decision of Supreme Court in the cases of : (a) Sambhaji  

 Ors.  vs. Gangabhai  Ors. [Supra],  and (b)  Salem  Advocate Bar  

Assocaition vs. Union of India [Supra] were rendered in the context 

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C/SCA/4252/2018 JUDGMENT

of   the   time   limit   prescribed   under   the   amended   CPC   for   the 

defendant to file written statement. The Court held that the ninety 

days   of   period   provided   in   Rule   1   of   Order   VIII   of   CPC   was 

directory in nature. The situation in the said cases and the one on 

hand   before   us   are   vastly   different   and   the  ratio  in   the   said 

decisions cannot be imported in the present facts of the case. 

38.       In   the   case   of  Mangalore   Chemicals     Fertilizers     Limited   v.  

Deputy   Commissioner  [Supra],   the   Supreme   Court   had   observed 

that while interpreting a condition precedent for exemption, there 

would be distinction to be made between a procedural condition 

of a technical nature and a substantive condition. We have given 

elaborate   reasons   that   the   time   limit   provision   for   making 

declarations in the present case is of considerable importance and 

cannot be seen merely as a technical requirement. Removing such 

time limit would have a potential to lead to utter economic chaos.

39. In case of State of Mysore  Ors. v. Mallick Hashim  Co. 

[1974] 3 SCC 251, it was the High Court which had struck down 

the rule framed by the Government providing the time limit for 

filing the refund application on the ground that the section which 

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C/SCA/4252/2018 JUDGMENT

granted the benefit of refund did not envisage any such time limit 

that   would   be   prescribed   under   the   rules.   The   Supreme   Court, 

however, did not proceed on this logic. The Court held that it was 

not necessary to go into this question, since sub­rules (2) and (3) of 

Rule   39A   of   the   Mysore   Sales   Tax   Rules,   1957   were   wholly 

unreasonable, and therefore, cannot be sustained. Sub­rule (3) of 

Rule 39­A provides that before a person is entitled to refund, he 

must have to make the refund application within the time before 

which   he   should   have   submitted   his   Sales­tax   return.   It   was 

observed that in many States, the dealers have to submit quarterly 

returns.   Under   rule   18   of   the   Rules,   the   dealer   would   have   to 

submit its annual return within 30 days from the end of Financial 

Year. Thus, if there be a sale in the course of inter­State trade has 

been   made   on   31st  March  of  a  year,  the   refund  application  will 

have   to   be   made   within   30   days   from   that   date.   The   Supreme 

Court was therefore of the opinion that the said rule was merely 

an   attempt   to   deny   the   dealers,   the   refund   to   which   they   are 

entitled under the law, or at any rate to make the enforcement of 

that right unduly difficult. 

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C/SCA/4252/2018 JUDGMENT

40. In   case   of  Sales   Tax   Officer,   Ponkannam     Anr.   v.   K.I. 

Abraham, reported in AIR 1967 SC 1823, rule 6 of the Central Sales 

Tax (Kerala) Rules 1957 came up for consideration, particularly in 

the context of sub­section (4) of Section 8 of the CST Act, which as 

we have noted earlier, imposes the requirement of a dealer who 

has sold the goods in course of inter­State sale or Commerce, to 

furnish necessary declarations in prescribed manner. Rule 6 of the 

Central Sales Tax (Kerala) Rules, besides making other provisions, 

prescribes   time   limit   for   making   declarations.   Such   rule   was 

examined in light of rule making power contained in Section 13 (4) 

of   the   CST   Act,   clause   (e)   of   which   provided   that   the   State 

Government may make rules for the purpose of the authority from 

whom,   the   conditions   subject   to   which   and   the   fees   subject   to 

payment   of   which   any   from   declaration   prescribed   under   sub 

­Section (4) of Section 8 may be obtained, the manner in which the 

form   shall   be   kept   in   custody   and   records   relating   thereto 

maintained. In this context, it was observed that the phrase, "in the  

prescribed manner" occurring  in Section 8 (4) of the Act does not 

take   into   time­element.   While   concluding   that   the   time   limit 

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C/SCA/4252/2018 JUDGMENT

prescribed in Rule 6 (1) was ultra vires, and therefore, assessee was 

not bound to furnish declarations in Form "C" before 16th February 

1961   into   said   case,   the   duty   of   the   assessee   was   to   furnish 

declaration  within  a  reasonable  time. In  the said case, since  the 

assessee   had   already   furnished   C­Forms   before   the   assessment 

was   over,   it   was   held   that   there   was   compliance   with   the 

requirement of Section 8 (4) of the Act. In the present case, we have 

noted   the   statutory     provisions,   the   scale   of   operations   and   the 

possible repercussions; if such time limit contained in Rule 117 is 

annihilated   and   a   registered   person   is   allowed   to   make 

declarations of the left over residuary duty of credit at the time of 

migration to the new tax structure. The time limit provisions, we 

have   already   stated   more   than   once,   under   such   circumstances, 

cannot be seen as merely technical in nature. 

In the result, petition is dismissed.

[Akil Kureshi, J.]

[B.N Karia, J.]
Prakash

Page 62 of 62

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