Time Limit For Availing Transitional Input Tax Credit Under GST Mandatory : Madras HC [Read Judgment]

The Madras High Court has ruled that the time limit for availing Transitional Input Tax Credit (ITC) is mandatory in nature, not directory. The Court also observed that the ITC is a form of concession not a property, in which right can be vested. The time limit prescribed to avail such a concession under Rule 117 must be followed in a mandatory nature. The petitioner P.R.Mani Electronics, a retail merchant of electronic appliances, challenged the constitutional validity of Rule 117 of the Central Goods and Service tax Rules, 2017 (CGST Rules) as ultra vires to Section 140 of Central Goods and Service Tax Act, 2017 (CGST Act) and Articles 14 and 300 A of the Constitution.BackgroundThe Petitioner was a proprietary concern engaged in the retail trade of electronic goods including mobile phones. The petitioner stated that it was entitled to avail Transitional ITC of an amount Rs 4,62,496/- under CGST and Rs 7,512/- under SGST. Section 140 of the CGST Act prescribes that, the registered person is required to submit a return, within such time, and in such manner as may be prescribed for purposes of availing Transitional ITC. The procedure relating to availing of Transitional ITC was prescribed by Rule 117 of the CGST Rules.Petitioner alleges that,on the prescribed time as per the rule, the Petitioner's consultant could not enter the common portal and upload the required form. Subsequently the Petitioner had approached the Sales Tax Collection Inspector, in person and submitted a hard copy of Form GST TRAN-1 and also received an acknowledgment. In spite of repeated follow up with the Respondents, there was no response with regard to the entitlement of the Petitioner to Transitional ITC, as alleged by the petitioner. As per the petitioner, ITC is in the nature of the Petitioner's property and, therefore, the Petitioner cannot be deprived of its property merely because the requisite form could not be submitted within the prescribed time limit. The prescription of such time limit in Rule 117 is ultra vires to Section 140 and violates Article 14 and 300-A of the Constitution., alleged by the petitioner.Input Tax Credit (ITC)Input Tax Credit system grants an opportunity to the tax payer to reduce the tax amount that he had already paid.For example at the time of paying tax for the sales, the tax payer can reduce the amount of tax that he already paid at the time of purchases. The GST implementation had widened the scope of ITC. The basic norm of ITC is to cut short the tax paid on inputs from the amount of taxes paid on output. Section 140 of the CGST Act is dealing with Transitional ITC under the CGST Act and it stipulates that a registered person is required to submit a return , within such time , and in such a manner may be prescribed for purposes of availing Transitional ITC. The procedure related to the availing of Transitional ITC is prescribed under Rule 117 of the CGST Rules.As per the rules, a registered person is required to submit a declaration, electronically, in Form GST TRAN-1 on the common portal within 90 days or, if applicable, the extended period not exceeding 180 days from the appointed date in order to make a claim for Transitional ITC.ITC : A form of Concession.The court observed that ,ITC is a form of concession granted to a registered person under the CGST Act , not a property in which a person can establish any rights. The time limits prescribed under the CGST rules are valid and strict in nature. The Court had declined the argument raised by the petitioner that, ITC is a form of property and rights can be vested upon the same."Thus, the object and purpose of Section 140 clearly warrants the necessity to be finite. ITC has been held to be a concession and not a vested right. In effect, it is a time limit relating to the availing of a concession or benefit. If construed as mandatory, the substantive rights of the assesses would be impacted; equally, if construed as directory, it would adversely impact the Government's revenue interest, including the predictability thereof. On weighing all the relevant factors, which may be not be conclusive in isolation, in the balance, we conclude that the time limit is mandatory and not directory.", the court observed.In Jayam and Company v. Assistant Commissioner and another, (2016) 15 SCC 125 ,the apex court had observed the nature of Rule 117. The Court albeit in the context of the TNVAT Act, categorically concluded that ITC is a form of concession provided by the legislature and it can only be availed by satisfying the prescribed conditions." 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 such concession. Thus, it is not the right of the "dealers" to get the benefit of ITC but it is a concession granted by virtue of Section 19. As a fortiori, conditions specified in Section 10 must be fulfilled. In that hue, we find that Section 10 makes...

Time Limit For Availing Transitional Input Tax Credit Under GST Mandatory : Madras HC [Read Judgment]

Viswajith Anand

Availing Transitional ITC Under GST Must Be Time Bound, Holds Madras High Court. [Read Order]

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