GST – CIDCO has correctly collected GST on the total one-time lease premium amount payable by the successful allottee at the rate of 18% - Demand for payment of GST is in accordance with law - said demand cannot be said to be vitiated by any error of law apparent on the face of the record: High Court [para 12 to 14, 21]
Petition dismissed
Observations of High Court –
++ The GST Act is an Act to make a provision for levy and collection of tax on intra-state supply of goods or services or both by the Central Government and for the matters connected therewith or incidental thereto.
++ Chapter I contains preliminary provisions and section 2 therein defines certain expressions and words. The term "business" is defined in inclusive manner in section 2(17). The expression includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. It also includes any activity or transaction undertaken by the Central Government or State Government or any local authority in which they are engaged as public authorities . The other definition, which is material and relevant is to be found in section 2(31) is of the word "consideration".
++ A perusal of sections 7, 8, 9, 10 and 11 falling in this Chapter leaves us in no manner of doubt that the expression "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. By sub-section (2) and which opens with a non-obstante clause, such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. Equally, subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendation of the Council, specify, by notification, the transactions that are to be treated as a supply of goods and not as a supply of services or a supply of services and not as a supply of goods. Pertinently, no notification and traceable to sub-section (2) of section 7 has been brought to our notice.
++ CIDCO is a person and in the course or in furtherance of its business, it disposes of lands by leasing them out for a consideration styled as one-time premium. Therefore, if one refers to Schedule II, section 7, then, Item No. 2 styled as land and building and any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential complex for business, either wholly or partly is a supply of service.
++ It is settled law that such provisions in a taxing statute would have to be read together and harmoniously in order to understand the nature of the levy, the object and purpose of its imposition. No activity of the nature mentioned in the inclusive provision can thus be left out of the net of the tax. Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered.
++ We are concerned here with the GST Act and the tax on supply of goods and services. It is not disputed that the position of the CIDCO for the purpose of orderly planning and development will be of no assistance in the sense while developing a new township, the objective of the planning authority is not to earn money, but to develop the area so that the purpose of setting up a township is achieved by more people wanting to live in the area in lieu of the various amenities provided in the area. The CIDCO is one such authority. It is entirely for the legislature, therefore, to exercise the powers conferred by sub-section (2) of section 7 of the GST Act and issue the requisite notification. Absent that notification, merely going by the status of the CIDCO, we cannot hold that the lease premium would not attract or invite the liability to pay tax in terms of the GST Act.
++ With respect, it cannot be said that the activities performed by sovereign or public authorities under the provisions of law, which are in the nature of statutory obligations are excluded from the purview of the present enactment.
2018-TIOL-23-HC-MUM-GST
JCB INDIA LTD Vs UoI : BOMBAY HIGH COURT (Dated: March 19 & 20, 2018)
CGST – Section 140(3) of the CGST Act, 2017 – Petitioners challenge clause (iv) prescribing time limit for transitional credit availment on the ground that the same violates the mandate of Articles 14 and 19(1)(g) of the Constitution of India. Held: CENVAT credit is a mere concession and it cannot be claimed as a matter of right - credit on inputs under the existing law itself is not absolute but a restricted or conditional right - If the existing law itself imposes condition for its enjoyment or availment, then, it is not possible to agree with the Counsel that such rights under the existing law could have been enjoyed and availed of irrespective of the period or time provided therein - The period or the outer limit is prescribed in the existing law and the Rules of CENVAT credit enacted thereunder - In the circumstances, it is not possible to agree with the Counsel appearing for the petitioners that imposition of the condition vide Clause (iv) is arbitrary, unreasonable and violative of Articles 14 and 19(1)(g) of the Constitution of India - if right to availment of CENVAT credit itself is conditional and not restricted or absolute, then, the right to pass on that credit cannot be claimed in absolute terms - there cannot be a estoppel against a statute - transitional arrangements that have been made have clear nexus with the object sought to be achieved and cannot be struck down as having no such relation or nexus – Petitions fail: High Court [para 47, 50, 51, 52, 56, 57, 61, 65, 66, 67]
Petitions dismissed
Facts:
Petitioners seek to question Clause (iv) of Section 140(3) of the Central Goods and Services Tax Act, 2017[Section 140. Transitional arrangements for input tax credit.].
The clause (iv) reads - (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and
Grounds taken :
+ Section 140(3) of the CGST Act inter alia allows a registered trader to avail input tax credit of goods held in stock as on 172017, subject to certain conditions. It is submitted that upon a plain reading of the provisions and particularly Clause (iv) of subsection (3) of Section 140, the input tax credit of stock of goods can be availed only when such goods are purchased after 30.06.2016.
+ A trader or a depot of a manufacturer was not entitled to avail credit as the CENVAT Credit Rules, 2004 allows credit availment only by a manufacturer or a service provider. However, there were provisions through which an importer could pass on the credit of duty paid by registration as first stage dealers.
+ By the GST and particularly by virtue of the provisions contained in Section 140(1) and Section 140(3) of the CGST Act, a situation of inequality amongst the manufacturer and the depot/trader as far as the stock on 172017, occurs and such ineligibility of credit under the GST regime causes discrimination between the petitioner and other manufacturers. It is put to a disadvantageous position as far as the closing stock on 172017 in respect of goods lying in stock prior to 3062016.
+ It is elaborated as to how a person who is not in possession of a duty paying document is also eligible to avail input tax credit on a presumptive basis, but the petitioner who is in possession of all the duty paid documents is barred from availing CENVAT credit where the invoice is issued on or prior to 30.06.2016. It is contended that nonavailment of such credit was not due to the fault of the petitioner but due to unreasonable and arbitrary cutoff date of goods lying in stock for less than one year to transition of such credit. Now, the petitioner will have to bear the burden of double taxation in case it is not allowed to transition the credit of central excise duty paid by it at the time of removal from the factory for demo machines. The petitioner has already paid excise duty on the demo machines at the time of removal prior to 30.06.2016 and will again be compelled to pay GST on supply of such goods to customers/dealers.
+ The argument is that a law cannot expect, much less compel a person to perform an impossible task. If the nature of business of the petitioner is such that the cycle for supply of demo goods is 23 years, then, pendency of such stock was not due to the petitioner's fault. Therefore, denying the credit to the petitioner on such grounds is grossly arbitrary and bad in law.
+ The result of such provision would be that the petitioner would be forced to pay entire tax under the CGST Act on supplies without availing input tax credit of taxes paid earlier. There is no reasonable rationale beyond inflicting tax cascading effect on depot/traders while extending full credit to registered manufacturers and partial credit to traders who do not have the duty paying documents available with them. It is in these circumstances that the provisions and insofar as noted above are challenged as violating the mandate of Articles 14 and 19(1)(g) of the Constitution of India.
Held:
++ A bare perusal thereof would indicate that transitional arrangements for input tax credit are set out therein. Pertinently, subsection (1) deals with a registered person, other than a person opting to pay tax under Section 10. He shall be entitled to take, in his electronic credit ledger, the amount of CENVAT 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. The proviso to subsection (1), however, says that the registered person shall not be allowed to take credit in the circumstances set out therein. By subsection (2), a registered person, other than a person opting to pay tax under section 10, his availment of input tax credit of the unavailed CENVAT credit in respect of capital goods is dealt with. Pertinently, there as well, the proviso imposes conditions.
++ Petitioners are happy with the other clauses for they know that inputs or goods used or intended to be used for making taxable supplies under this Act meaning the CGST Act, the registered person under the CGST Act is eligible for input tax credit on such inputs under the CGST Act and would alone be able to avail of the benefit and carved out by subsection (3) of Section 140. They are unhappy with the condition stipulated in Clause (iv) where the registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs but not with condition No.(v), namely, the supplier of services is not eligible for any abatement under this Act means the CGST Act. They are not unhappy with the proviso either.
++ All that the impugned Clause (iv) does is that it tells the registered person who is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs that such invoices or other prescribed documents ought be issued not earlier than twelve months immediately preceding the appointed day. Pertinently, the transitional provisions relating to job work, miscellaneous transitional provisions and other provisions of the law are not questioned. There are various other compliances which have to be made by the law which is now brought in and equally they are not questioned. In this behalf a reference can usefully be made to Section 140(4), (5), (6) and pertinently the Clauses of subSection 6 which contain similar conditions. The persons covered therein are not aggrieved nor are complaining about the conditions or restrictions all of which are to be found in a Taxing Statute. Secondly, they are inserted in as transitional provisions.
++ Thirdly, while judging their legality and validity we are bound by the settled legal principles. In the case of P. M. AshwathanarayanaSetty and Others vs. State of Karnataka and Others reported in AIR 1989 SC 100 and in the case of Kerala Hotel and Restaurant Association and Ors. vs. State of Kerala and Ors., reported in AIR 1990 SC 913 .
++ Repeal of the Acts mentioned in sub section (1) of Section 174 would not affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders made under such repealed or amended Acts. That is saved and except the proviso below subsection (2) of Section 174.
++ Ordinarily, the expression “accrued right” means a matured right, a right that is ripe for enforcement (as through) {Advanced Law Lexicon by P. RamanathaAiyar.}. The expression “vested right” means an absolute or indefeasible right.
++ It is too well settled that right to take advantage of a statutory provision cannot be said to be an accrued right and similarly a right which would, if allowed to be asserted, will affect adversely the larger public interest that cannot be permitted to be enforced.
++ Argument is made by the petitioners, be they a depot of a manufacturer or a first stage dealer, that they had secured a right to claim CENVAT credit or input tax credit; that right had accrued to them in terms of the existing law and that could have been claimed without any restriction or conditions;that once under the existing law no such preconditions were imposed for the enjoyment or availment of that right, then, the present regime which seeks to impose a condition which is unreasonable and arbitrary, therefore, would make the statutory provision violative of Articles 14 and 19(1)(g) of the Constitution of India.
++ From the CCR, 2004 it is evident that the fifth proviso to subrule (7) of Rule 4 would indicate that availment of CENVAT credit is conditional upon the satisfaction of all the provisos. Thus, there is a period stipulated for availment of this CENVAT credit. In addition thereto, there are conditions imposed for the availment.
++ To our mind, therefore, the learned Additional Solicitor General is right in his contention that a CENVAT credit is a mere concession and it cannot be claimed as a matter of right.
++ If the CENVAT Credit Rules under the existing legislation themselves stipulate and provide for conditions for availment of that credit, then, that credit on inputs under the existing law itself is not a absolute but a restricted or conditional right. It is subject to fulfilment or satisfaction of certain requirements and conditions that the right can be availed of. It is in these circumstances that we are unable to agree with the Counsel appearing for the petitioners that the impugned condition defeats any accrued or vested right. It was never vesting in them in such absolute terms, as is argued before us.
++ If the existing law itself imposes condition for its enjoyment or availment, then, it is not possible to agree with the Counsel that such rights under the existing law could have been enjoyed and availed of irrespective of the period or time provided therein. The period or the outer limit is prescribed in the existing law and the Rules of CENVAT credit enacted thereunder. In the circumstances, it is not possible to agree with the Counsel appearing for the petitioners that imposition of the condition vide Clause (iv) is arbitrary, unreasonable and violative of Articles 14 and 19(1)(g) of the Constitution of India.
++ It is clear that if right to availment of CENVAT credit itself is conditional and not restricted or absolute, then, the right to pass on that credit cannot be claimed in absolute terms.
++ While moving from one legislation to another comprehensive legislation, in the latter legislation the Legislature deemed it fit and proper to continue the earlier or erstwhile arrangement by terming it as a transition or transitional one. That continuation was with conditions and one of the conditions which is questioned here is consistent with the conditions imposed under the existing law. Such a situation was not dealt with in Eicher Motors . Thus, the decision is clearly distinguishable.
++ True it is that arbitrariness in legislation is termed to be very much a facet of unreasonableness, and arbitrariness can be used to strike down the legislation when it is challenged as violative of Article 14 of the Constitution of India. However, once we find nothing arbitrary in the legislation, then, we cannot take assistance of this principle.
++ In the transitional provisions possibly every person and who is going to be affected by the movement or transition to the new regime is included. In this transitional phase, some of the benefits and concessions derived under the existing law are protected but consistent with the conditions already imposed under the existing Law for their enjoyment.
++ Equally, we do not think that there is any merit in the argument that the Clause (iv) of subsection 3 of Section 140 of the GST Act violates the principle of promissory estoppel. As is rightly contended before us, there cannot be a estoppel against a statute. Apart therefrom, we do not find any promise which was absolute and unconditional from inception having been breached or resiled by the Executive or the State. From inception, the concession or right based on the same was extended but with conditions. Now that the new regime has taken over and which does away with all the existing laws on the subject, then, in the transitional phase and for the transition to be smooth and proper necessary provisions are inserted in the New Law. With these in place, even the conditional arrangement under the existing laws is saved for a particular duration. To our mind, therefore, we do not see how when the imposition of the condition has a clear nexus with the object sought to be achieved, then, that can be termed as violative of the principle of promissory estoppel either.
++ In fact, we have found from the scheme of the new law that the object and purpose sought to be achieved after its introduction of the new law is of not permitting the existing law arrangement to continue endlessly. Some day or some time has been stipulated as appointed day for the new regime to come into force. For it to come into force and function effectively, the transitional arrangements have been made. They have clear nexus, therefore, with the object sought to be achieved. They cannot be struck down as having no such relation or nexus.
++ Once we are of the opinion that there is nothing indefeasible or absolute in the right claimed under the existing law or in transitional arrangements set out, or in the substantive provisions permitting availing of input tax credit, then, all the more the challenge must fail.
++ We cannot also by any comparative analysis of the Central and State Law hold that this condition, as imposed, is unreasonable.
Conclusion:
++ Each of these petitions fails.
