Doctrine of necessity
MARCH 16, 2022
By Vijay Kumar
WHAT do you do when you are entitled to something but you find that there is no provision under the law for that. Take the case of GST from 1.7.2017. A taxpayer was allowed to carry forward the cenvat credit as a transitional concession, but this was to end on 27.12.2017. What if the tax was paid after 27.12.2017 for the pre GST period? He is eligible for the credit, but the law doesn't allow that. Recently the Madras High Court resolved this issue by invoking the "Doctrine of necessity"
In Election Commission of India Vs. Dr. Subramaniam Swamy, the Supreme Court in 1996 held:-
It is well settled that the law permits certain things to be done as a matter of necessity which it would otherwise not countenance on the touchstone of judicial propriety. Stated differently, the doctrine of necessity makes it imperative for the authority to decide and considerations of judicial propriety must yield. It is often invoked in cases of bias where there is no other authority or Judge to decide the issue. If the doctrine of necessity is not allowed full play in certain unavoidable situations, it would impede the course of justice itself and the defaulting party would benefit therefrom.
Take the case of a certain taxing statute which taxes certain perquisites allowed to Judges. If the validity of such a provision is challenged who but the members of the judiciary must decide it. If all the Judges are disqualified on the plea that striking down of such a legislation would benefit them, a stalemate situation may develop. In such cases the doctrine of necessity comes into play. If the choice is between allowing biased person to act or to stifle the action altogether, the choice must fall in favour of the former as it is the only way to promote decision-making.
The Madras High Court in the recent case observed, - 2022-TIOL-325-HC-MAD-GST
Normally, the theory of "Doctrine of Necessity" could be invoked when there is a dire necessity with regard to the forum, before whom, the issue has to be referred to and disposed and decided by such forum. Earlier the view was that, it would apply only to judicial matters but in Mohapatra and Company and another Vs. State of Orissa and another [1985] 1 SCR 322, it was held that "the doctrine of necessity applies not only to judicial matters but also to quasi-judicial and administrative matters".
The "Doctrine of Necessity" though would be applied only with regard to the forum or the authority by whom it shall be decided, here, since it is a transitional period from the erstwhile tax regime to the present GST regime, where, the available provisions are to be best utilised by the taxpayers, it become imperative in order to meet the special situation, to have a forum, for which, the available legal provision of the Act viz., GST Act, 2017 can very well be invoked.
Though normally the "Doctrine of Necessity" would only be invoked for want of forum, here in the case, it also can be construed that, if Section 142(3) is not permitted to be invoked in meeting situations like this, that situation would render that taxpayer remediless, hence, here also the "Doctrine of Necessity" can be invoked, in the considered opinion of this Court.
And so, the Madras High Court held,
Since the language used in Section 142(3) of the Act is refund claim, the petitioner has made application for refund claim. However, under the erstwhile law, since the petitioners are not entitled to get any refund claim and their eligibility is confined only by taking the credit under Cenvat Credit Rules, beyond which, the relief cannot be stretched upon. Moreover, the Cenvat credit facilities which is a concession and if at all that concession has to be availed by the petitioners, that concession can be availed only in the manner known to law, for which, only credit facility can be adopted and therefore, the question of making any refund by way of cash as provided under Section 142(3) does not arise in this case, as, for which, the petitioners since have not been eligible or entitled to, that kind of claim cannot be made by the petitioners.
But at the same time, the petitioners' application at least could have been considered by the respondents under Section 142(3) of the Act for the purpose of taking the credit and such credit could have been considered and allowed for carrying forward in the electronic credit ledger of the GST regime which is nothing but a different route than Section 140 and that is the only possibility for dealing with these kind of applications. Hence, this Court has no hesitation to hold that, the reasons stated by the respondents in these cases in passing the orders impugned to reject the claim made by the petitioners are not tenable or these reasons would not stand in the legal scrutiny, in view of the legal position which have been discussed herein above.
This is a landmark judgement as the "doctrine of necessity" was thought to be invoked in cases of bias where there is no other authority or Judge to decide the issue.
The taxpayer is entitled to the credit of taxes paid and if a transitional provision does not allow that, by necessity, some other provision should be invoked. Maybe this is the first time that an assessee is getting fiscal benefit based on the "doctrine of necessity".
Until Next Week
