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2018 Supreme(Bom) 516
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. DHARMADHIKARI, PRAKASH D. NAIK, JJ.
JCB India Limited and Others – Petitioners
Versus
Union of India, Rep. through Union Secretary, Department of Revenue – Respondent
Writ Petition Nos. 3142, 3186, 3187, 3212 of 2017 and Civil Writ Petition Nos. 12378, 14245 of 2017
Decided On : 20-03-2018
For the Petitioners: Vikram Nankani, Prithviraj Chauhan, Ritesh Jain, M.J. Juris, Raghuraman, Raghvendra, Prabhakar K. Shetty, Abhishek Adke.
For the Respondents: Anil C. Singh, Pradeep S. Jetly, M. Dwivedi, Jitendra B. Mishra, Geetika Gandhi.
Headnote:
Central Goods and Services Tax Act, 2017 - Section 140(3) - Maharashtra Value Added Tax Act - Central Excise Act, 1944 - Petitioner in this petition states that it is a company registered under Companies Act and is engaged in manufacture of Excavators Loaders Compactors etc falling under Chapter Heading - Petitioner has its manufacturing facility/place of business at Plots Floriculture & Industrial Village from where it supplies machines manufactured by it to its dealers located in various parts of country - Petitioners manufacturing facility/ factory was registered under erstwhile Central Excise Act and petitioner paid central excise duty on clearance of such machines from its factory – Held, Appellants appear to be under impression that even if in altered market conditions continuance of exemption may not have been justified yet Government was bound to continue it give extra profit to them - That certainly was not object with which Notification had been issued - Withdrawal of exemption in public interest is a matter of policy and court would not bind Government to its policy decisions for all times to come irrespective of satisfaction of Government that a change in policy was necessary in public interest - Courts do not interfere with fiscal policy where Government acts in public interest and neither any fraud or lack of bona-fides is alleged much less established - Government has to be left free to determine priorities in matter of utilization of finances and to act in public interest while issuing or modifying or withdrawing an exemption Notification – Order Accordingly
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The case involves multiple writ petitions challenging Clause (iv) of Section 140(3) of the Central Goods and Services Tax Act, 2017 (CGST Act), which restricts input tax credit for traders, first stage dealers, depots, etc., on stock held as on 1.7.2017 to invoices issued not earlier than twelve months preceding the appointed day.[4000563460002][4000563460003][4000563460013][4000563460014] (!) (!)
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Petitioners are manufacturers of machinery (e.g., excavators under Chapter 8429) with duty-paid depots, and traders/first stage dealers dealing in machines, pipes, tubes, etc., who paid excise duty on clearance from factories but challenge denial of credit for stock older than 12 months under GST transition, claiming double taxation and discrimination against depots/traders vs. manufacturers.[4000563460003][4000563460004][4000563460011][4000563460012][4000563460021]
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Under pre-GST regime, petitioners' factories/depots were registered under Central Excise Act/Rules; demo machines cleared on payment of duty from factory to unregistered depots, sold later on VAT/CST; no excise on depot removal; duty-paid documents exist for stock as on 30.6.2017 older than 12 months.[4000563460003][4000563460004][4000563460021]
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Petitioners argue Section 140(3)(iv) is arbitrary cutoff causing inequality (manufacturers get full credit via Section 140(1), traders partial/none), violates Articles 14, 19(1)(g), 265, 300A; no nexus to GST object of eliminating cascading; ignores business cycle (2-3 years for demo sales); vested right under existing law saved by Section 174; promissory estoppel applies.[4000563460005][4000563460006][4000563460008][4000563460022][4000563460023][4000563460031][4000563460033]
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Respondents deny challenge merits; policy decision by Parliament not justiciable; 12-month limit reasonable safeguard against misuse (similar to CENVAT Rule 4(7) proviso); input credit is concession/restriction under VAT principles, not equity/hardship; no discrimination; Section 16(1) CGST empowers credit restrictions.[4000563460016][4000563460028][4000563460029]
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Court holds input tax credit under CGST (Sections 16-18) and CENVAT Rules conditional/restricted (e.g., time limits, documents); no unconditional vested right under existing law; transitional Section 140(3) provides concession with nexus to smooth transition, consistent with prior conditions. (!) (!) [4000563460039][4000563460040][4000563460041][4000563460054][4000563460055]
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Clause (iv) not arbitrary: 12 months reasonable for documents; applies to specific class (traders/depots not registered under prior excise); fiscal policy deference to Legislature; no double taxation as excise subsumed but credit transitional/conditional.[4000563460045][4000563460046][4000563460055]
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Section 174 saves conditional rights/privileges under repealed laws; no absolute accrued right to unrestricted credit; promissory estoppel inapplicable against statute/legislative policy in public interest.[4000563460047] (!) [4000563460048][4000563460050][4000563460064]
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No discrimination: transitional provisions cover all; equals treated equally with conditions; Elcher Motors/Jayam distinguished (no lapsing of unutilized credit here, but conditional transition).[4000563460060][4000563460061]
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Petitions dismissed; Rule discharged; no costs.[4000563460066][4000563460067][4000563460068]
S.C. DHARMADHIKARI, J.
1. All these petitions were heard together and are being disposed of by this common Judgment.
2. We issue Rule on these petitions. The respondents waive service. Since an affidavit in reply is filed in Civil Writ Petition No. 12378 of 2017 and which is stated to be reflecting the common stand of the respondents to the challenge, with consent of both sides, we dispose of these writ petitions by this common Judgment and Order.
3. The writ petitions filed by M.J. Juris and particularly Writ Petition No. 3142 of 2017, treated as the lead matter, seeks to question Clause of Section 140(3) of the Central Goods and Services Tax Act, 2017 (“CGST Act” for short).
4. The petitioner in this petition states that it is a company registered under the Companies Act and is engaged in the manufacture of Excavators, Loaders, Compactors, etc. falling under Chapter Heading 8429. The petitioner has its manufacturing facility/place of business at Plots-A and B, Talegaon Floriculture & Industrial Village, Ambi Navlakh- Umbhare, Talegaon, Dabhade, Pune from where it supplies machines manufactured by it to its dealers located in various parts of the country. The petitioner's manufacturing facility/ factory was registered under the erstwhile Central Excise Act and the petitioner paid central excise duty on clearance of such machines from its factory. The petitioner has a Duty Paid Depot in the State of Maharashtra at Plots-A and B of the same village. The Duty Paid Depot was registered under the Maharashtra Value Added Tax Act prior to 1.7.2017, but was not registered under the Central Excise Act, 1944. Upon transitioning to GST, the petitioner's factory and depot obtained registration under GST in the State of Maharashtra.
5. That some of the machines manufactured by the petitioner were used as demo machines which were cleared on payment of excise duty by its factory and were removed on self-invoicing basis. The petitioner used to keep these demo machines at the depot after removing them from the factory and these machines were removed from the depot on need basis. The demonstration machines were removed from the depot for that purpose and which, after the demonstrations, are sold to dealers/customers. However, these machines are typically sold when they are aged for about 2-3 years. Under the erstwhile regime, these machines were sold from the depot on payment of VAT/CST. The petitioner had in stock, at the Duty Paid Depot, machines as on 30.6.2017 which are older than twelve months, namely, on 30.6.2016 and duty paid documents are available with respect to the same. In these circumstances, under the erstwhile regime the petitioner was not required to pay excise duty again in case it removed/sold the machines from its depot. After the onset of the Goods and Services Tax (“GST”) regime whereby transitional provisions were introduced with the sole intention of allowing seamless flow of credit and the supplies under the GST regime which have already suffered tax once, do not suffer them again. This GST was introduced with effect from 1.7.2017. After its introduction, various duties such as excise duty, countervailing duty, special additional duty, etc. have been subsumed under the GST regime. Unlike the erstwhile levies, the GST is payable at all stages of supply right from the manufacturer/importer to the final customer with credit of input taxes available at each stage of value addition. This essentially makes the GST a tax only on value addition. This is to ensure elimination of cascading effect of taxes and provide a common market for all goods and services. Adverting to the Statement of Objects and Reasons, it is urged that the essential vision is to create one-nation-one-market wherein all the goods irrespective of their territory suffer the same tax and have the same costs.
6. To abolish the cascading effect, the CGST Act provides for the input tax credit eligibility in terms of these transitional provisions. Section 14
