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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NITIN JAMDAR, M.S. KARNIK, JJ.
Nelco Limited – Appellant
Versus
The Union of India – Respondent
Writ Petition No. 6998 of 2018
Decided on : 20-03-2020.
The challenge to the time limit stipulated under Rule 117 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as 'the Rules') for availing Input Tax Credit (ITC) under Section 140(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as 'the Act') was brought before the Court. The Petitioners contended that the time limit was ultra vires of the Act, unreasonable, and violative of Article 14 of the Constitution of India. The Respondents, on the other hand, defended the impugned enactment and opposed the relief sought.
Fact of the Case:
The Petitioners, registered under the Goods and Services Tax (GST) regime, encountered difficulties in filing the TRAN-1 Form, which is required for availing ITC, on the common portal due to alleged technical issues. Despite multiple attempts, they were unable to submit the form within the prescribed time limit. Consequently, they challenged the validity of Rule 117 and sought directions to permit the filing of TRAN-1 Form.
Finding of the Court:
1. The Court held that the time limit stipulated under Rule 117 was not ultra vires of the Act. The rule-making power under Section 164(2) of the Act was broad and pervasive and took within its sweep the impugned Rule. The input tax credit under Section 140(1) was a concession attached with conditions of its exercise within the time limit. 2. The Court further held that the time limit was neither arbitrary nor unreasonable. It was rooted in the larger public interest of having certainty in allocation and planning of resources. The Court noted that even under the GST law, there was a time limit for availing ITC, and it would be incongruous to have no such time limit for the transitional period. 3. The Court also held that the insistence on submitting the declaration electronically did not create an arbitrary classification between those with the necessary capabilities and equipment and those who did not. The entire GST system envisaged electronic filing, and it was not unreasonable to mandate electronic compliance, especially in a complex tax regime powered by a software-based system. 4. Regarding the meaning of 'technical difficulties' under Rule 117(1A), the Court held that it referred to technical difficulties on the common portal of GST. The IT Grievance Redressal Cell, set up by the GST Council, was tasked with examining the existence of such difficulties. The Court found that the system log on the common portal was a cogent proof for ascertaining technical difficulties and that the categorization of cases based on system logs was not arbitrary or a fettering of discretion.
Issues: 1. Whether the time limit stipulated under Rule 117 of the Rules for availing ITC under Section 140(1) of the Act was ultra vires of the Act. 2. Whether the time limit was unreasonable and violative of Article 14 of the Constitution of India. 3. Whether the insistence on submitting the declaration electronically created an arbitrary classification. 4. The meaning of 'technical difficulties' under Rule 117(1A) and the role of the IT Grievance Redressal Cell.
Ratio Decidendi: 1. The time limit under Rule 117 was not ultra vires of the Act as it was traceable to the rule-making power conferred under Section 164(2) of the Act. 2. The time limit was neither arbitrary nor unreasonable as it was rooted in the larger public interest of having certainty in allocation and planning of resources. 3. The insistence on submitting the declaration electronically did not create an arbitrary classification as the entire GST system envisaged electronic filing. 4. 'Technical difficulties' under Rule 117(1A) referred to technical difficulties on the common portal of GST, and the IT Grievance Redressal Cell was tasked with examining the existence of such difficulties.
Final Decision: The Petition was dismissed, and the Rule was discharged with no costs awarded.
JUDGMENT:
NITIN JAMDAR, J.
Rule. Rule made returnable forthwith. Respondents waive service. Taken up for final disposal.
2. The Petitioner - Nelco Limited is a Company incorporated under the Companies Act. It supplies and undertakes various network-related services. Respondent No.1 is the Union of India. Respondent No.2 is the Central Board of Indirect Taxes. Respondent No.3 is the State of Maharashtra. Respondent No.4 is the Goods and Services Tax Council. Respondent No.5 is an officer exercising powers under the Maharashtra Goods and Services Tax Act, 2017. Respondent No.6 is a company which operates the online portal known as GSTN. Respondent No.7 is the Assessing Officer having jurisdiction over the Petitioner.
3. The Goods and Services Act was brought into force from 1 July 2017. This tax replaced and subsumed various indirect taxes in India. For the transition between the old and new regimes, provisions have been made under the Act. Goods and Services Tax Act provides for utilization of Input Tax Credit accumulated under the earlier tax laws upon certain conditions. The Goods and Services Tax Rules framed under the Act provides for filing of a form known as GST TRAN-1 for availing of such input tax credit. The Rules provide for a time limit within which the TRAN-1 Form has to be filed. This time limit is the subject of debate in this Petition.
4. Goods and Service Tax is levied on the supply of goods and services. It is a destination-based consumption tax. The GST has introduced a unique concept where both, the Central and the State, levy taxes on a joint base. The GST levied by the State Governments is called a State GST, in short SGST. GST levied by the Central Government is called a Central GST, that is the CGST. Regarding Inter-State supply, the levy is called Integrated GST, the IGST. The GST has replaced various taxes collected by the Central and the State. CGST has subsumed Central Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty, Special Additional Duty of Customs, Excise Duty on Medicinal & Toilet Preparations. SGST has subsumed Sales Tax, Value Added Tax, Entertainment Tax, Central Sales Tax, Octroi &, Entry Tax, Purchase Tax, Luxury Tax, Taxes on Lottery, Betting & Gambling. A Goods and Services Tax Council is established. The Council comprises of the Union Finance Minister, the Union Minister of State, Minister nominated by each State government. Out of several functions of the GST Council, one of them is the resolution of disputes.
5. The timeline of the statutory enactment as follows. On 19 June 2017 the Central Goods and Services Tax Rules, 2017 were notified. Rule 117 was introduced on 28 June 2017 into the CGST Rules with effect from 1 July 2017 to provide that every registered person may file TRAN-1 Form within 90 days of 1 July 2017. Rule 117(1) Proviso stipulated that the Commissioner may on the recommendations of the GST Council extend this period by a further 90 days. GST regime was implemented in the country from 1 July 2017 with the enactment of the Central Goods and Services Tax Act, 2017 along with the allied Central GST Acts and the State GST Acts. Rule 120A was introduced on 15 September 2017 in the CGST Rules with effect from 15 September 2017 providing for a one-time revision of TRAN-1 Form within the same time prescribed in Rule 117. Time was extended for revising and filing TRAN-1 Form to 31 October 2017. On 28 October 2017, this was further extended to 30 November 2011. On 10 November 2017 a press release issued stating that the time of filing/revising Form TRAN-1 had been extended till 31 December 2017, however on 15 November 2017, the time limit was extended only to 27 December 2017. On 3 April 2018 by a circular was issued by the CBEC on the directions of the GST Council an IT Grievance Redressal Mechanism was enacted. On 10 September 2018 Rule 117(1A) inserted into the CGST Rules providing the extension of the time for filing TRAN-1 Form for persons who faced techni
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