‘Doctrine of Necessity’: Madras High Court allows Credit of Service Tax Paid under RCM which could not be availed as Transitional Credit under GST [Read Judgment]

The Madras High Court has allowed the Credit of Service Tax Paid under RCM which could not be availed as Transitional Credit under the Goods and Services Tax ( GST ) regime.

The petitioners are Ganges International Private Ltd, SRC Projects Private Ltd, and Supreme Petrochemicals Ltd, engaged in providing various construction services to Government/Private parties and was registered with the erstwhile Service Tax Department. From 01.07.2017 as the GST regime has come into effect, the petitioner has shifted to the GST regime from that date. The petitioner had filed the last service tax return in the erstwhile regime for the quarter from April to June 2017 by 15.08.2017.

Advocate G.Natarajan, the Counsel who appeared for the petitioners submitted that, This is the peculiar situation faced by the petitioners as they paid the service tax only on 30.12.2017. In order to get the refund of the said amount, because, the said service tax paid is purely an input tax, for which, credit can be taken by the petitioner under erstwhile Cenvat Credit Rules, he had made an application, of course within the time limit to the respondent/Revenue. However, the said application seeking for refund filed by the petitioner, having been considered, was rejected through Order-in-Original No.19/2018 dated 24.09.2018.

The Petitioner also submitted that, In the said order, though the respondent has found that, the assessee is eligible for taking Cenvat credit of the amount so paid under Service Tax Rules since there was no provision in the new regime to allow as an input tax credit in GST/credit in Electronic cash ledger/payment in cash and in the absence of any specific provision, such kind of plea made by the petitioner for a refund of the input tax credit cannot be considered and refunded, therefore, the claim was untenable and accordingly, it was rejected. Aggrieved by the said order, the present writ petition has been filed.

While allowing the petition, a Single Judge bench of Justice R. Suresh Kumar observed that, “in these kinds of special situations, for which, the provision if not Section 142(3), no other eligible provision is available. Therefore, this Court feels that, since it is a dire necessity, as these kind of situation necessarily to be met with by the Legislation, for which, these transitional provision has been brought in in the Statute Book, there can be no impediment for invoking Section 142(3) of the Act by invoking the ‘Doctrine of Necessity ”.

The Court also said that, “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, it was held that “the doctrine of necessity applies not only to judicial matters but also to quasi-judicial and administrative matters”.

While relying on many case laws, the Court also added that, 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 as the one discussed above, to have a forum, for which, the available legal provision of the Act viz., GST Act, 2017 can very well be invoked. Therefore, 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.

The Court also directed the GST Department to pass the necessary orders within a period of six weeks from the date of receipt of a copy of this order. It is made clear that, before passing the orders as indicated above, an opportunity of being heard shall be given to the petitioners, so that the petitioners can put forth their case by providing all necessary inputs to the satisfaction of the authorities to take a decision thereon.

M/s.Ganges International Private Ltd. VS The Assistant Commissioner of GST & Central Excise

CITATION: 2022 TAXSCAN (HC) 118

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