While admitting a petition challenging the provisions of Gujarat Goods and Services Tax (GGST) Act, the Gujarat High Court has issued notices to GST Council, GSTN, State Government and Central Government and observed that the transitional credit is vested right which cannot be denied by the Government.
The petitioners, M/s Willowood Chemicals Pvt. Ltd filed the writ petition before the Gujarat High Court challenging the Constitutional validity and vires of Rule 117 of the Gujarat Goods and Services Tax Rules, 2017 and Form GST Tran-1 issued in relation thereto vis-à-vis Section 140(3), Section 164 of the Central Goods and Services Tax Act, 2017.
Counsel for the Petitioners, Mr. Vinay Shraff, Mr. Vishal J Dave and Mr.Nipun Singhvi submitted before the Court that under the existing Central Sales Tax Act, 1956, for non-submission of the statutory declaration in Form C, F, H, I etc., the differential tax is demanded which further subject to appeal/revision. The input tax credit already earned under the Gujarat Value Added Tax Act, 2003 is allowed to be retained and utilized for payment of VAT/CST and neither under the Gujarat Value Added Tax Act, 2003 nor under Central Sales Tax Act, 1956 there is any provision to deny input tax credit in case of failure to furnish statutory declaration. It was also submitted that Section 140 of the Gujarat GST Act is a transitional provision.
The Petitioners further submitted that under the value added tax mechanism no one to one co-relation was mandated between the inputs tax credit on one hand and the type of sale/clearances/dispatches and output on the other; tax liabilities under the Gujarat Value Added Tax Act, 2003/Central Sales Tax Act, 1956.
For that, the Petitioners submitted that the Central Sale Tax Act, 1956 read with the Central Sales Tax (Gujarat) Rules, 1957 provides for the mechanism for assessment of tax etc. in the event of non-compliance with provisions. The form GST Tran-1 Sr. No.5(c) is adjusting the differential tax liability attributable to pending declaration forms against tax carried forward ITC of VAT.
It was also submitted that they will remain liable to pay differential tax, interest and penalty under Central Tax Act for non-submission of forms C/F/H/I, therefore disallowance of carrying forward of acquired accrued/acquired right of input tax credit under VAT Act even before assessment under the Central Sales Tax Act, 1956, is wholly arbitrary and confiscatory. This will also result in double jeopardy and double taxation without any consequential remedy. It was further submitted that it is an established principle of law that taxing the same property or subject-matter twice, for the same purpose, for the same period and in the same territory is ultra vires to the constitution. This double taxation would result in unjust enrichment in favour of the Government. This is also violative of Article 300A of the Constitution and is confiscatory in nature.
CA Abhishek Chopra, GST Consultant to the petitioner opined that “The GST is a value-added tax and Cenvat credit or Value added tax are the vested right of an assessee is which acquired under existing law. Further, there were specific provisions under Central Sale Tax Act, 1956 read with the Central Sales Tax (Gujarat) Rules, 1957 which provides for the mechanism for assessment of tax etc. in the event of non-compliance with provisions including non-submission of forms. Therefore disallowance of carry forward of the acquired right of input tax credit under VAT Act that too before assessment under the Central Sales Tax Act, 1956, is wholly arbitrary and confiscatory. In the disguise of Section 140(1) of Gujarat GST Act, the government is adjusting future liability against current credit.Further, Section 140(1) of the Gujarat GST Act is ultra vires to the Article 279A of the Constitution of India inasmuch as the Article 279A of the Consultation of India does not empower the Goods and Services Tax Council to make recommendation for adjustment of a tax liability which may arise in future under Central Sales Tax Act, 1956, which is a Central legislation, against a accrued/ acquired right under the scheme of Value Added Tax Act, which is a state legislation.”
Subscribe Taxscan Premium to view the Judgment
