1 WP 6998.2018 final.

doc

JPP

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

APPELLATE CIVIL JURISDICTION

WRIT PETITION NO. 6998 OF 2018

Nelco Limited
a Company registered under the
Companies Act, 1956 having its office at
Francysters Centre, 3rd Floor, Evcharistic
Congress Bldg. No. III, 5 Convent Street,
Colaba, Mumbai – 400 001. … Petitioner

V/s.

1. The Union of India

through the Revenue Secretary,
Department of Revenue, Ministry of
Finance having his office at 128-A/
North Block, New Delhi.

2. The Central Board of Indirect Taxes

and Customs through its Chairman
having his office at North Block,
New Delhi – 110 001.

3. The State of Maharashtra

through the Government Pleader,
High Court, Mumbai

4. The Goods and Services Tax Council

having its office at 5th floor, Tower II,
Jeevan Bharti Building, Janpath Road,
Connaught Place, New Delhi – 110001
 2 WP 6998.2018 final.doc

5. The Commissioner of State Tax

having his office at 8th floor Vikrikar
Bhavan, Mazgaon, Mumbai-400 010

6. Goods and Services Tax Network

a Private Limited Company registered
under the Companies Act, 1956
having its office at 4th floor, East Wing,
World Mark-1, Aerocity, New Delhi

7. The Superintendent,
Range-V, Belapur-IV GST,
Ground Floor, CGO Complex,
CBD Belapur, New Mumbai. ... Respondents

Mr. V. Sridharan, Senior Advocate a/w. Mr. Prakash Shah and Mr.
Sriram Sridharan i/b. PDS Legal for the Petitioner.

Mr. Anil Singh, Addl. Solicitor General a/w. Mr. Pradeep S. Jetly,
Senior Advocate a/w. Mr. J.B. Mishra for the Respondents 1,2,4,6 &
7
Ms. Shruti D. Vyas, ‘B’ Panel Counsel for the Respondent No.3.

CORAM : NITIN JAMDAR &

M.S. KARNIK, JJ.

RESERVED ON : 21 FEBRUARY 2020.

PRONOUNCED ON : 20 MARCH 2020.

JUDGMENT (PER NITIN JAMDAR, J.) :-

Rule. Rule made returnable forthwith. Respondents

waive service. Taken up for final disposal.
 3 WP 6998.2018 final.doc

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

 4 WP 6998.2018 final.doc

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
 5 WP 6998.2018 final.doc

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 technical difficulties in
filing the TRAN-1 Form. Further, under Rule 117(1A) time for
filing TRAN-1 Form was extended till 31 January 2019 for persons
facing technical difficulties. With further extensions now it is
extended to 31 March 2020 for the persons specified in Rule
117(1A).
 6 WP 6998.2018 final.doc

6. Reverting to the facts of this case. The Petitioner had

accumulated CENVAT Credit during its activities and payment of
taxes. According to the Petitioner, the Petitioner attempted to file
TRAN-1 Form on 27 December 2017. However, it could not file
the same, as according to the Petitioner, there were problems on the
common portal run of Respondent No.6. It is the Petitioner’s case
that the Petitioner sent an e-mail to the official complaint portal of
the Respondents for GST related issues, and the Petitioner received
no response. Further, it is the case of the Petitioner that when the
Petitioner tried again to file TRAN-1 Form on 28 December 2017, it
did not permit an option for filing of the TRAN-1 Form. Another e-
mail was sent by the Petitioner on 12 January 2018 to resolve the
technical difficulties but the Petitioner which received no response. It
is the case of the Petitioner that the Deputy Commissioner (Anti-
Evasion) and Superintendent (Anti-Evasion) of Central Goods and
Services Tax Authority visited the Petitioner’s premises on 28 March
2018 regarding GSTR-3B; however, they did not remedy the
grievance of the Petitioner regarding TRAN-1 Form.

7. According to the Petitioner, the Petitioner is entitled to

avail CENVAT Credit, details of which are given in the Petition,
under Section 140 of the Central Goods and Services Tax Act and
the Maharashtra Goods and Services Sales Tax Act. It is the
grievance of the Petitioner that last communication made by the
 7 WP 6998.2018 final.doc

Petitioner on 23 April 2018 requesting the Respondents to permit

filing TRAN-1 Form has not been answered and there is no option
of manually filing the TRAN-1 Form, and the Petitioner is in danger
of losing the CENVAT Credit accrued, the Petitioner is constrained
to file this Petition.

8. The Petitioner has challenged the Rule 117 of the

Central Goods and Services Tax Rules, 2017 as ultra-vires Sections
140(1), 140(2), 140(3) and 140(5) of the Central Goods and
Services Act, 2017 to the extent that it prescribes a time limit for
filing of TRAN-1 Form. Consequently, the validity of CBEC’s
Orders dated 21 September 2017, 28 October 2017 and 15
November 2017 issued under Rule 117 of CGST are challenged.
The Petitioner has further sought for a direction to the Respondents
to permit the filing of TRAN-1 Form.

9. The Respondents have filed reply affidavit and have

supported the impugned enactment, and have opposed the relief
sought for. As regards the Petitioner’s case of the Petitioner making a
bonafide attempt to file the GST TRAN-1, reply affidavit has been
filed by the Commissioner of Central Goods and Services Tax and
Central Board of Excise and Customs. It is stated that the Petitioner
did not specify the nature of technical difficulties, produced no proof
of having been encountered technical difficulties and the e-mail on
27 December 2017 was sent on 17.53 hours. Since no proof was
 8 WP 6998.2018 final.doc

produced that the Petitioner made any bonafide attempt and

encountered technical difficulties, the Petitioner cannot be held to be
a person facing technical difficulties to give the benefit of the
extended period. The case of the Petitioner was examined based on
the system log of the portal, and it is clear that the Petitioner had
encountered no technical difficulties and no evidence of error was
found on the system log.

10. The Petitioner has filed an affidavit in rejoinder stating

that the Petitioner made various followup attempt by forwarding
scanned copies of the letter dated 23 April 2018 to the jurisdictional
officer and met the officers to resolve the issue. The Petitioner has
asserted in the rejoinder that the Petitioner encountered the technical
difficulties in submitting TRAN-1 Form on 27 December 2017 due
to technical difficulties on GSTN common portal. The Petitioner
contends that once the Respondents admit there is an IT-related
difficulty on the common portal, then it cannot ask the Petitioner to
produce the proof thereof.

11. The Petitioner, by an additional affidavit dated 13 March

2019 has sought to produce a screenshot of the browsing history
from the laptop of its officer to demonstrate that bonafide attempt
was made to file the TRAN-1 Form. It is also stated that history was
extracted in March 2019, and the extracted history may not contain
 9 WP 6998.2018 final.doc

full details.

12. We have heard Mr. V. Sridharan, learned Senior

Advocate along with Mr. Prakash Shah and Mr. Sriram Sridharan,
learned Advocates for the Petitioner and Mr. Anil Singh, the learned
Additional Solicitor General along with Mr. Pradeep Jetly, learned
Senior Advocate and Mr. J.B. Mishra, learned Advocate for
Respondent Nos.1,2,4,6 and 7 and Ms. Shruti Vyas, learned
Additional Government Pleader for Respondent No.3.

13. Various petitions have been filed in this Court

challenging the time limit stipulated. These Petitions are listed
together and notified on board. The challenge on the ground of
ultra-vires and violative of Article 14 of the Constitution of India is
common in all the Petitions. During the hearing of the present
Petition, we permitted the Advocates in other Petitions to address on
these legal issues and treated the present Petition as a lead Petition.
Accordingly, Mr. Bharat Raichandani, Mr. Ishaan Patkar, Mr.
Prithviraj Choudhari and Mr. Chandrakant Thakar, the learned
Advocates have addressed us. Mr. V.A. Sonpal, the learned Advocate,
has addressed us for the Respondents in some of the Petitions.

14. The discussion can be divided under four heads - (i)

the challenge to the impugned Rule on the ground of it being ultra-
vires of the parent statute; (ii) the challenge on the ground of the
 10 WP 6998.2018 final.doc

Rule being unreasonable and violative of Article 14 of the

Constitution on India; (iii) the meaning of the phrase ‘technical
difficulties’ under Rule 117(1A) and the role of the IT Redressal Cell
and whether by creating categories discretion is being fettered; (iv)
relief to the Petitioner, if any.

15. First, we take the ground of ultra-vires. Second, the

challenge based on Article 14 of the Constitution of India. Third, the
aspect of technical difficulties under Rule 117(1A) and last, the relief
to the present Petitioner.

16. In short, the Petitioner’s contentions on the first aspect

are: Rule 117 is ultra-vires of Section 140 and is not traceable to any
provision of the Act. The phrase used in Section 140 as “prescribed
manner” cannot mean a rule-making power to prescribe the period
of limitation. This phrase is judicially construed. The Supreme
Court and various High Courts have construed the phrase
“prescribed manner” as not to include the power to make rules
imposing a time limit. After the judicial pronouncement, if the
legislature later has used the same phrase, it has to be construed as it
is judicially interpreted. There is intrinsic evidence in the Act itself
to show that whenever the legislature wanted to confer rule-making
power, specific phraseology is used. Therefore, whenever the
legislature wanted to confer rule-making power to prescribe time
 11 WP 6998.2018 final.doc

limit, it has been specifically so prescribed. It is a uniform and

settled legislative practice to use the phrase “prescribed manner”
when the legislature does not intend to confer rule-making power to
provide limitation. The rule-making power to prescribe time limit
cannot be traced to general rule-making power under Section 164.
Merely because the Rules have been placed before the Parliament
does not cure the inherent lack of power. Section 140 prescribes a
self-declaration to be confirmed later during the stipulated period
and therefore, no prejudice to the Respondents. Rule 117 so far as it
prescribes time limit to submit TRAN-1 Form cannot be traced
either to Section 140 nor to Section 164 nor any other provision of
the Act. Therefore, Rule 117, to the extent it provides a time limit, is
ultra-vires of the parent statute. The input tax credit has always been
a core feature of goods and services tax all over the world and denial
of the input tax credit when the levy is imposed on output strikes at
the core. Under the new GST law, every supply is taxable. The GST
is applicable on the appointed date, despite the contract entered into.
Provisions are made for the automatic transaction to GST to enable
the collection of GST for output, and there is no choice. Under the
scheme of the Act, therefore the input tax credit for the earlier
period has to be given. Filing of the form is necessary only for the
procedural formalities, and therefore, filing of return is
contemplated. However, the Parliament has given a right to the
Input Tax Credit for the earlier period under Section 140(1), and
 12 WP 6998.2018 final.doc

this right cannot be taken away by rules. A right to input tax credit
existed under the old regime and also the same is continued under
the new regime.

17. The reply of the Respondents, in brief, is as follows.

There is a presumption to the legality and validity of subordinate
legislation, and the burden is heavy on those who assert its invalidity.
Even with subordinate legislation, the Court should be slow in
concluding invalidity. The input tax credit, in the transitionary
provision under section 140, is a nature of exemption and is not a
matter of right. Section 140 is a transitional provision which by
very nature is limited by the time duration. The provisions under
the Act could have easily taken away the input credit accrued under
the earlier regime, but by way of concession, input credit is
continued with conditions. As regards the rule-making power,
Section 164(2) is the general rule-making power. Section 164(2) is
couched in most extensive terms, and Rule 117 is traceable to this
power. The time limit under Rule 117 is not contrary to any
provisions of the Act, nor it takes away any substantive right. The
judicial pronouncements about the rule-making power and time
limit within the earlier tax regime would not if so facto apply for
interpreting the transitionary provisions. Further, the GST tax
regime and the transitionary provisions are unique. For determining
the challenge based on lack of rule-making power, the scheme and
 13 WP 6998.2018 final.doc

the Act have to be seen. The Rules once placed before the
Parliament and approved cannot be debated upon for their validity.
The availment of Input Tax Credit is regulated by the rules and must
be availed within a time period.

18. Rule 117 falls under chapter XIV of the Goods and
Services Tax Rules. Chapter XIV is titled Transitional Provisions.
This chapter contains six Rules. Rule 117 deals with a tax or duty
credit carried forward on the appointed date. Section 118 is regarding
the person to whom Section 142(11)(c) applies. Rule 119 is
regarding the declaration of stock. Rule 120 deals with details of
goods sent on approval basis. Section 120A deals with revision of
declaration of TRAN-1 Form. Section 121 is regarding recovery of
credit wrongly availed. The part of Rule 117 relevant for this
discussion is reproduced below:

Rule 117: Tax or Duty Credit Carried Forward under

any Existing Law or on Goods Held in Stock on the
Appointed Day (Chapter-XIV: Transitional Provisions)

(1) Every registered person entitled to take credit of

input tax under section 140 shall, within ninety days of
the appointed day, submit a declaration electronically in
FORM GST TRAN-1, duly signed, on the common
portal specifying therein, separately, the amount of input
tax credit to which he is entitled under the provisions of
the said section:
 14 WP 6998.2018 final.doc

Provided that the Commissioner may, on the

recommendations of the Council, extend the period of
ninety days by a further period not exceeding ninety
days.
* * *
(1A) * * *
(2) * * *
(3) * * *
(4) * * *
(emphasis supplied)
Rule 117(1), thus, states that the person entitled to take credit of
input tax under Section 140 would file a declaration electronically in
a form known as GST TRAN-1 within 90 days. The period can be
extended on the recommendation of the Council for a further period
not exceeding 90 days.

19. Before we deal with the challenge to Rule 117, two

positions must be borne in mind. First, there is a presumption to
the legality of the statute. This presumption also applies to a
subordinate instrument. Second, both Section 140 and 117 fall in
that part of the statute which deals with transitionary provision
between two regimes of taxation. In this context validity of Rule 117
has to be examined.

20. The challenge to the time limit under Rule 117, so far as
it mandates time limit, being ultra-vires, it has two parts. First is
referring to Section 140(1) of the Act and the rule-making power
 15 WP 6998.2018 final.doc

then. Second is based on Section 164 of the Act, and the general
rule-making power. The Petitioner has advanced elaborate
submission on how the rule-making power to prescribe time limit
Rule 117 does not originate from Section 140, since the only phrase
used in this regard is `in such manner as may be prescribed’. Several
decisions have been cited on the proposition that this phrase cannot
confer power to prescribe time limit. The Respondents, however,
have relied upon Section 164 of the Act. Nevertheless, for
completeness, we refer to the contentions of the Petitioner regarding
Section 140 and the phraseology used for the rule-making power.

21. Chapter XX of the Act deals with Transitionary

Provisions. Section 139 is of migration of existing taxpayers, which
states that from on and from the appointed day, every person
registered under the existing laws and having a valid Permanent
Account Number, would be issued a certificate of registration on a
provisional basis. Section 139 states that the conditions of form and
manner would be as prescribed. The final certificate and the
conditions thereof would be as prescribed. Section 140 deals with
the transitional arrangement of input tax credit. Section 140 of the
CGST Act reads:

“140. (1) A registered person, other than a person

opting to pay tax under section 10, shall be entitled to
take, in his electronic credit ledger, the amount of
CENVAT credit of eligible duties carried forward in
 16 WP 6998.2018 final.doc

the return relating to the period ending with the day

immediately preceding the appointed day, furnished
by him under the existing law in such manner as may
be prescribed:
Provided that the registered person shall not be
allowed to take credit in the following circumstances,
namely:—
(i) where the said amount of credit is not admissible as
input tax credit under this Act; or
(ii) where he has not furnished all the returns required
under the existing law for the period of six months
immediately preceding the appointed date; or
(iii) where the said amount of credit relates to goods
manufactured and cleared under such exemption
notifications as are notified by the Government.
(2) A registered person, other than a person opting to
pay tax under section 10, shall be entitled to take, in
his electronic credit ledger, credit of the unavailed
CENVAT credit in respect of capital goods, not
carried forward in a return, furnished under the
existing law by him, for the period ending with the
day immediately preceding the appointed day in such
manner as may be prescribed:
Provided that the registered person shall not be
allowed to take credit unless the said credit was
admissible as CENVAT credit under the existing law
and is also admissible as input tax credit under this
Act.
Explanation: For the purposes of this sub-section, the
expression “unavailed CENVAT credit” means the
amount that remains after subtracting the amount of
CENVAT credit already availed in respect of capital
goods by the taxable person under the existing law
from the aggregate amount of CENVAT credit to
 17 WP 6998.2018 final.doc

which the said person was entitled in respect of the

said capital goods under the existing law.
(3) A registered person, who was not liable to be
registered under the existing law, or who was engaged
in the manufacture of exempted goods or provision of
exempted services, or who was providing works
contract service and was availing of the benefit of
notification No. 26/2012-Service Tax, dated the 20th
June, 2012 or a first stage dealer or a second stage
dealer or a registered importer or a depot of a
manufacturer, shall be entitled to take, in his
electronic credit ledger, credit of eligible duties in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the
appointed day subject to the following conditions,
namely:–
(i) such inputs or goods are used or intended to be
used for making taxable supplies under this Act;
(ii) the said registered person is eligible for input tax
credit on such inputs under this Act;
(iii) the said registered person is in possession of
invoice or other prescribed documents evidencing
payment of duty under the existing law in respect of
such inputs;
(iv) such invoices or other prescribed documents were
issued not earlier than twelve months immediately
preceding the appointed day; and
(v) the supplier of services is not eligible for any
abatement under this Act:
Provided that where a registered person, other than a
manufacturer or a supplier of services, is not in
possession of an invoice or any other documents
evidencing payment of duty in respect of inputs, then,
such registered person shall, subject to such
 18 WP 6998.2018 final.doc

conditions, limitations and safeguards as may be

prescribed, including that the said taxable person shall
pass on the benefit of such credit by way of reduced
prices to the recipient, be allowed to take credit at
such rate and in such manner as may be prescribed.
(4) A registered person, who was engaged in the
manufacture of taxable as well as exempted goods
under the Central Excise Act, 1944 or provision of
taxable as well as exempted services under Chapter V
of the Finance Act, 1994, but which are liable to tax
under this Act, shall be entitled to take, in his
electronic credit ledger,—
(a) the amount of CENVAT credit carried forward in a
return furnished under the existing law by him in
accordance with the provisions of sub-section (1); and
(b) the amount of CENVAT credit of eligible duties in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the
appointed day, relating to such exempted goods or
services, in accordance with the provisions of sub-
section (3).
(5) A registered person shall be entitled to take, in his
electronic credit ledger, credit of eligible duties and
taxes in respect of inputs or input services received on
or after the appointed day but the duty or tax in
respect of which has been paid by the supplier under
the existing law, subject to the condition that the
invoice or any other duty or tax paying document of
the same was recorded in the books of account of such
person within a period of thirty days from the
appointed day:
Provided that the period of thirty days may, on
sufficient cause being shown, be extended by the
Commissioner for a further period not exceeding
thirty days:
 19 WP 6998.2018 final.doc

Provided further that said registered person shall

furnish a statement, in such manner as may be
prescribed, in respect of credit that has been taken
under this sub-section.
(6) A registered person, who was either paying tax at a
fixed rate or paying a fixed amount in lieu of the tax
payable under the existing law shall be entitled to
take, in his electronic credit ledger, credit of eligible
duties in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in
stock on the appointed day subject to the following
conditions, namely:–
1(i) such inputs or goods are used or intended to be
used for making taxable supplies under this Act;
(ii) the said registered person is not paying tax under
section 10;
(iii) the said registered person is eligible for input tax
credit on such inputs under this Act;
(iv) the said registered person is in possession of
invoice or other prescribed documents evidencing
payment of duty under the existing law in respect of
inputs; and
(v) such invoices or other prescribed documents were
issued not earlier than twelve months immediately
preceding the appointed day.
(7) Notwithstanding anything to the contrary
contained in this Act, the input tax credit on account
of any services received prior to the appointed day by
an Input Service Distributor shall be eligible for
distribution as credit under this Act even if the
invoices relating to such services are received on or
after the appointed day.
(8) Where a registered person having centralised
registration under the existing law has obtained a
 20 WP 6998.2018 final.doc

registration under this Act, such person shall be

allowed to take, in his electronic credit ledger, credit of
the amount of CENVAT credit carried forward in a
return, furnished under the existing law by him, in
respect of the period ending with the day immediately
preceding the appointed day in such manner as may
be prescribed:
Provided that if the registered person furnishes his
return for the period ending with the day immediately
preceding the appointed day within three months of
the appointed day, such credit shall be allowed subject
to the condition that the said return is either an
original return or a revised return where the credit has
been reduced from that claimed earlier:
Provided further that the registered person shall not
be allowed to take credit unless the said amount is
admissible as input tax credit under this Act:
Provided also that such credit may be transferred to
any of the registered persons having the same
Permanent Account Number for which the centralised
registration was obtained under the existing law.
(9) Where any CENVAT credit availed for the input
services provided under the existing law has been
reversed due to non-payment of the consideration
within a period of three months, such credit can be
reclaimed subject to the condition that the registered
person has made the payment of the consideration for
that supply of services within a period of three months
from the appointed day.
(10) The amount of credit under sub-sections (1), (3),
(4) and (6) shall be calculated in such manner as may
be prescribed.
Explanation 1: For the purposes of sub-sections (3),
(4) and (6), the expression “eligible duties” means–
 21 WP 6998.2018 final.doc

(i) the additional duty of excise leviable under section

3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957;
(ii) the additional duty leviable under sub-section (1)
of section 3 of the Customs Tariff Act, 1975;
(iii) the additional duty leviable under sub-section (5)
of section 3 of the Customs Tariff Act, 1975;
(iv) omitted
(v) the duty of excise specified in the First Schedule to
the Central Excise Tariff Act, 1985;
(vi) the duty of excise specified in the Second
Schedule to the Central Excise Tariff Act, 1985; and
(vii) the National Calamity Contingent Duty leviable
under section 136 of the Finance Act, 2001,
in respect of inputs held in stock and inputs contained
in semi-finished or finished goods held in stock on the
appointed day.
Explanation 2: For the purposes of Sub-sections (1)
and (5), the expression “eligible duties and taxes”
means–
(i) the additional duty of excise leviable under section
3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957;
(ii) the additional duty leviable under sub-section (1)
of section 3 of the Customs Tariff Act, 1975;
(iii) the additional duty leviable under sub-section (5)
of section 3 of the Customs Tariff Act, 1975;
(iv) omitted
(v) the duty of excise specified in the First Schedule to
the Central Excise Tariff Act, 1985;
(vi) the duty of excise specified in the Second
Schedule to the Central Excise Tariff Act, 1985;
 22 WP 6998.2018 final.doc

(vii) the National Calamity Contingent Duty leviable

under section 136 of the Finance Act, 2001; and
(viii) the service tax leviable under section 66B of the
Finance Act, 1994,
in respect of inputs and input services received on or
after the appointed day.
Explanation 3: For removal of doubts, it is hereby
clarified that the expression “eligible duties and taxes”
excludes any cess which has not been specified in
Explanation 1 or Explanation 2 and any cess which is
collected as additional duty of customs under sub-
section (1) of section 3 of the Customs Tariff Act,
1975.”

Subsections 1, 2, 3 and 5 lay down the terms and conditions for

transfer of credit from CENVAT Credit to Input Tax Credit. Section
140(1) deals with the return to be filed for transfer of credit under
the pre- GST regime. Section 140(2) deals with transferring credit
regarding Capital Goods. Credit of eligible duties on inputs or
finished goods or semi-finished goods held in stock on the appointed
day and transition is dealt with under Section 140(3) of the Act.
Section 140(5) refers to transferring credit regarding inputs or input
services in transit on the appointed day. Section 140 deals with
transitional arrangement of input tax credit, and for the present
topic, Section 140(1) 1 is material.

22. According to the Petitioner, section 140(1) confers right

on a registered person to take CENVAT Credit of the eligible duties
 23 WP 6998.2018 final.doc

in its electronic trading ledger the to be carried forward and the said
right can be regulated only in such manner as may be prescribed, and
thus, regulated by framing Rules. The phrase as may be prescribed
has been judicially construed as not to include within its ambit the
prescription of limitation. On this proposition, reliance is placed on
the decision of the Supreme Court in the case of Sales Tax Officer
Ponkunnam and Anr. v/s. K.I. Abraham1, Bharat Barrel and Drum
Mfg. Co. Ltd. v. Employees State Insurance Corporation 2 CIT,
Patiala v. Shri Krishen Chand Charitable Trust3, Second ITO v.
M.C.T. Trust4, CIT v. Trustees of Shri Techchand Chandiram
Trust5 and the decision of Division Bench of Madras High Court in
M/s. Solar Works v/s. Employees State Insurance Corporation 6. A
perusal of these decisions does indicate that the phrase “prescribed
manner” has been construed not to include within its ambit a rule-
making power to prescribe a time limit. Different phrases have been
employed in the Act such as Section 37 uses the phrase "within such
time”, Section 38 uses the phrase “within such time” as may be
prescribed, Sections 25,28, 29, 30, 32, 37,38, 40, 43, 49, 50, 52, 53,
53A, 84, 141 also use different phrases regarding time limit.

23. However, as stated earlier, the primary reliance of the

Respondents is on Section 164, that is the general rule-making

1 (1967) 3 SCR 518

2 (1971) 2 SCC 860
3 (1975) 98 ITR 387 (J & K)
4 (1976) 102 ITR 138 (Madras)
5 (1990) 184 ITR 537 (Bom)
6 AIR 1964 MAD 376
 24 WP 6998.2018 final.doc

power. Section 164 empowers the Government to makes rules on

the recommendations of the Council for carrying out the provisions
of the Act. Without prejudice to the generality of the provisions, it
also confers powers on the Government to make rules for all or any
of the matters which by this Act are required to be, or may be,
prescribed or in respect of which provisions are to be or may be made
by rules.

24. The Division Bench of Gujarat High Court in the case of

Willowood Chemicals Ltd. v/s. Union of India 7 has negatived the
contention of Rule 117(1) being ultra-vires referring to Section 164
of the Act. The criticism of the Petitioner on this approach of
Gujarat High Court is that though the Court noticed the decision of
the Supreme Court in the case of K.I. Abraham, it failed to notice
that in the Supreme Court has held that imposition of the time limit
could not be referred to the general rule-making power.

25. In the case of K.I. Abraham, the Supreme Court was

considering the Central Sales Tax Act. Reliance is placed on the
observations of the Supreme Court in the following passage:-

“4. It was contended on behalf of the appellants that

the assessee had not filed the declarations in form "C"
before February 16, 1961 according to the third proviso
to Rule 6(1) and in view of the breach of this Rule the
assessee was not entitled to take advantage of the lower
7 (2014) 306 ELT 551
 25 WP 6998.2018 final.doc

rate of assessment under s. 8(1) of the Act. The opposite

view-point was put forward on behalf of the assessee and
it was argued that the third proviso to Rule 6(1) was ultra
vires of s. 8(4) read with s. 13(4)(e) of the Act. The
decision of the question at issue therefore depends on the
construction of the phrase "in the prescribed manner" in
s. 8(4) read with s. 13 of the Act. In our opinion, the
phrase "in the prescribed manner" occurring in s. 8(4) of
the Act only confers power on the rule-making authority
to prescribe a rule stating what particulars are to be
mentioned in the prescribed form, the nature and value
of the goods sold, the parties to whom they are sold, and
to which authority the form is to be furnished. But the
phrase "in the prescribed manner" in s. 8(4) does not
take in the time-element. In other words, the section
does not authorities the rule-making authority to
prescribe a time-limit within which the declaration is to
be filed by the registered dear. The view that we have
taken is supported by the language of s. 13(4)(g) of the
Act which states that the State Government may make
rules for "the time within which, the manner in which
and the authorities to whom any change in the
ownership of any business or in the name, place or
nature of any business carried on by any dealer shall be
furnished." This makes it clear that the Legislature was
conscious of the fact that the expression "in the manner"
would denote only the ode in which an act was to be
done, and if any time-limit was to be prescribed for the
doing of the act, specific words such as "the time within
which" were also necessary to be put in the statute. In
Stroud's Judicial Dictionary it is said that the words
"manner and form" refer only "to the mode in which the
thing is to be done, and do not introduce anything from
the Act referred to as to the thing which is to be done or
the time for doing it. "In Acraman v. Herniman 117 E.R.
1164 the plaintiffs had become the assignees in
 26 WP 6998.2018 final.doc

bankruptcy proceedings against Garret who had executed

on March 4, 1850 a warrant of attorney to the defendant
Herniman on the strength of which the latter had
obtained judgment against him and sold his goods. A
copy of the warrant of attorney was filed with the officer
acting as clerk of the documents and judgments in the
court of Queen's Bench on March 11, 1850, but no
affidavit of the time of execution of such warrant of
attorney was filed at any time. Stat. 12 and 13 Vict. C.
106, s. 136 provided that any warrant of attorney given
by a trader to confess judgment in a personal action, not
filed within twenty-one days after execution in the
manner and form provided by State. 3. G-4, C. 39
should be deemed fraudulent, null and void Section 1 of
Stat. 3 G. 4, C. 39 required that such warrant of attorney
should be filed together with an affidavit of the time of
execution thereof, within twenty-one days of the
execution of the warrant of attorney. Section 2 provided
that if after twenty-one days, the party giving such
warrant of attorney shall be declared a bankrupt, then
unless the warrant or a copy thereof shall have been filed
as aforesaid within 21 days from the execution or unless
judgment shall have been signed or execution issued
thereon within the same period, such warrant of attorney
and the judgment and execution thereon, shall be
deemed fraudulent and void against the assignees, As
already stated, judgment had been signed on March 11,
1850, i.e., within twenty-one days of the execution of the
warrant of attorney, and it was contended on behalf of
the defendant that the judgment was valid
notwithstanding the failure to file the affidavit as
required by section 1 of Stat. 3 G. 4 C. 39. The
arguments was rejected and it was held by the Queen's
Bench that the warrant of attorney and the judgment
thereon were void as against the assignees in bankruptcy.
In the course of his judgment, Lord Campbell C.J.
 27 WP 6998.2018 final.doc

observed as follows :

"The enactment of stat. 12 & 13 Vict. C. 106, s.

136, is very plain; and I cannot agree to put a forced
construction upon it. The Legislature has said there
that any warrant of attorney given by a trader to
confess judgment in a personal action, not filed
within twenty-one days after execution in manner
and form provided by star. 3. G 4. C. 39, shall be
deemed fraudulent, null and void. the manner
directed by that Act is filing the warrant or copy,
with an affidavit of the time of execution. Here are a
judgment and execution on a warrant of attorney
given by a trader, and the warrant filed, but without
an affidavit. The plain meaning of the late Act is
that such a warrant shall be null and void against
the assignees. The words 'in manner and form,
'refer only to the mode in which the thing is to be
done, and do not introduce anything from the Act
referred to, as to the thing which is to be done or
the time for doing it."

5. The view that we have expressed as to the

interpretation of s. 8(4) of the Act is also supported
by the 'Note' to the form of declaration - Form C -
prescribed by Rule 12 of the Central Sales Tax
(Registration & Turnover) Rules, 1957. The Note
states that the form is to be furnished to the
prescribed authority in accordance with the rules
framed under section 13(4)(c) by the appropriate
State Government. For the reasons expressed, we
hold that the third proviso to Rule 6(1) is ultra vires
of s. 8(4) read with s. 13(3) and (4) of the act. It
follows therefore that the assessee was not bound to
furnish declarations in Form 'C' before February 16,
1961 in the present case. In the absence of any such
 28 WP 6998.2018 final.doc

time-limit it was the duty of the assessee to furnish

the declarations in form C within a reasonable time,
and in the present case it is the admitted position
that the assessee did furnish the declaration on
March 8, 1961 before the order of assessment was
made by the Sales Tax Officer. We are accordingly
of the opinion that the assessee tax furnished the
declarations in Form C in the percent case within a
reasonable time and there has been a compliance
with the requirements of s. 8(4)(a) of the act. It
follows that the High Court was right in quashing
the order of assessment made by the Sales Tax
Officer and directing him to make a fresh order of
assessment taking into consideration the declaration
forms furnished by the assessee on March 8, 1961.”

Thus, the Supreme Court considered the phrase ‘prescribed manner’

in Section 8(4) of Central State Tax Act, and Section 13(4)(g) to
declare the invalidity. As our further analysis will show that the
provisions under consideration of the Supreme Court and the
context of the legislation were completely different than one at hand.

26. It is necessary to examine the scheme of the Act, the

terminology employed conferring general rule-making power and
the nature of the Legislation to adjudicate the charge of lack of rule-
making power. When the court is called upon to decide a challenge
to the validity of subordinate legislation, it will have to consider the
nature, object, and scheme of the Act, and the area over which
power has been delegated under the Act.
 29 WP 6998.2018 final.doc

27. The Respondents have stressed upon the distinctiveness

of the Act and constitutional amendments governing it. With GST,
a large number of Central and State taxes were subsumed in a single
tax. The Constitution of India provides for segregation of fiscal
powers between the Centre and the States essentially with no
overlap. However, by the 100th Constitution Amendment Act,
2016, for the first time, both Centre and the States concurrently have
the power to levy and collect GST. A mechanism for the joint
operation of GST is evolved. Union levies CGST and the States
levy SGST. The Parliament has exclusive power to levy IGST on
interstate trade or commerce. The Goods and Service Tax Council
has been established. For dealing with the IT system, Goods and
Services Tax Network (GSTN) has been set up. The point to stress
here is that with Goods and Services Tax, the indirect taxation
regime in India has undergone a complete overhaul and it has
brought about a unique amalgam of fiscal powers.

28. Another unique feature is the chapter XX of the Act,

which incorporates Section 140. The Petitioner bases it’s right to
section 140. The heading of Chapter XX is 'Transitional provisions'.
The heading of S.140 is 'Transitional Arrangements for Input Tax
Credit'. The words used provide a clue to the nature of this
provision. The word 'arrangement' means action, process, plan.
'Transition' means a process or period changing from one state or
 30 WP 6998.2018 final.doc

condition to another8. Thus, the plain language understanding of

these two phrases, juxtaposed, is a process of regulating the change
from one position to another. Under this Chapter, the legislature has
devised an arrangement during the transitional period from the
earlier tax system to GST regime. This transitionary provision is a
unique legislative provision and merits different approach by the
Courts.

29. The amplitude of rulemaking power is regulated by and

is conditional upon the phraseology of the provision of the Act
conferring it. If the provision granting rulemaking power is
couched in widest terms, then the doctrine of ultra vires cannot be
casually applied.

30. Thus now to examine the phraseology used in Section

164 of the Act. Section 164 reads thus:

“S. 164 Power of Government to Make Rules

(1) The Government may, on the recommendations of
the Council, by notification, make rules for carrying out
the provisions of this Act.

(2) Without prejudice to the generality of the provisions

of sub-section (1), the Government may make rules for
all or any of the matters which by this Act are required to
be, or may be, prescribed or in respect of which
provisions are to be or may be made by rules.
8 Concise Oxford English Dictionary 11th Edition, Oxford University Press.
 31 WP 6998.2018 final.doc

(3) The power to make rules conferred by this section

shall include the power to give retrospective effect to the
rules or any of them from a date not earlier than the date
on which the provisions of this Act come into force.

(4) Any rules made under sub-section (1) or sub-section

(2) may provide that a contravention thereof shall be
liable to a penalty not exceeding ten thousand rupees.”

31. Section 164 (1) empowers the government, on the

recommendation of the GST Council, to make rules for carrying out
the provisions of the Act. Sub-section (3) declares that power to
make a rule under this section also include the power to give
retrospective effect. A power to levy penalty in the contravention is
declared in sub-section (4). Sub-section (2) is in most extensive
terms. The Government can make rules for all or any of the matters
which by this Act are required to be, or may be prescribed or in
respect of which provisions are to be or may be made by rules. It is
clear from reading Section 164(2), that the Government has the
power to make rules not only for the matters already prescribed but
those may be prescribed in future or in respect of which provisions
are to be made by rules. Thus, section 164 governs the most
comprehensive range of rule-making power.

32. The reason behind granting an extensive range of rule-

making power under this Act is not difficult to comprehend. It is
 32 WP 6998.2018 final.doc

because of the nature of the legislation in question. GST has

overhauled the existing multiple tax regimes into a single tax. This a
first of its kind in the country. Since the system and the principles
under it are new, quick adaption to the peculiar situations that may
arise is crucial. It is necessary that the system is dynamic to keep
pace with technological and commercial developments. It should be
flexible to meet the emerging challenges to the revenue needs on an
ongoing basis. It is for this flexibility that the legislature has
conferred an extensive rule-making power.

33. The reason for alluding to the legislative backdrop and

the language of section 164 is because each disputes relating to
limitation of rule-making power will have to be resolved with
reference to the language of each provision. The doctrine of ultra
vires should not be uniformly applied without examining the
terminology of the concerned statute.

34. Turning now to the decisions cited by the Petitioner.

The rule-making power which arose for consideration of the
Supreme Court in the Central Sales Tax Act in the case of A.K.
Abraham was Section 8(4) and Section 13. The Petitioner has drawn
comparison to Section 13(3) of the Central Sales Tax Act with
Section 164 of the CGST Act. Relevant provisions are reproduced
by the in para 3 of the judgment, as under :
 33 WP 6998.2018 final.doc

3. Section 8 of the Act, it stood on the material date, was to

the following effect :

"8. (1) Every dealer, who in the course of inter-State

trade or commerce -
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the
Government goods of the description referred to in sub-
section (3);
Shall be liable to pay tax under this Act, which shall
be one per cent, of his turnover.
(2) the tax payable by any dealer on his turnover in so
far as the turnover or any part thereof relates to the sale
of gods in the course of inter-State trade or commerce
not falling within sub-section (1) -
(a) in the case of declared goods, shall be calculated at
the rate applicable to the sale or purchase of such goods
inside the appropriate State; and
(b) in the case of goods other than declared goods,
shall be calculated at the rate of seven per cent, or at the
rate applicable to the sale or purchase of such goods
inside the appropriate State, which-ever is higher :
and for the purpose of making any such calculation
any such dealer shall be deemed to be a dealer liable to
pay tax under the sales tax law of the appropriate State,
notwithstanding that the, in fact, may not be so liable
under that law.
* * *
(4) the provisions of sub-suction (1) shall not apply to
any sale in the course of inter-State trade or cannoneers
unless the dealer selling the goods furnished to the
prescribed authority in the prescribed manner -
(a) a declaration duly filled and signed by the
registered dealer to whom the goods are sold containing
the prescribed particulars in a prescribed form obtained
from the prescribed authority; or
 34 WP 6998.2018 final.doc

(b) if the goods are sold to the Government, not

being a registered dealer, a certificate in the prescribed
form duly filled and signed by a duly authorised officer
of the Government."

Section 13 states :

"(1) The Central Government may, by notification in

the Official Gazette, make rules providing for -
(a) the manner in which applications for registration
may be made under this Act, the particulars to be
contained therein the procedure for the grant of such
registration, the circumstance in which registration may
be refused and the form in which the certificate of
registration may be given :
(b) the period of turnover, the manner in which the
turnover in relation to the sale of any goods under this
Act shall be determined, and the deductions which may
be made in the process of such determination :
(c) the cases and circumstances in which and the
conditions subject to which any registration granted
under this Act may be cancelled;
(d) the form in which and the particulars to be
contained in any declaration or certificate to be given
under this Act;
* * *
(3) The State Government may make rules, not
inconsistent with the provisions of this Act and the rules
made under sub-section (1) to carry out the purpose of
this Act.
(4) In particular and without prejudice to the powers
conferred by sub-section (3), the State Government may
make rules for all or any of the following purpose,
namely;-
* * *
(e) the authority from whom, the conditions subject
 35 WP 6998.2018 final.doc

to which and the fees subject to payment of which any

form declaration prescribed under sub-section (4) of
section 8 may be obtained, the manner in which the
form shall be kept in custody and records relating
thereto maintained, the manner in which any such form
may be used an any such declaration may be furnished;
(f) in the case of an undivided Hindu family,
association, club, society, firm or company or in the case
of a person who carries on business as a guardian or
trustee or otherwise on behalf of another person, the
furnishing of a declaration stating the name of the
person who shall be deemed to be the manager in
relation to the business of the dealer in the State and the
form which such declaration may be given.
(g) the time within which the manner in which and
the authorities to whom any change in the ownership of
any business or in the name, place or nature of any
business carried on by any dealer shall be
furnished……."

Section 13(1) of the Central Sales Tax Act empowered the

government to make rules for manner of applying for registration,
the period of turnover, cancellation of registration, the form and
particulars and fees for form of declaration, declaration in certain
classes of persons, and the general rule-making power of making
rules 'not in consistent with the provisions of the act and rules' to
carry out the purpose of the act. A bare perusal of this provision
shows it deals with specific contingencies and granted limited rule
making power. In none of the decisions cited before us by the
Petitioner, including that of K.I. Abraham, wide ambit of rule-
 36 WP 6998.2018 final.doc

making power as in Section 164 and that too to deal with transitional
provisions of two tax regimes, has been considered. Therefore, the
decisions cited cannot be straightway made applicable without
reference to the language of section 164 to hold that Rule 117 is
ultra vires.

35. The situation regarding input tax credit within GST

regime, is also relevant to note. It is governed by Section 16(4) of
the Act. Section 16(4) reads thus :

“Section 16(4) :- A registered person shall not be entitled

to take input tax credit in respect of any invoice or debit
note for supply of goods or services or both after the due
date of furnishing of the return under Section 39 for the
month of September following the end of financial year
to which such invoice or invoice relating to such debit
note pertains or furnishing of the relevant annual return,
whichever is earlier.”

Section 16(4) provides that a registered person shall not be entitled

to take input tax credit regarding any invoice or debit note for supply
of goods or services after the due date of furnishing of the return
under section 39 for the month of September following the end of
the financial year to which such invoice or invoice relating to such
debit note pertains or furnishing of the relevant annual return,
whichever is earlier. Section 16. Thus under the GST regime, also
Input Tax Credit is not without time limit. Prescribing a time limit
 37 WP 6998.2018 final.doc

under the impugned Rule is not contrary to the object of the Act.

36. The respondents have, thus, rightly relied on Section

164. The powers conferred by Section 164(2) are broad and
pervasive and take within its sweep the impugned Rule.

37. The second limb of the petitioner's argument is that

assuming there is general rule-making power under Section 164(2),
it cannot be exercised to take away substantive rights. This
submission is founded on the proposition that CENVAT credit is a
right; the same cannot be taken away. Petitioner contends that the
right to input credit may not be a common law right, but the statute
confers it under Section 140, and the same, thus, cannot be abridged
by the executive through a rule-making power. Relying on the
decision of the Supreme Court in the case of Bharat Barrel, it is
contended that where substantive rights are affected, the power of
prescribing limitation is kept by the Legislation to itself. Thus,
substantive rights can be done away only by the Parliament and not
by its subordinates. The Respondents contend that the input tax
credit, which is in the nature of exemption, is not a matter of right.
Respondents rely on the decisions of this Court. The Counsel for
the parties have cited various decisions on this point; however, it is
not necessary to refer to all as it is a reiteration of the same basic
principle. We have, therefore restricted our discussion of the case-
 38 WP 6998.2018 final.doc

laws cited on those which are closer to the controversy at hand.

According to us, two decisions referred below are most relevant,
having construed the very same provision and the same arguments.

38. The question of input credit tax being a right or

otherwise has in the context of Section 140 has been directly
considered by this Court in the case of JCB India Ltd. and by the
Gujarat High Court in the case of Willowood. The Division Bench
of this Court in the case of JSW Dharmatar Port Pvt. Ltd. v/s. Union
of India9, in the context of refund for limitation has followed the
decision in Willowood.

39. First, the decision of Gujarat High Court in Willowood.

Here the Court was considering a challenge to the constitutionality
of Section 140(1) of the Gujarat Goods and Services Tax Act. The
vires of Rule 117 of the Central and the Gujarat Goods and Services
Tax Rules was also challenged. Prayers were sought to permit carry
forward of the CENVAT credit. Gujarat High Court took a review
of case law on the subject. It referred to Rule 164 of the Act. It
observed thus:

“25. Section 140 of the Act envisages certain benefits

to be carried forward during the regime change. As is
well-settled, the reduced rate of duty or concession in
payment of duty are in the nature of an exemption and is
9 2019(20) GSTL 721 (Bom.)
 39 WP 6998.2018 final.doc

always open for the Legislature to grant as well as to

withdraw such exemption. As noted in case of Jayam &
Co. [2016] 96 VST 1 (SC) : [2016] 15 SCC 125, the
Supreme Court had observed that input-tax credit is a
form of concession provided by the Legislature and can
be made available subject to conditions. Likewise, in the
case of Reliance Industries Limited [2018] 50 GSTR 14
(SC) : [2017] 16 SCC 28, it was held and observed that
how much tax credit has to be given and under what
circumstances is a domain of the Legislature. In the case
of Godrej & Boyce Mfg. Co. Pvt. Ltd. [1992] 87 STC
186 (SC) : [1992] 3 SCC 624, the Supreme Court had
upheld a rule which restricts availment of Modvat credit
to six months from the date of issuance of the
documents specified in the proviso. The contention that
such amendment would take away an existing right was
rejected.
(Emphasis supplied)

The Gujarat High Court held that the Input Tax Credit under
Section 140 was a matter of concession. The contention of the
Petitioner that Gujarat High Court in Willowood has mixed up
various concepts is neither warranted nor justified. The arguments
were advanced regarding the reasonableness of restriction and the
rulemaking power and that the input credit being a right or
otherwise, and they were considered together. The Court kept in
mind the distinction between the concepts. Merely because various
heads of challenges have been dealt with together, it does not mean
they have been mixed up.
 40 WP 6998.2018 final.doc

40. Division Bench of this Court in JCB India Ltd.

considered the provisions of Section 140 of the Act . Here the
petitioner manufactured certain heavy machinery had in certain
stock machines as of 30 June 2016, and according to it, it did not
have to pay excise duty again after the onset of GST regime. In this
context, the challenge was made to the provision. The Petitioner had
contended that Input Tax Credit being an integral part of GST law;
it is a right, and it is not a concession by the Government. The
Respondent – State contended the claim of the Petitioner that the
credit being right. The contention of the State is reproduced in para
30, which is the same advanced before us, is as under:-

“30. Our attention has been invited by Mr. Anil Singh to

the settled principle that insofar as economic legislation
is concerned, the grounds on which its constitutionality
can be challenged are extremely limited. In the sense, if
that legislation incorporates a policy measure, then the
wisdom thereof cannot be questioned by this Court. Mr.
Anil Singh would submit that this matter is of a
concession or relaxation. Nobody can claim a vested
right in such measures evolved by the Legislature. It is
entirely for the Legislature to make a provision and
restrict the benefit or concession or relaxation either to a
class of persons or even if it extends to all, it can restrict
the term or period or limit up to which the concession
can be availed of. In the instant case, the period of
twelve months is provided as a safeguard against
potential misuse of availment of credit during the
transition period by placing restriction on availing credit
based on documents which are not very old. There is no
concept as equality in Tax matters. Apart therefrom,
 41 WP 6998.2018 final.doc

similar restrictions had been in place on the

manufacturers/service providers under the Firth proviso
to sub-rule (7) of Rule 4 of the erstwhile CENVAT
Credit Rules, 2004. It is also argued by Mr. Anil Singh
that when in a Value Added Tax there was a restriction
on availing of credit in law, now, there is a substantive
provision in the new law. However, it is only the
transitional provision which inserts or incorporates the
above condition, as the Legislature deemed it fit and
proper to enforce the new regime from 1-7-2017. When
the new regime replaces a bundle of legislations seeking
to tax the activity of manufacturers, sales and extension
of service, then, it was deemed fit and proper that the
transition to the new regime, from the old one, should
be smooth. For it to be smooth and proper, a restriction
has been placed on availment of CENVAT credit during
the transitional period and by making the above
statutory prescription. Mr. Anil Singh would submit that
it is entirely for the Legislature to make such a provision
and its power in that behalf is not questioned. If there is
no challenge to the impugned condition on the ground
of competence of the Legislature, then, the competent
Legislature could have made a restrictive provision and
which is precisely the intent. The transition from the old
regime to the new one should be smooth and expedient.
Hence, a reasonable period of twelve months has been
provided. Why it is only twelve months and why it does
not date back to the stage, the petitioners in these
petitions would deem it fit and proper, is not the test
which can be evolved and applied for considering the
constitutionality of the legislation. Ultimately, it is the
Legislature which is the best Judge and in its wisdom,
insofar as fiscal policies are concerned, it has imposed
this condition. That is, therefore, reasonable and as
explained in the affidavit in reply. On all counts,
therefore, the challenge is devoid of merits according to
 42 WP 6998.2018 final.doc

Mr. Anil Singh and it deserves to be repelled.”

(emphasis supplied)

Therefore, the issue as to the input credit contemplated under

transitional provision being a concession or right was squarely put
forth for consideration. The Division Bench analyzed the decisions
on the subject of the Supreme Court in Jayram and Company v/s.
Assistant Commissioner & Anr.10, Eicher Motors Ltd. v/s. Union of
India11, Osram Surya (P) Ltd. v/s. Commissioner of Central Excise,
Indore12, Samtel India Ltd. v/s. Commissioner of Central Excise,
Jaipur13and concluded by observing thus:-

“56. To our mind, therefore, the learned Additional

Solicitor General is right in his contention that
CENVAT credit is a mere concession and it cannot be
claimed as a matter of right. If the CENVAT Credit
Rules under the existing legislation themselves stipulate
and provide for conditions for availment of that credit,
then, that credit on inputs under the existing law itself is
not a absolute but a restricted or conditional right. It is
subject to fulfilment or satisfaction of certain
requirements and conditions that the right can be
availed of. It is in these circumstances that we are unable
to agree with the Counsel appearing for the petitioners
that the impugned condition defeats any accrued or
vested right. It was never vesting in them in such
absolute terms, as is argued before us. If the existing law
itself imposes condition for its enjoyment or availment,
then, it is not possible to agree with the Counsel that
10 2016(15) SCC 125
11 1999(106) ELT 3 SC
12 2002(142) ELT 5 SC
13 2003(155) ELT 14 SC
 43 WP 6998.2018 final.doc

such rights under the existing law could have been

enjoyed and availed of irrespective of the period or time
provided therein. The period or the outer limit is
prescribed in the existing law and the Rules of
CENVAT credit enacted thereunder. In the
circumstances, it is not possible to agree with the
Counsel appearing for the petitioners that imposition of
the condition vide Clause (iv) is arbitrary, unreasonable
and violative of Articles 14 and 19(1)(g) of the
Constitution of India.

57. We would refer to the Judgments which are heavily

relied upon in this context. It is stated that the rights
and privileges accrued during the existing law have been
specifically saved under Section 174 of the CGST Act,
2017. If what are saved are the rights and privileges of
the nature noted above, then it cannot be said de hors
the conditions or de hors the restriction on availment
or enjoyment of that right they have been saved by the
CGST Act. In other words, if rights are conferred with
conditions under the existing law, then, they are saved
by the CGST Act with such conditions and not
otherwise. There must be clear provision to grant it
otherwise than in terms of the existing Law or in other
words, the restrictions or conditions on availment of
that right are removed totally. No such provision has
been brought to our notice. It is clear that if right to
availment of CENVAT credit itself is conditional and
not restricted or absolute, then, the right to pass on that
credit cannot be claimed in absolute terms. It is argued
that it is a vested right accruing to the petitioner.

58. In the case of Elcher Motors (supra), what was in

issue before the Supreme Court must be noted. In
Elcher Motors, the Three Judge Bench of the Supreme
Court of India was concerned with the validity and
 44 WP 6998.2018 final.doc

application of the scheme, as modified by introduction

to Rule 57F {read as 57F(4A)} of the Central Excise
Rules, 1944, under which credit which was lying
unutilised on 163 995 with the manufacturers, stood
lapsed in the manner set out in the provision. That was
questioned.

60. In para 5 of this Judgment, the introduction was

traced and it was held that if on the inputs the assessee
had already paid the taxes on the basis that when the
goods are utilised in the manufacture of further
products as inputs thereto, then, the tax on these goods
gets adjusted which are finished subsequently. Thus, a
right accrued to the assessee on the date when they paid
the tax on the raw materials or the inputs and that right
would continue until the facility available thereto gets
worked out or until those goods existed. Thus, this is a
case where the Rule, as introduced, provided for total
lapsing of that credit which was lying unutilised with
the manufacturer on 1631995. That was held to be
impermissible within the scheme of the law. We are not
considering here such a situation.

61. We are not confronted with a situation of the

lapsing of the credit though the petitioners may equate
the position before us with that of Elcher Motors. We
are dealing with the validity and legality of a condition
imposed in the transitional arrangement. While moving
from one legislation to another comprehensive
legislation, in the latter legislation the Legislature
deemed it fit and proper to continue the earlier or
erstwhile arrangement by terming it as a transition or
transitional one. That continuation was with conditions
and one of the conditions which is questioned here is
consistent with the conditions imposed under the
existing law. Such a situation was not dealt with in
 45 WP 6998.2018 final.doc

Elcher Motors. Thus, the decision is clearly

distinguishable.

62. Reliance is then placed on another decision in the

case of Jayam & Company (supra). Once again we must
see what was dealt with in Jayam & Company. The
argument before the Hon'ble Supreme Court in Jayam
& Company was whether subsection (20) of Section 19
of the Tamil Nadu Value Added Tax Act, 2006 could be
given retrospective effect. The appellants were dealers
and registered as such under the provisions of the above
VAT Act. They argued that they had dealt in electronic
home appliances. They purchased them from local
registered dealers on payment of VAT under the VAT
invoice issued by the vendors. Thereafter, there was a
resale to consumers under the VAT invoice charging
appropriate VAT on their selling price. On resale, VAT
is paid by the dealer. The dealer is entitled to avail input
VAT credit and he is entitled to credit on VAT which
was paid to the vendors on purchase of TV sets from the
vendors. What had happened was, after the original tax
invoice and availing the input tax credit, the vendor
gave a discount and purchase credit note was issued for
a lesser price. The dealer took into account the price
which it had paid to the vendor after adjusting the
discount that was subsequently given to the dealer to
arrive at net cost and adding VAT which was limited to
the vendors by the dealers. The goods were resold at a
lesser price. After the introduction of subsection (20) in
Section 19 and once again, which has a nonobstante
clause, the obligation was to reverse the input tax credit.
In other words, if the registered dealer sold goods at a
price lesser than the price of the goods purchased by
him, he had to reverse the amount of input tax credit
over and above the output tax of those goods. It was
such an issue which was considered and in considering
 46 WP 6998.2018 final.doc

that the definitions and substantive provisions of the

Tamil Nadu Value Added Tax Act, 2006 were referred.
The Supreme Court noted that input tax credit is a form
of concession provided by the Legislature. It is not
permissible to all kinds of sales and certain specified
sales are specifically excluded. The concession of input
tax credit is available on certain conditions mentioned
in this section, namely, Section 19 and one of the most
important condition was that, in order to enable the
dealer to claim that credit it has to produce the original
tax invoice, complete in all respect, evidencing the
amount of input tax. It is in these circumstances that the
Hon'ble Supreme Court held that the challenge to the
constitutional validity had to fail. It clearly held that
when there was a concession given by the statute, the
Legislature has to make provision stating the form and
manner in which the concession is to be allowed and the
subsection (20) seeks to achieve that. There was no
right, inherent or otherwise, vested with dealers to claim
the benefit of input tax credit but for Section 19 of the
VAT Act. We, therefore, do not see how de hors this
position a reliance can be placed only on some paras of
this Judgment. We cannot ignore what was essentially
decided. This is not a matter of retrospective operation
of a fiscal statute, as was projected before us in the
passing. This is a clear case as operating within the
ambit of Jayam & Company itself. As is before us, a
concession is being provided by the Legislature which
but for the provision granting such concession could
have not been availed. The availment of CENVAT
credit or input tax credit is clearly termed as a
concession. With the conditions imposed, the
concession could have been availed of. In the absence of
a substantive provision granting such concession, there
would have been no concession at all. Thus, one cannot
pick and choose a condition for challenge by alleging
 47 WP 6998.2018 final.doc

that the availment is undisputedly conditional but one

of the conditions, though having nexus with the
availment, is unconstitutional or arbitrary and excessive.
The nature of that condition, its placement consistent
with the scheme is then conveniently ignored. We
cannot allow this argument to be built on the basis of
reliance on para 18 of the Judgment in Jayam (supra).

(emphasis supplied)

The ratio laid down by the Division Bench in JCB India Ltd.
interpreting the Transitional Provisions and distinguishing the other
decisions, is unequivocal.

41. The Petitioner has sought to distinguish the decisions in

Willowood and JCB India Ltd. contending that the Division Bench
was not considering Section 140(1) and the right under different
subsections of section 140 are different and operate in different fields
and what is relevant for one class cannot be made applicable to
another class. It is submitted that the decisions in JCB India Ltd.
and Willowood have considered section 140(3) of the Act. We do
not think these decisions can be distinguished in this manner. The
decisions in JCB India Ltd. and Willowood have laid down a general
principle of law. The question of credit in a transitional provision
being a concession or a right was argued and has been considered.
We have not been shown any decision of this Court to the contrary.
As a matter of judicial discipline, we will have to follow the dicta laid
 48 WP 6998.2018 final.doc

down by the Division Bench of this Court in JCB India Ltd.

42. The decision of the Supreme Court in the case of

Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd. 14 cited
by the Petitioner refers to MODVAT credit and in deciding a co-
relation of the raw material and final product. The Apex Court held
that it is not as if the credit can be taken only on the final product
manufactured out of a particular raw material in which the credit is
related. It was held that the credit may be taken on a final product
on the very day it has become available. It is in this context, the
nature of MODVAT credit was held to be indefeasible. The learned
Additional Solicitor General has rightly distinguished this decision
by pointing out that this decision does not consider the contingency
of time limit on availment of credit, and also not in a transitionary
provision. Under the impugned Rule, the input credit has been
denied per se, but a time limit has been placed on its availment.

43. The CENVAT Credit Rules prescribe conditions for

availment of that credit. The rights and privileges accrued during the
existing law have been saved under Section 174 of the Act. If what is
saved from the earlier regime was conditional, then it cannot be
converted to something without conditions in the new regime
during the period of transition. If, before and after the GST regime,
the availment of input credit is conditional, it cannot be that it is
14 1999 (112) ELT 353 (SC)
 49 WP 6998.2018 final.doc

without any limit in the transitional period. With the advent of an

entirely new tax regime, the earlier credit could have lapsed, but as
and by way of concession it is permitted to be carried forward for a
limited time. Thus, going by the scheme of the Act, under Section
140(1), the reference to Input Tax Credit is not by way of a right,
but as a concession.

44. The Petitioner advanced certain ancillary submissions.

First, Section 164(1) contemplates recommendation of the GST
Council, and the GST Council had recommended a longer period. It
was contended that the GST Council recommendations are binding
regarding the rule-making power. However, this argument overlooks
that power under Section 164(2) is without prejudice to the power
under Section 164(1) regarding the recommendation of the GST
Council.

45. Second, that the same relief sought for by the Petitioner
can be granted under section 54 of the Act and, therefore, necessary
directions be issued. This argument is advanced for the first time
across the bar with no pleadings or prayers. The Respondents had
no opportunity to deal with the same.

46. Third, the scheme of the Act is that there is self-

declaration which has to confirmed later and, therefore, there is no
prejudice to the Respondents if credit is given now. It was
 50 WP 6998.2018 final.doc

contended that the submission of return under section 140 is subject

to confirmation under the provisions governing Assessment. This
submission is incorrect. Acceptance of Assessment is not subject to
confirmation but being based on the principle of self-assessment, is
open for verification; which is a different aspect. It is contended that
claim of the input tax credit is in the Returns to be filed and Form is
not important, and once this procedure is laid down, a time limit
cannot be provided. Once it is held that the rulemaking power
exists and the placing of time limit on the concession is not ultra
vires, then the further tinkering with the statutory scheme on
hypertechnical and academic arguments is neither desirable nor
necessary.

47. Thus the time limit in Rule 117(1) is traceable to the

rule-making power conferred in Section 164(2). The credit
envisaged under Section 140(1) being a concession, it can be
regulated by placing a time limit. Therefore, the time limit under
Rule 117(1) is not ultra-vires of the Act.

48. As regards laying of the Rule before the Parliament, the

Petitioner contends that laying of the Rule before the Parliament will
not cure the defect if there is no rule-making power exist. For this
purpose, reliance is placed on the decision in the case of Hukam
Chand v/s. Union of India15. It is contended that the fact that the
15 1972 (2) SCC 601
 51 WP 6998.2018 final.doc

Rules have to be laid before the Parliament does not confer validity if
the rule is made not in conformity with the Act. In view of our
finding that the rule-making power exists for Rule 117 and traceable
to Section 164, laying the Rule before the Parliament strengthen the
case of the Respondents for supporting its validity.

49. We now turn to the second part of the discussion that is

the challenge to the Rule on the touchstone of Article 14 of the
Constitution of India.

50. The Petitioner contends that the time limit imposed

under Rule 117 is arbitrary, reasonable and in violation of Article 14.
It is contended that the right accrued to the Petitioner of input credit
is being taken away by the impugned Rule. The Petitioner contends
that section 140 of the Act, through its subsections, operate in
different scenarios, and need to be treated differently. It is
contended that under the CENVAT Credit Rules, 2004, the
taxpayer was entitled to 50% of credit in the earlier year of purchase
of capital goods and balance 50% in the subsequent year and,
therefore, on the relevant date right to take the balance of 50% credit
had accrued. It is contended that this right has been saved by saving
clause in section 174. The Petitioner has placed strong reliance on
the decisions of the Supreme Court in the cases of Eicher Motors and
Osram Surya (P) Ltd. It is contended that the time limit has no
 52 WP 6998.2018 final.doc

nexus to the Act. The Respondents have supported the impugned

legislation contending that without time limit, the concept of
transitional provisions will become nugatory.

51. This analysis needs be prefixed by referring to the scope

of judicial scrutiny in the matters of economic legislations. When
economic legislation is questioned, the Courts are slow to strike
down a provision which may lead to financial complications. The
Supreme Court has sounded a note of caution in the cases of R.K
Garg v/s. Union of India16, Bhavesh D. Parish v/s. Union of India 17,
Director General of Foreign Trade v/s. Kanak Exports 18, Swiss
Ribbons Pvt. Ltd. and Ors. vs. Union of India 19. The summary of
the principles laid down is as follows. Taxation issues are highly
sensitive and complex. Legislations in the economic matters are
based on experimentations. The Court should decide the
constitutionality of such legislation by the generality of its
provisions. The Court cannot assess or evaluate the impact of
provision and whether it would serve the purpose in view or not.
Trial and error method is inherent in the economic endeavours of
the State. In matters of economic policy, the accepted principle is
that the courts should be cautious to interfere. The interference by

16 1981(4) SCC 675

17 2000(5) SCC 471
18 2016(2) SCC 226
19 2019(4) SCC 17
 53 WP 6998.2018 final.doc

the Courts in a complex taxation regime can have large-scale

ramifications. Unless the provision is plainly unjust or glaringly
unconstitutional, the courts should show judicial restraint. In
complex economic matters, rules are generally based on trial and
error and their validity cannot be tested on any rigid prior
considerations or by applying straitjacket formulas.

52. One of the foundations of the argument that the time

limit in Rule 117 is unreasonable is that it takes a right. In view of
two conclusions we have reached much of the force of this argument
is diluted. Firstly what is claimed by the Petitioner is not a right but
concession. Secondly, the Rule is not ultra-vires. Even on the aspect
of unreasonableness, judicial pronouncements already hold the field.
Division Bench of this Court in JCB India Ltd. observed that the
object and purpose sought to be achieved of not permitting the
existing arrangement to continue endlessly. For the new regime to
come into force, the transitional arrangements have been made.
Division Bench observed that Section 140 has a clear nexus to the
object sought to be achieved and can be struck down as having no
such relation or nexus. The Gujarat High Court in the case of
Willowood on the same aspect has observed thus in the economic
matters of such vast scale and the broader considerations of the State
exchequer, cannot be kept out of purview while interpreting a
statutory provision. The Court noted that the entire exercise was
unprecedented in the Indian context. The claims of carrying forward
 54 WP 6998.2018 final.doc

of the existing duties and credits during the period of migration,

therefore, had to be within the prescribed time. The Court observed
that doing away with the time-limit for making declarations could
cause multiple large-scale claims trickling in for years together after
the new tax structure is put in place. The bench observed this would
besides making matching of the credits impractical if not impossible,
also affect the revenue collection estimates. The view taken by the
Gujarat High Court in Willowood is that Rule 117 is not ultra-vires
and there is no indefeasible right to carry forward CENVAT credit
and the stipulation of the time limit is reasonable.

53. We do not find that the time limit in the impugned rule
is arbitrary or unreasonable. To plan to allocate resources, it is
necessary to know the amount of taxes available by a particular time.
For an efficient administration of a tax system, certainty, especially
in terms of time, is important. Calculations of the tax liability
dictated by subjective conditions can lead to uncertainty. Such
uncertainty makes it difficult to budget and ensure that funds are
allocated where they are most required. The time limit for availing
of input tax credit in the transitionary provisions is thus rooted in
the larger public interest of having certainty in allocation and
planning. The time limit under Rule 117 is thus not irrelevant.

54. Section 140 read with Rule 117 under Chapter XX

 55 WP 6998.2018 final.doc

deals with transitional provisions for availment of CENVAT credit. It

permits availment of CENVAT credit, however within a stipulated
transitional period. This availment is not absolute and is with a time
limit. Upholding only the right to carry forward the credit and
ignoring the time limit would make the transitional provision
unworkable. The credit under the transitional provision is not a right
to be exercised in perpetuity. By the very nature of the transitional
provision, it has to be for a limited period.

55. The Petitioner has placed on record the Concept Notes

and Flyers issued by CBEC to demonstrate the salient features of
GST and how the input tax credit is a core of the GST regime.
Based on this material and the statements and objects and reasons of
the Act, it is contended that a transitional provision is for a smooth
transition of existing taxpayers to GST regime and it is to avoid
cascading effect of the taxes. The statements and objects of the Act
cannot, of course, be debated, but nowhere there any indication that
for availing of input tax credit in a transitional provision there is no
time limit. The decision of the Supreme Court in Sambhaji v.
Gangabai20, the decision of the Allahabad High Court in Global
Sugar Ltd. v. Commissioner of Central Excise 21 and the decision of
the Madras High Court in Hospira Health Care India P.Ltd. v. Dev.
Commr., MEPZ SEZ & Heous, Chennai22 relied upon by the
20 2009 (240) ELT 161 (SC)
21 2016 (334) ELT 604 (All.)
22 2016 (340) ELT 668 (Mad.)
 56 WP 6998.2018 final.doc

Petitioners are all the cases, as rightly pointed out by the

Respondents are within a tax regime. None of these decisions deal
with transitional provisions between two tax regimes.

56. Reference is already made to Section 16(4) of the Act.

Section 16(4) provides that a registered person shall not be entitled
to take input tax credit in respect of any invoice or debit note for the
supply of goods or services or both, after the due date of furnishing
of the Return under section 39 for the month of September
following the end of the financial year to which such invoice or
invoice relating to such debit note pertains or furnishing of the
relevant annual return, whichever is earlier. Thus even under the
GST law, the input tax credit cannot be availed without any time
limit. It cannot be that under the GST law, there is a time limit, but
for the transitional period, there is no such time limit. Once under
the GST law for future transactions time limit is stipulated, then
there is nothing unreasonable in the stipulated time limit for the
transitional period.

57. Various decisions of the High Courts have been cited

by the Petitioner regarding Rule 117 and Section 140 of the Act
wherein directions have been issued in writ jurisdiction for opening
the TRAN-1 Form. These are Jakap Metind Pvt. Ltd. v/s. Union of
India through the Secretary and Ors.23. Adinath Industries v. Union

23 Special Civil Application 19951

 57 WP 6998.2018 final.doc

of India24, Adfert Technologies Pvt.Ltd. v. Union of India 25 Afran

Technology Pvt.Ltd, Asiad Paints Ltd v. Union of India 26, Gillette
India Limited v. Union of India27, Jakap Metind Pvt.Ltd. v. Union
of India28, Jay Bee Industries v. M/s.J.B. Industries v. Union of
India29, A.F. Babu v. Union of India 30, Tara Exports v. The Union
of India31, Siddharth Enterprises v. The Nodal Officer32 , Ra Export
Siddhartha Enterprise, Triveni Needdles Pvt. Ltd. v. Union of
India33, Bhargava Motors v/s. Union of India & Ors. 34, M/s. Blue
Bird Pure Pvt. Ltd. v/s. Union of India35. The decision in the case of
Adfert Technologies of the Division Bench of Punjab and Haryana
High Court relied by the Petitioner was one wherein direction was
issued to permit the revision of incorrect TRAN-1 Form and after
noticing the decision of Gujarat High Court of Willowood, the
Division Bench stated that they are not in agreement with the view
taken. However, we do not find there is no discussion in the said
decision upholding the validity of Rule 117. The decision is based
primarily on the CENVAT credit being a vested right. The decision
of Siddharth Enterprises of Gujarat High Court does not refer to the
decision in Willowood even though it was rendered prior. These

24 2019-VIL-526-DEL
25 2019-VIL-537-P&H
26 2019-VIL-598 KAR
27 2020-VIL-01-DEL
28 2019-VIL-556-GUJ
29 201-VIL-570-HP
30 2019-VIL-610-KER
31 2019-VIL-432-MAD
32 2019-VIL-442-GUJ
33 2019-VIL-618-DEL
34 2019-VIL-218-DEL WP(C) 1280/2018 dtd 13.05.2019
35 2019(7) TMI 1102 - 2019-VIL-347-DEL
 58 WP 6998.2018 final.doc

decisions are founded on the basis that the CENVAT Credit is a

vested right guaranteed under Article 300A of the Constitution of
India. In none of the decisions, Rule 117 has been struck down as
arbitrary.

58. The High Courts in the above decisions have exercised

writ jurisdiction to direct the Respondents to give relief to the
petitioners before it. The Courts may have done so in equity
jurisdiction. We have concluded that the time limit stipulated is
neither ultra vires nor unreasonable. Issuing a writ would mean
overriding this time limit. The concept of a time limit under this
provision is not casual but has a larger purpose to serve. The GST
Act deals with the generation and distribution of the revenue. The
collected revenue is expended on various functions for which
budgetary allocations are made and time limits are stipulated for the
execution of various schemes. For fiscal planning, certainty
regarding receipt and distribution of revenue is necessary. If relief is
to be granted to the individual Petitioner overriding the time limit
on equity, the perception of what is equitable will differ from
authority to authority. This would lead to uncertainty. The
operation of this complicated tax system will become unworkable.
The time limit placed under the impugned rule being rooted in need
to have certainty in fiscal management, we are of the opinion that
equity jurisdiction ought not to be exercised.
 59 WP 6998.2018 final.doc

59. As another facet of arbitrariness it was argued that

insistence on submitting declaration electronically creates a
classification between those with needed capabilities and equipment
and those who do not and hence it is violative of Article 14. There
is no merit in this submission. Entire GST system, not only section
140 and Rule 117 envisage electronic filing. It has an intricate
inter-linking regulated by software and data analysis. Numerous
departments and enactments now mandate electronic submission of
forms. With the ever-expanding sweep of digital data pervading
almost all walks of life, it will be a retrograde step to declare a
provision unreasonable because it mandates electronic compliance,
especially when the enactment in question is an intricate tax regime
powered by a software-based system.

60. To summarize, therefore, the time limit stipulated

under Rule 117 is neither unreasonable or arbitrary nor violative of
Article 14. This rule is in accordance with the purpose laid down in
the Act.

61. Now we turn to the third aspect of the matter that is the
meaning of the phrase ‘technical difficulties’ under Rule 117A and
the role of the IT Redressal Cell and whether by creating categories
discretion is being fettered; To appreciate the Petitioners’ challenge,
the procedure to be followed while submitting Form TRAN-1 needs
 60 WP 6998.2018 final.doc

to be narrated. The Respondents have placed on record the

procedure, which is: First, the taxpayer has to log in to the GST
Portal. Then navigate to the TRAN-1 Form in Services Section. If
the TRAN-1 is already submitted or filed, then a Reopen button is
provided to the taxpayer to modify previously submitted/filed data
or for adding missing records. Once the taxpayer clicks on the
Reopen button, then the status of TRAN-1 is changed to Reopen.
The taxpayer then fills up the respective sections of the TRAN-1
Form and then enters details under various tables such as Table 5A,
5B, 7A, 8 etc. The taxpayer then saves TRAN-1 and verifies the
entered values. After that, the TRAN-1 is submitted on GST Portal.
After its submission, TRAN-1 credit is calculated based on the
values in the form and entries are made to the Electronic Input Tax
Credit (ITC) ledger. Then the taxpayer is required to authenticate
TRAN-1 by attaching digital signature using and file TRAN-1
Form. Then the filing process is complete. Thereafter the entries
of the amount being posted in the Electronic ITC Ledger can set off
liabilities in GSTR-3B. The credit of TRAN-1 is credited and
posted in ledgers for use to set off liabilities when the taxpayer
“submits” TRAN-1 Form. This is the method followed by the
taxpayer.

62. The Respondents noted the existence of technical

difficulties in the filing of TRAN-1 and incorporated Rule 117(1A).
 61 WP 6998.2018 final.doc

Rule 117(1A) has been inserted with effect from 10 September 2018.
Rule 117(1A) reads as under:

Rule 117: Tax or Duty Credit Carried Forward under

any Existing Law or on Goods Held in Stock on the
Appointed Day (Chapter-XIV: Transitional Provisions)

(1) * * *

(1A) Notwithstanding anything contained in sub-rule

(1), the Commissioner may, on the recommendations of
the Council, extend the date for submitting the
declaration electronically in FORM GST TRAN-1 by a
further period not beyond 31st March, 2019, in respect
of registered persons who could not submit the said
declaration by the due date on account of technical
difficulties on the common portal and in respect of
whom the Council has made a recommendation for such
extension.
* * *

This Rule provides that the Commissioner may, on the

recommendations of the Council, extend the date for submitting the
declaration electronically in FORM GST TRAN-1 by a further
period not beyond 31 March 2019, regarding registered persons who
could not submit the said declaration by the due date because of
technical difficulties on the common portal and regarding whom the
GST Council has made a recommendation for such extension.

63. First, the time limit was 31 March 2019. Now, with
 62 WP 6998.2018 final.doc

further extension, it is extended to 31 March 2020. However, for the

extended period to apply, certain criterion has to be satisfied. The
extension applies to the submission of GST TRAN-1 to be made
electronically. It applies only to those registered persons who could
not submit their declaration by the due date under Rule 117(1)
because of technical difficulties. The technical difficulties have to be
the ones referable to the common portal of GST, and last, it in whose
cases the Council has made a recommendation for an extension.

64. In the GST Council Meeting held 10 March 2018, a

grievance redressal mechanism was set up to address the issue. This
mechanism was called IT Grievance Redressal Cell. The IT-
Grievance Redressal Cell consists of three members, namely – CEO
(GSTN), DG (Systems) GBEC and a third member from any State
nominated by Secretary. GST Council. GSTN, Central and State
governments appointed nodal officers to address the problem a
taxpayer faces due to the technical difficulties.

65. Details of the Grievance Redressal Mechanism is on

record. An outline is: If the taxpayers encounter a technical
difficulty regarding TRAN-1 Form, he has to apply to the Nodal
officers. The technical difficulty relating to the Common Portal and
not individual problems and local issues such as non-availability of
internet connectivity, power failure or a problem of a specific
 63 WP 6998.2018 final.doc

system. The application should show bonafide attempts by the

taxpayer to comply with the due process of law. The application is
forwarded to GSTN, who would on receipt of the application, after
identifying the issue, forward the same to the IT Grievance Redressal
Committee for decision. The cases are examined and are categorized
broadly reason-wise and then further grouped into two major
categories as Category ‘A’ and Category 'B". Category 'A' includes
cases in which the taxpayer could not file TRAN-1 Form because of
technical difficulties, whereas Category ‘B’ includes cases where
detailed analysis at GSTN reveals that there were no technical issues
in filing TRAN-1 Form as per the system logs. Category 'B' is
further subdivided into eleven categories based on the claims of
taxpayers and cases forwarded by Nodal Officer. System logs
regarding the filing of TRAN-1 Form are examined to ascertain the
evidence of error of submission/filing of TRAN-1 Form before the
due date. In short, if, as per GST system log, there is no evidence of
submission/filing of TRAN-1 Form on the common portal, it has to
be concluded that the taxpayer did not try for saving/submitting or
filing TRAN-1 Form before the due date and, not entitled to the
benefit of the extended period under Rule 117(1A).

66. The petitioner contends that the ambit of phrase

'technical difficulties' will have to be defined by the Court and it
cannot be left to the IT Grievance Cell of the GST Council to define
 64 WP 6998.2018 final.doc

the same. Further, an ad-hoc criterion has been devised classifying

the registered persons into arbitrary groups and for some
recommendation is made, and for some, it is rejected. The Petitioner
contends that is that the GST Council cannot delegate this power to
the IT Grievance Redressal Committee. This submission cannot be
accepted. The GST Council is not a body to resolve technical issues.
Therefore, an IT Grievance Redressal Mechanism was developed by
the GST Council. This Committee involved the CEO of the GST,
Network Director General of Systems, CBSC and the Nominee from
State as technical persons. Based on the report of this Technical
Committee, a further recommendation would be made. Therefore,
there is no merit in the contention that the power could not have
been delegated to the IT Grievance Redressal Committee.

67. Petitioner then contends that the phrase `technical

difficulty' in Rule 117(1A) has to be broadly construed. It is not
possible to do so. Rule 117(1A) refers to technical difficulties in
online submission of TRAN-1 Form on the common portal. These
technical difficulties are not the ones faced in general but on the
common portal of the GST. The meaning of the phrase `technical
difficulty’ is, thus clear that is the technical difficulties are those
which arise at the common portal of GST.

68. The IT Grievance Redressal Cell has taken the system

 65 WP 6998.2018 final.doc

log on the common portal as evidence of attempts made. There is no

merit in the criticism of the Petitioner in taking system logs as a basis
for determining technical difficulties. Since Rule 117(1A) refers
only to the technical difficulties on the common portal, the record on
the common portal would be a material piece of evidence. Since the
phrase “technical difficulty” does not envisage any other difficulties,
the IT Grievance Redressal Committee rightly evolved the criteria of
system logs. The system log is an auto-generated data which records
the activities performed. A system log maintained by the portal
shows details of requests made at the page. This data is not manually
collected but auto-generated. From the system log, it can be
ascertained whether an attempt was made to access the data.
Therefore, not only there is nothing arbitrary insisting on system log
but a correct criterion to be adopted.

69. Petitioner then contended that insisting on system log

as proof from the very system which has technical difficulties, is
arbitrary and unworkable. There is no merit in this contention. It is
not the case that common portal had stopped working or that none
of the taxpayers could submit the declarations. As per the data given
by the Respondents, thousands of registered users could submit their
TRAN-1 Form declarations. In the affidavit-in-reply filed by the
Commissioner, the number of entries made between the last four
days of the closing facility of TRAN-1 has been placed on record.
 66 WP 6998.2018 final.doc

These are : 24 December 2017 – 36349; 25 December 2017 –

97939; 26 December 2017 – 233455and on 27 December 2017 –
165723. The object of bringing in Rule 117(1A) did acknowledge
that certain registered user encountered technical difficulties in the
common portal. However, it does not mean that the common portal
had stopped working; only that some registered users could not
submit their forms. Whether they made an effect could be seen from
the system logs.

70. There would be some who never attempted to submit

the TRAN-1 Form. There would be some who attempted but
encountered difficulties at their end. There would some who
encountered difficulties on the common portal. Since it is the only
third category covered by Rule 117(1A), it had to be asserted from
the system log of the common portal itself. Insisting on system log
as proof of technical difficulties, thus, is neither arbitrary. The
Respondents have pointed out that the cases where there were
technical difficulties on the common portal as seen from the system
log, recommendations have been made in their favour. It is also
pointed out that many taxpayers did not file their applications until
the last minute. It has been tried to be suggested that filing of
TRAN-1 Form was deliberately delayed by some to create fake
invoices.
 67 WP 6998.2018 final.doc

71. Petitioner contended that the categorization based on

system log amounts to a fettering of discretion. There is no merit in
this submission. The categorization made by the Cell is not fettering
the discretion but involving rules of evidence to determine whether a
registered user encountered difficulties while submitting forms on
the common portal. It is only if the registered user encountered
technical difficulties on the common portal, that Rule 117(1A)
comes into play.

72. In some decisions referred to in para 57, the Courts have

directed the Respondents to open the portal. It is observed therein
that many of the registered persons come from a rural and semi-
literate background and they may have no record, and they cannot be
made to suffer when the systems of the Respondents were not
efficient. This approach proceeds on the basis that once there is an
acknowledgment of technical difficulties, a liberal view must be
taken. However, though the Respondents have accepted there have
been technical difficulties, they have not admitted a complete failure.
A mechanism has been set up. A uniform and technically capable
criteria to determine technical difficulties on the portal of system logs
has been evolved. There is no allegation, nor there is any question of
any personal malafides while ascertaining the system logs. The
system logs are generated automatically and based on such system
logs categorization has been made.
 68 WP 6998.2018 final.doc

73. The input tax credit in the transitional provision is a

concession to be utilised in a time-bound manner, and further
extension is given if the GST Council finds that there was a technical
difficulty at its end. If there is no technical difficulty on the common
portal for the registered user, this additional concession is not
extended. Whether to grant further concession as Rule 117(1A) will
be determined from examination the system logs from the portal.
Exercise of equity jurisdiction in some cases and not in other cases
would cause an anomalous situation, particularly when a time limit
has been placed in a taxing statute for achieving certainty and
finality.

74. Last, turning now to the question of relief to the present

Petitioner. A reply affidavit has been filed wherein it is stated that no
details of technical difficulties were stated in the representations
emailed nor any proof was provided. It is stated that the Petitioner
sent an email on 27 December 2017 at 17.53 which was the final
date for filing TRAN-1 Form. It is stated that the case of the
Petitioner was discussed by the IT Redressal Cell in its meeting on
27 August 2018 and as per the GST System log, no evidence was
available. The decision was communicated to the Petitioner on 10
July 2018. The Petitioner has filed a rejoinder, and it is reiterated
that the Petitioner has now produced a screen-shot of the browsing
 69 WP 6998.2018 final.doc

history extracted from the laptop of one of it’s employee which

reveals that the portal was accessed on 27 December 2017. It is
stated that the history was extracted in March 2019 and there is a
possibility that it may not contain full details and also there may not
be a complete list of browsing history.

75. The Petitioner submits that based on the browsing

history now produced by way of rejoinder, the fact that the Petitioner
attempted and encountered technical difficulties be upheld. This
submission cannot be accepted. We have held that the phrase
technical difficulty in Rule 117(1A) of the Rules is in relation to the
common portal and the criteria for determining the error on the
common portal is a system log on the common portal. The system
log is an unquestionable criterion for ascertaining the activity on the
portal. An adjudication based on contemporaneous material besides
the system log will make ascertainment of technical difficulties
unguided. The existence of technical difficulties as seen from the
system logs at the common portal is a cogent proof. In the absence
thereof, the adjudication will be in the realm of subjectively. The
system log on the common portal does not support the case of the
Petitioner. This has been communicated to the Petitioner. No
direction thus can be issued to the Respondents now to treat the case
of the Petitioner as falling within the ambit of Rule 117(1A).
 70 WP 6998.2018 final.doc

76. To conclude, the time limit stipulated under Rule 117

of the Rules is not ultra vires of the Act. This Rule is traceable to the
power conferred under section 164(2) of the Act. The time limit
stipulated in Rule 117 is in consonance with the transitional nature
of the enactment, and it is neither arbitrary nor unreasonable.
Availment of input tax credit under section 140(1) is a concession
attached with conditions of its exercise within the time limit. The
IT Grievance Redressal Cell is set up by the GST Council to examine
the existence of technical difficulties on the common portal.
Sufficient guidance is provided in the definition of technical
difficulty in Rule 117(1A). Examining the system log to ascertain
the existence of technical difficulties on the common portal for
registered persons, is not arbitrary, nor does it lead to a fettering of
discretion by the authorities. Those registered persons who could
not submit the declaration by the due date because of technical
difficulties on the common portal as can be evidenced from the
system logs are given an extension on the recommendation of the
Council. Where no such evidence is forthcoming, no
recommendation is made. In the Petitioner’s case, no such proof
emerges and, therefore, no direction as sought for can be issued.
 71 WP 6998.2018 final.doc

77 . As a result, the Petition is dismissed. Rule discharged.

No costs.

M.S. KARNIK, J. NITIN JAMDAR, J.

Digitally signed
Jyoti P. by Jyoti P.
Pawar

Pawar Date:
2020.03.20
16:58:34 +0530