the essay of 1 July 2020 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">JULY 01, 2020</font></strong></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Transitional Credit - Determined to Deny </strong></font></p> <p align="center"> <u><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Vijay Kumar</strong></font></u></p> <p align="justify"><STRONG><FONT SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF">AS</FONT></STRONG><FONT SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF"> we enter the fourth year of GST and as revenue collections have gone for a toss, the GST Department seems to be determined to fight it out to deny a little transitional credit to a few unfortunate taxpayers who could not avail it for various reasons, including incompetence of the Government. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The GST Policy Wing in the CBIC in a letter last week [<a href="https://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjcwOTI=" target="_blank">F.No. CBEC-20/10/11/2019-GST/1001</a>] [Still CBEC?] advised the field formations on how to fight the menace of <em>"unscrupulous"</em> taxpayers claiming transitional credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They have observed that appeals have been or are being filed in the various High Courts by taxpayers who were not able to carry forward or transition the accumulated CENVAT credit under the erstwhile regime to GST regime due to non-filing of TRAN-1/ TRAN-2 within due date due to technical glitches or various other reasons. In all these cases, the petitioners, time and again, challenge the transitional provisions of the Central Goods and Services Tax <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/cgst_act/2017/cgst_act_index.htm" target="_blank">Act, 2017</a></strong> and rules made thereunder. Now, the Policy Wing has suggested the model defence for the field formations before the High Courts. Their suggestions look like hoarse war cries. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See a few samples:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">CENVAT CREDITS OR INPUT TAX CREDITS ARE NOT </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">ABSOULTE </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">/VESTED RIGHTS OVER AND ABOVE </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">STATUE</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span"> AND ARE SUBJECT TO STATUTORY PROVISIONS AND RULE UNDER WHICH THEY </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">EXISTS</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First of all, see the highlighted words. Maybe what they mean are </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">ABSOULTE </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">= ABSOLUTE </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">STATUE </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">= STATUTE </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">EXISTS </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">= EXIST </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is with this kind of language that they want to impress the High Courts on what the words in the statute mean. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the record, such eyesores appear these many times in this advisory - five (5) <em>"STATUE"</em>, three (3) <em>"ABSOULTE"</em> and three (3) <em>"EXISTS"</em>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, the letter concludes that, <em>it is clear that a taxpayer cannot claim input credit of the duty or tax paid as a vested right under GST and input credit is in the form of a concession / benefit and reasonable restrictions on availing such credit can be imposed. Thus, a taxpayer cannot claim credit accumulated under the erstwhile taxation regime (Central Excise and Service Tax) as a vested right for transition under GST. Provisions have been made under section 140 of the CGST for transition of credit for different class of tax payers and restrictions, if any, placed on a particular class of taxpayers are reasonable in nature and by no stretch of imagination be termed as perverse, arbitrary and unreasonable.</em> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">RULE 117 / 120A OF CGST RULES 2017 ARE WITHIN THE RULE-MAKING POWER OF THE CENTRAL GOVERNMENT UNDER THE CGST ACT, 2017 </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The letter explains: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 140 of the CGST Act, 2017, provides for the transitional arrangement for input tax credit. Further the said section envisages certain benefits, in the form of tax credits, to be carried forward during the regime change. Such benefits of tax credits at a large scale cannot be allowed to linger indefinitely as it would have a direct impact at the tax collection, estimates and budgetary allocations. Section 140(1) of the said Act, as amended with effect from 01.07.2017, by Section 128(a) of the Finance Act, 2020, itself provides that a registered person shall be entitled to take the amount of CENVAT Credit carried forward in the Return relating to the period ending with the day immediately preceding the appointed day furnished by him under the existing law within such time and in such manner as maybe prescribed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The words <em>"within such time"</em> has been retrospectively added to Section 140(1) of the CGST Act, 2017 by Section 128(a) of the Finance Act, 2020. The amendment has been brought about with effect from 01.07.2017 and notified on 16.05.2020. Therefore, the exercise or availing of the right of carrying forward CENVAT credit in the plenary provision itself has been made subject to <em>"within such time and in such manner as maybe prescribed".</em> Therefore, when Rule 117 lays down the manner in which such Right can be prescribed, it cannot be said that such Rule in any manner was an excessive delegation. The petitioner has fallen into error in holding that there is nothing sacrosanct in sub-rule (1A) of Rule 117 in laying down the outer limit as 31.12.2019. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">TIME LIMIT PRESCRIBED UNDER RULE 117 / 120A OF CGST RULES 2017 IS RATIONAL AND MANDATORY: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">SUB-RULE (1A) OF RULE 117 OF CGST RULES, 2017 CANNOT BE TERMED AS ARBITRARY OR VAGUE AND IS WELL WITHIN THE FOUR CORNERS OF THE STATUE. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Again, a </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFFF00" span="span">statue</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">, not statute! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly, installing a <em>"statue"</em> in place of a <em>"statute"</em> is not new for the Revenue departments. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From our archives - </font></p> <p align="justify"><font color="#990000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Though a minor error, the letter from NADT mentions interpretation of <strong>statues</strong>, not <strong>statutes.</strong> It is this kind of callous attitude that makes lifeless statues of vibrant statutes. In any case interpreting a statue is far more difficult than interpreting our statutes.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> - <a href="https://taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjA1NDU=" target="_blank">DDT 2364 </a></font></p> <p align="justify"><font color="#990000" size="2" face="Verdana, Arial, Helvetica, sans-serif">3. National Academy (NACEN) to conduct regular training for all adjudicating authorities - former members of the CESTAT (The Appellate Tribunal) to be invitees to lecture the officers. Intensive training also to <font color="#FF0000">AR's</font> in the act of advocacy, interpretation of <font color="#FF0000">statues</font>, to be given. </font></p> <p align="justify"><font color="#990000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Please note all the words marked in red. If they had an English teacher in the Board, she would have told them that an apostrophe is not used for plural as <font color="#FF0000">AR's</font> don't mean <font color="#FF0000">ARs</font>. And training on 'interpretation of <font color="#FF0000">statues'</font> is not really a good idea as they should be trained in statutes and that 'advice' is a noun.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> - <a href="https://taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjU3OTU=" target="_blank">DDT 2767 </a></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Policy Wing letter concludes: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is clear from the above discussions that the Government cannot be held responsible for negligence and dereliction of duty by a responsible taxpayer. Thus, Rule 117 and Rule 120 A of CGST <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/gst_forms/rule/cgst_rules_index.htm" target="_blank">Rules, 2017</a></strong>, prescribing time limit, are well within the ambit of Section 140 of the CGST Act, 2017 and nowhere goes beyond the Act. It may be noted that if the contention of the petitioner were to accepted by providing the facility of filing / revision of TRAN - 1, it would jeopardize Government revenue on account of similar demands from other taxpayers who could not file / revise in time due to negligence and it would be difficult for the Government to verify bona fides of such claims. Further, if the same ratio is accepted then any time limit provided in fiscal statutes like filing of statutory appeals, claim for refunds, issue of demand notices etc. would be necessarily challenged thereby setting a chaos in the system. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Policy Wing Commissioner, who has issued this letter says it has been issued with the approval of the Member, GST. Fine, but why do you use the entire might and brilliance of the gigantic Government of India to deny a little rightful credit to a few taxpayers? After all, GOI will not go bankrupt if credit is allowed to these taxpayers, but the taxpayers will, if credit is denied. At least in these COVID times can't you show a little mercy and allow small benefits to the trade so that they will stand up and work hard to give you more revenue? What will you get if you throttle the geese that consistently, painfully and even inexplicably have been laying golden eggs for you? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As we enter the fourth year of GST, please be a little considerate and - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Allow all the transitional credit as a one-time measure. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Treat all the GST pending appeals as decided in favour of the taxpayers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Close down the AAR, AAAR and the Anti-Profiteering Authority and treat all the orders given by them as non-existent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Build up your IT infrastructure and stop punishing taxpayers for your lapses. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Please remember taxpayers are Indians, you don't need to fight them. </font></p> </blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Three Years of GST </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether GST was a boon or bane, it is here to stay and when it's inevitable, let's learn to live with it. Maybe, we have realised that it is much better than Covid or China. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday, we had a very interesting webinar on the occasion of three years of GST. You can watch it at <a href="https://youtu.be/s3Hrcr1r7Lg" target="_blank">https://youtu.be/s3Hrcr1r7Lg.</a> We have another webinar today. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">GST has completed three </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Years of glory </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">we are not free </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From Litigation spree </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not always voluntary </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Limitless seems to be the boundary </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Until next week</strong></font></p> </body> </html>