(D Y Chandrachud & Sanjiv Khanna, JJ)

Dated: February 28, 2020

Transitional Credit – TRAN-1 – Section 140 – Rule 117- CGST Act

Supreme Court dismissed SLP filed by Union of India against Punjab & Haryana High Court judgment whereby it was had held that nobody shall be denied to carry forward legitimate claim of CENVAT/ITC on the ground of non-filing of TRAN-1 by 27.12.2017. The Apex Court did not feel inclined to exercise its jurisdiction under Article 136 of the Constitution.

This dismissal of SLP has paved way for a number of persons to claim their unutilised credit on the appointed day even if they had not filed TRAN-1 within the stipulated time. Though dismissal of SLP may not be considered as binding precedent of Supreme Court but since P&H High Court was based upon many other judgments in this regard from other High Courts, this case would certainly have impact on the outcome of those cases, wherever they have been challenged.

The amendment incorporated in Section 140 of CGST Act through Finance Act, 2020 may not have much impact on the rights of persons who have already succeeded through writ petitions as the said judgments were not based upon the non prescription of time in the section which is now being sought to be rectified.

Special Leave to Appeal (C) No. 4408/2020




[Dr. Dhananjaya Y Chandrachud & Ajay Rastogi JJ]

Dated: April 13, 2020

Classification – Entries in Schedule – Drugs – Medical Oxygen IP – Nitrous Oxide IP – Are Drugs – Drugs and Cosmetics Act 1940 – Taxable under Entry 88 of Schedule IV of Andhra Pradesh VAT Act, 2005.

The short point of law that arose in this case was whether “Medical Oxygen IP” and “Nitrous Oxide IP” are taxable under Entry 88 of Schedule IV of the Andhra Pradesh Value Added Tax Act 20051 or as “unclassified goods” under Schedule V. The classification of the two products determines the rate of tax to be levied on them – 4%/5% 2 under Entry 88 or 12.5%/14%3 under Schedule V.

The Apex Court upholding the judgment passed by the Andhra Pradesh High court has held in favour of the respondent Assessee that the substances ‘Medical Oxygen IP’ and ‘Nitrous Oxide IP’ should be taxed as drugs under Entry 88 of the AP Value Added Tax Act, 2005, and not as ‘unclassified goods’.

Contention was raised by the state against the inclusion of the said products under clause 3(b)(i) of Entry 88 on the grounds that these were substances and not medicines. These could not be included since the said Entry specifically excluded ‘medical grade oxygen’. The said products were absent in the given entry. Moreover, for a substance to be included in the said Entry, it had to be covered by the definition as given in 3(1)(b) 1940 Act.

Observing the publication from WHO, and various judgments from other High Courts, the court highlighted the curative and instrumental use of Medical Oxygen IP and Nitrous Oxide IP in the prevention and mitigation of disease and disorder. Therefore, the court upheld the order of the High court that the said substances are used for or in the diagnosis or treatment or mitigation or prevention of any disease or disorder in human beings falling within the ambit of S 3(b)(i) of the 1940 Act and hence are included under Entry 88 of the 2005 Act.

Civil Appeal No 2230 of 2020




(D Y Chandrachud & Ajay Rastogi, JJ)

Dated : February 19, 2020

Anti Profiteering – National Anti-Profiteering Authority – Challenge to Vires of Section 171 of CGST Ac and Rule 126 of CGST Rules – Petitions transferred to Delhi High Court for uniformity of view

Various persons being aggrieved by the orders of The National Anti-Profiteering Authority Challenged the Constitutional validity of Section 171 of the CGST Act read with Rule 126 of the CGST Rules before High Courts under Article 226. The petitions were pending before the High Courts of Delhi, Bombay and Punjab & Haryana. The National Anti-Profiteering Authority approached Hon’ble Supreme Court seeking transfer of cases pending before Bombay High Court to Delhi High Court. Considering the fact that Twenty writ petitions are pending before the Delhi High Court and two writ petitions which are the subject matter of the present Transfer petitions are pending before Bombay High Court it would be appropriate and proper that in the interests of a uniform and consistent view on the law, all the writ petitions should be transferred to the High Court of Delhi, where earlier writ petitions are already pending.

Transfer Petition (Civil) Nos. 290-292 of 2020


High Court of Punjab and Haryana




(S. Muralidhar & Avneesh Jhingan JJ)

Dated : March 13, 2020

Classification – Entries in Schedule – Mango Drink namely ‘Slice’ etc. – Fruit Drink even if it has fruit pulp content of 16% only and remaining being Sugar and Water – otherwise the drink would become unfit for consumption – Entry did not intend to mean that it should be made only of fruit – Where Two Views are possible – one which favours the assessee should be adopted.

In this case the question arose was whether the mango drink ‘Slice’ happens to be a fruit drink or not.

The Revisional authority had passed an order against the assessee -company holding that the said drink promoted by it was not a fruit drink since it contained only 17% mango pulp. Rest 83% included water, sugar and other natural/ artificial flavours. Hence, it was exigible to tax @ 12.5 % being an unclassified item. The appellant however, urged that the said drink was a fruit drink and water is required for solubility and sugar for taste and increasing shelf life. It thus ought to be covered under Entry 100-D of Schedule C of HVAT Act.

The Hon’ble High Court has clarified that on perusal of Entry 100D of Schedule C it is clear that the legislature used the word ‘drink’ made of ‘fruit’; it did not intend that the percentage of the fruit in such drinks should be so high to a point of making it impossible to drink. It would not be possible to classify a product as fruit drink which is no different from concentrate.

Entry 100-D of the Schedule C of the HVAT Act does not admit of a narrow interpretation particularly when it uses the words ‘fruit drinks made of’ the fruit in question. Even if one applied the common parlance the Appellant is right in contending that Slice does not cease to be a drink made of fruit only because the actual Fruit content is only 16%.

Also, when two diverse views are possible, one beneficial to the assessee should be preferred.

Hence, slice is a fruit drink falling under entry 100D of Schedule C of the Act.

VATAP No. 338 of 2019

Gujarat High Court




(J.B. Pardiwala & A.C. Rao JJ)

Dated: February 14, 2020

Review – Transitional Credit – TRAN-1 – Section 140 – Rule 117- CGST Act- Departmental Review dismissed.

Revenue file a Review Petition in the case of Siddharth Enterprises allowing filing of TRAN-1 after prescribed time time, contending that it was in ignorance of earlier judgments of Willowood Chemicals Ltd. vs Union of India 2018 (19) GSTL 228 (Guj) and Jay Chemicals Industries Ltd. vs Union of India 2018 (19) GSTL 440 (Guj). Gujarat High Court dismissed the Review Applications on 14/2/2020 filed by Revenue. The Hon’ble court observed that the judgment under review was in league with the earlier judgment of same High Court in case of Filco Trade Centre Pvt. Ltd. vs Union of India 2018(17) GSTL 3 (Guj) which recognised the accrued ITC as a vested right and struck down Section 140(3)(iv) of CGST Act. The court held that Rule 117 is only procedural in nature and is not mandatory.

Misc. Civil Application (For Review) No. 1 of 2019 in R/Special Civil Application No. 5758 of 2019

Calcutta High Court




(Shekhar B Saraf, J)

Dated: March 04, 2020

Transitional Credit – TRAN-1 – Section 140 – Rule 117- CGST Act- Form can be filed even after expiry of period prescribed as per Rules.

On the issue of Tran-1, Calcutta High Court also took a view in favour of taxable persons allowed the assessees to file TRAN-1 after the lapse of period prescribed by the rules. It was observed that though the time-limit for uploading of TRAN-1 is extended till March 31, 2020, sub-rule 1A of Rule 117 extends this benefit only to those registered persons who could not upload the form in time on account of technical difficulties on the common portal and in respect of whom, the GST Council forwards a recommendation for extension. It was notice by the court that assessees transitioning into a new procedure set out under the GST regime are bound to face complications and in some cases may be completely unable to carry out the new procedure. The court following the decisions given by other High Courts held that there is no reason to take a different view. It was held that a procedural law should not take away the vested rights of persons that are provided to them by statute. However the said claim of assessee is subject to scrutiny by the Department.

W.P. 17234 (W) of 2019

Bombay High Court




(Nitin Jamdar & M S Karnik, JJ)

Dated: March 20, 2020

Transitional Credit – TRAN-1 – Section 140 – Rule 117- CGST Act – Vires of Rule 117 – Article 14 – Constitutionality of Rule upheld – Assessee not allowed to file TRAN-1 after 27.12.2017.

Bombay High Court dismissed a bunch of petitions seeking writ to allow filing of TRAN-1 after the stipulated period i.e. 27.12.2017. The petitioners also laid challenge to the vires of Rule 117 on the ground of same being ultra vires Section 140 and for being violative of Article 14 of the Constitution. Prayer was also made to allow filing of TRAN-1 relying upon various other judgments of High Courts.

The High Court however negatived the contention and held that the rights and privileges accrued during the existing law have been saved u/s 174 of the CGST Act and was conditional. It cannot be contended that such a right can be exercised without conditions under the new law and such condition can be with regard to the time also. If the legislature deemed appropriate it could have allowed the earlier credit to lapse as well but it allowed it to continue with certain conditions and to be claimed within prescribed time. ITC is not a right but a concession

On the contention that Rule 117 prescribing time does not emanate from Section 140, the Court held that the power to prescribe time u/r 117 can be traced to Section 164(2) which is very wide in its amplitude. Therefore no valid challenge can be laid to Rule 117 on this ground.

In so far as contention of Petitioner that the time limit prescribed u/r 117 is arbitrary and is in violation of Article 14 of the Constitution. It was held that

When economic legislation is questioned, the Courts are slow to strike down a provision which may lead to financial complications. What is claimed by the petitioner is not a right but a concession and secondly the rule is not ultra vires. The provision under challenge is a transitional provision having its effect only for a limited time. This view is also supported by Gujarat High Court in Willowood Chemicals Ltd. vs Union of India 2018 (19) GSTL 228 (Guj) held 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. Therefore, the time limit stipulated under rule 117 is neither unreasonable or arbitrary nor violative of Article 14.

Petitioner sought the relief on the basis of pronouncements of other High Court where filing of TRAN-1 was allowed. Rejecting this, Court held that 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.

Another contention was raised that the 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 the same.

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.

Writ Petition No. 6998 of 2018

Chhattisgarh High Court




(P Sam Koshy, J)

Dated: March 16, 2020

Detention of Goods – Undervaluation – Section 129 – Section 68 – Not Permissible – Assessing Authority to take action

Petitioner- Company manufactures ‘Pan Masala and Tobacco products’. The goods were dispatched in a vehicle to its customers along with invoice and E-way Bill as required under Section 68 of the Act. On its way, the vehicle was intercepted and goods were detained on the ground that there was discrepancy in the valuation of goods. Subsequently, an order was passed whereby tax and penalty was assessed for releasing the goods. The petitioner filed a writ in this regard raising the contention that the petitioner had fulfilled the requirement of Section 68 of CGST Act 2017 by producing the E-Way bill and tax invoice. It was contended that that discrepancy in valuation cannot be a ground for detention of goods. The state on the other hand contented that the price at which goods were sold was not matching the MRP of the product due to which goods were detained.

Allowing the writ petition, The Hon’ble court has held that the factum of manufacturer selling his products to its customers at a lower price than MRP cannot be a ground for detention of vehicle. Even if it is contrary to law, proper proceedings as per law are to be initiated. The Assessing Authority could have been intimated regarding the discrepancy in the given case for initiating proper proceedings. The vehicle could not have been detained for a proceeding u/s 129 of CGST Act 2017 r/w Rule 138 of CGST Rules 2017. Hence, the goods are ordered to be released and state authorities are not precluded from initiating proceedings as per law for undervaluation of goods.

WPT No 36 of 2020

High Court of Gujarat

Manoj Bhanwarlal Jain


State of Gujarat

(Umesh A. Trivedi J)

Dated: March 12, 2020

Arrest – Bail – Offences under GST – Section 132 – wrongful availment of ITC beyond 5 Crores – No Complaint filed even after 52 days – no remand was ever sought – Bail granted.

In an offence committed u/s 132(1)(c) of Central Goods and Services Tax Act, related to availing ITC wrongfully beyond an amount of Rs 5 Crores, whereby the applicant was arrested , an application is filed for grant of bail.

The Hon’ble Court has viewed that even after a lapse of 52 days after the date of arrest; no complaint is filed by the officer concerned. No remand was ever sought by the officer of the department. Therefore, the application stands allowed and bail is granted on execution of personal bond and one surety. Certain restrictions are imposed on the applicant on breach of which appropriate action would be taken against it.

R/ Criminal Misc Application No. 3488 of 2020

High Court of Kerala




(Alexander Thomas, J)

Dated: February 04, 2020

Assessment – Order passed on grounds not specified in Notice – Rectification Application filed – Rejected – Not Justified – Matter Remitted back for fresh consideration of Rectification Application

The petitioner is an assessee under the KVAT Act engaged in the execution of works contract. A pre-assessment notice was issue mainly proposing to fix turnover on the basis of the figures as seen from the profit and loss account. There are proposals to disallow the exemption claimed by the petitioner under Rule 10 as also disallow a minor portion of input tax credit. The petitioner filed replies pointing out that the figures as per the financial statements also include the transactions outside Kerala, value of land etc. which are outside the purview of taxation under the VAT Act. However, Assessment Order was passed by taking the value as per the financial statements for Kerala as the basis for assessment. A portion of input tax credit and the expenses were also disallowed for reasons not stated anywhere in the pre-assessment notice. Application for rectification filed was also rejected

On A Writ the High Court held that,

The petitioner has indeed made strong grounds for judicial review. Petitioner has made a specific case that the pre-assessment notice does not disclose grounds which has actually been now relied on in the impugned assessment order. Further that, going by the data and facts and figures now projected in application for rectification would indicate that the petitioner has made out a very strong case that even parameters like land cost, corpus fund, electrical and water charges, etc. has already been reckoned by the 1st respondent, while determining the issue of value added tax, as per the impugned Ext.P-5 assessment order. Such an aspect would certainly termed as “wednesbury unreasonableness” in the decision making process, which led to the impugned assessment order.

In that view of the matter, it is ordered that the impugned order rejecting the plea for rectification will stand set aside. Rectification application filed under Sec. 66 of the Kerala Value Added Tax will stand remitted to the 1st respondent, for consideration and decision afresh, after hearing the petitioner.

WP(C) No. 33901 of 2019(K)

High Court of Gujarat





(Harsha Devani & A G Uraizee, JJ)

Dated: March 12, 2020

Review – Grant of Interest – Writ allowed granting Refund of Principle amount – Interest prayer rejected – Review not maintainable where court rejected the prayer even if reasoning for declining such relief may be fallacious.

The applicant had filed a petition seeking refund of an amount of ₹ 73, 60,061/- of education cess and higher secondary education cess paid under mistake of law for the period from July 2004 to April 2014.

In the writ petition, the petitioner had sought two reliefs (i) a direction to the respondents to sanction refund of ₹ 73,60,061/- and (ii) grant of interest at the rate of 18% per annum. By the judgment and order dated 16.6.2016.

The court had allowed the petition in favour of the applicant by setting aside the order-in-original dated 24.11.2014 and directing the second respondent to forthwith sanction and grant the applicant refund of ₹ 73,60,061/- as claimed vide application dated 17.7.2014. However, as regards the claim of interest at the rate of 18% per annum, court held that the interest claimed is not backed by any statutory provision and hence, such relief cannot be granted.

Petitioner sought review seeking grant of interest at the rate of 18% per annum or such other rate as the court deems fit.

Court had considered the prayer of Interest and rightly or wrongly, for the reasons set out in the order, declined to grant such relief. Once the court has, after duly recording reasons, turned down the prayer for grant of interest, even if the reasoning for declining such relief may be fallacious, the same would not fall within the scope of a review application.

Application rejected Misc. Civil Application (for Review) No. 1 of 2016

In R/Special Civil Application No. 2556 of 2015

High Court of Rajasthan




(Sandeep Mehta & Vijay Bishnoi, JJ)

Dated: April 07, 2020

Recovery of Tax – IB Code, 2016 – Financial Creditors – Have Precedence over Tax Dues which fall under category of Operational Creditors – Resolution passed and approved allowing a part of amount to be paid for outstanding tax dues – No fresh Recovery can be made from Petitioner who took over management.

A company named Binani Cement suffered huge losses and was unable to pay the debts to the Financial Creditor, which preferred an insolvency application under Section 7 of the Insolvency Bankruptcy Code 2016. A Corporate Insolvency Resolution Process (hereinafter to be referred to as ‘CIRP’ for brevity) was initiated by the NCLT under the provisions of the IBC 2016. After reviewing and comparing the resolution plans received, the COC came to the conclusion that the resolution plan of the petitioner company Ultra Tech was the best one equipped to achieve the purpose of the IBC i.e. the maximization of the value of the assets. In the meeting of the COC the resolution plan submitted by Ultra Tech was approved unanimously and it was declared to be the successful resolution applicant. The resolution plan dealt with the dues of all the creditors equitably and was superior in terms of recovery to the banks and other creditors as compared to the losses which all the creditors would have suffered in case the company had gone into liquidation.

While considering the resolution plan, the NCLT duly approved proportion/distribution of the payment to be made by the petitioner company to all the creditors. The resolution professional collated claims of all operational creditors after following the due process of law and with due diligence, verified the claim of the respondent Goods and Service Tax Department to the extent of ₹ 72.85 crores towards liabilities of excise duty and service tax. The resolution professional, also determined that liquidation value of the Binani Cement was ₹ 2300/- crores which was much less than the outstanding debt. The resolution plan was approved by the National Company Law Appellate Tribunal

Pursuant to receiving this final seal of approval of the resolution plan, the petitioner Ultra Tech took over the management and operations of Binani Cement Ltd. and the name of the company was changed to Ultra Tech Nathdwara Cement Ltd. The resolution plan was fully implemented and payments in its terms were duly made to all the creditors including the statutory creditors.

Despite the resolution plan having attained finality and having been executed, the respondent department raised numerous demands from the petitioner for the period from April 2012 to June 2017 and interest up to 25.7.2017. Having failed to get any positive response from the respondents, the petitioner company has approached this Court through this writ petition under Article 226 of the Constitution of India seeking the relief.

Financial creditors have to be given precedence in the ratio of payments when the resolution plan is being finalized. It is the financial creditors who are given right to vote in the COC whereas, the operational creditors viz. Commercial Taxes Department of the Central Government or the State Government as the case may be, have no right of audience. The purpose of the statute is very clear that it intends to revive the dying industry by providing an opportunity to a resolution applicant to take over the same and begin the operation on a clean slate. For that purpose, the evaluation of all dues and liabilities as they exist on the date of finalization of the resolution plan have been left in the exclusive domain of the resolution professional with the approval of the COC. The courts are given an extremely limited power of judicial review into the resolution plan duly approved by the COC. In the case at hand, the situation has proceeded much further. The operational creditors i.e. the Commercial Taxes Department of Govt. of Rajasthan as well as the respondent Commissioner of Goods and Service Tax assailed the resolution plan by filing appeals before Hon’ble the Supreme Court with a specific plea that their dues have not been accounted for by the COC in the resolution plan. The objection so raised stands repelled with the rejection of the appeals by Hon’ble the Supreme Court. In addition thereto, it may be mentioned here that from the two possible situations; one being liquidation and the other being revival, the respondents will gain significantly in the later because as per the assessed liquidity value, their dues have been assessed as nil, whereas as per the resolution plan with revival of the industry at the instance of the resolution applicant (the petitioner company herein), their rights have been secured to the extent of ₹ 72 crores odd. It may be emphasized here that the amount of ₹ 72 crores assessed by the resolution professional in favour of the respondent GST Department has already been deposited by the successful resolution applicant i.e. the petitioner company.

Therefore, the respondents would be acting in a totally illegal and arbitrary manner while pressing for demands raised vide the notices which are impugned in this writ petition and any other demands which they may contemplate for the period prior to the resolution plan being finalized.

The demand notices are ex-facie illegal, arbitrary and per-se and cannot be sustained.

D B Civil Writ Petition No. 9480/2019

High Court of Jharkhand




(H C Mishra & Deepak Roshan, JJ)

Dated: March 19, 2020

The petitioner Company is the manufacturer and seller of heavy and medium commercial vehicles and its spare parts and accessories. The Company, in normal course of its business, allowed trade discounts and such incentives and discounts are normally accounted for at the end of the financial year. Similarly, the petitioner Company also received trade discounts and incentives in respect of the raw materials, purchased by it, in the similar manner.

Section 9 (5) of JVAT Act was inserted way of an amendment made in the year 2011. Pursuant to which the petitioner became liable to pay the tax on the said trade discounts and incentives as well.

The petitioner Company challenged the amendment in the JVAT Act, being ultra vires and unconstitutional, stating that the assessment orders after the year 2011, are under challenge and pending before the appellate / revisional authorities, and these appeals / revisions shall be dependent upon the result of this writ application, as the appellate / revisional authorities cannot look into the challenge to the vires of the JVAT Act.

Section 9 of the JVAT Act speaks of levy of tax on sale and determination of taxable turnover. Thus, it is not in dispute that the VAT is chargeable on the transactions, which come within the meaning of the sale, defined in the Sale of Goods Act, 1930, or under Article 366(29-A) of the Constitution of India. By bringing sub-Section (5) of Section 9 in the JVAT Act, by the Jharkhand Value Added Tax (Amendment) Ordinance, 2011, what has been purported to be done, is that the trade discounts / incentives, which earlier, were not being treated as sales either under the Sale of Goods Act, or under Article 366(29-A) of the Constitution of India, and thus were not taxable under the JVAT Act, were brought within the purview of sale by a deeming fiction, stating that such trade discounts / incentives shall be deemed to be sale by the dealer.

State Government has exceeded its legislative competence and has in that effort, treated the trade discounts / incentives as taxable transactions, treating them to be sale by a deeming fiction by bringing sub-Section (5) in Section 9 of the JVAT Act, and has thus sought to make such transactions taxable, which are in addition to the transactions described under Article 366(29A) of the Constitution of India, which the State Government could not do, and admittedly, prior to bringing of Section 9(5) of the JVAT Act, into the Statute Book, such transactions were never being subjected to tax under the JVAT Act.

With Regard to maintainability of writ at this stage the court held that they do not find any substance in the submission of learned counsel for the State that in the present case only apprehending danger is challenged, and judicial review is not available at the stage prior to making a decision, on the ground of quia timet action. The law relating to quia timet action, is also no more res integra, in view of the law laid down by the Apex Court in Bhilal Bhai’s case (supra), and Tashi Delek Gaming Solutions Ltd.’s case (supra), holding that a quia timet application would be maintainable.

Accordingly Section 9(5) of the JVAT Act, brought into force by amendment in the JVAT Act in the year 2011, was held to be beyond the legislative competence of the State Legislature, and the same is ultra vires Article 246(1) of the Constitution of India, and cannot be sustained in the eyes of law.

Question of retrospectivity was left open as the provision itself was found to be unconstitutional.

WP (T) No. 7806 of 2011

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