ORDER

The petitioners have challenged constitutionality of second proviso to Section 140 [1] of the Gujarat Goods and Services Tax Act, 2017 [“GGST Act” for short]. The petitioners have also challenged the vires of Rule 117 of the Central Goods and Services Tax Rules, 2017 [“CGST Rules” for short] and Rule 117 of the Gujarat Goods and Service Tax Rules, 2017 [“GGST Rules” for short]. The petitioners have prayed that the respondents be directed to allow the petitioners to carry forward CENVAT credit in the electronic credit ledger, available as on 30th June 2017 in terms of Section 140 [3] of the Central Goods and Services Tax Act, 2017 [“CGST Act” for short]. Similar direction is sought in connection with the carry forward of eligible credit of State tax ie., the Value Added Tax [“VAT” for short] available as on 30th June 2017. We may record that the petitioners have also in the prayer clause, included the challenge to the vires of Section 164 of the CGST Act. However, no contentions were raised with respect to this last challenge. We would, therefore, not elaborate on this aspect in the judgment.

2. The petitioners’ prayers arise in the following background :

2.1 Petitioner no. 1 is a company registered under the Companies Act, 1956. The petitioner no. 2 is a Director of the company. The petitioner no. 1 is registered under the CGST as well as GGST Acts. Previously, the petitioner no. 1­Company was registered under the Gujarat Value Added Tax Act, 2003 [“GVAT” for short]. With the advent of GST regime with effect from 1st July 2017, the company had to migrate to the new tax structure. The newly framed statutes for such purpose include transitional provisions, enabling dealers to carry forward tax credits available to them as on 30th June 2017. Section 140 of the CGST Act lays down conditions for carry forward of such tax credit. Section 164 of the CGST Act is a rule making provision empowering the Government to frame the rules for the purpose of carrying out provisions of the Act. In exercise of such powers, the Central Government has framed CGST Rules. Rule 117 contained therein pertains to carry forward of tax credits under the existing law. Sub­rule [1] thereof envisages that every registered person entitled to take credit of input tax under Section 140, shall submit a declaration electronically in Form GST Tran­1 within ninety days of the appointed day. This time limit was extended from time to time. The final extension was granted upto 27.12.2017, beyond which the respondents did not accept any further declarations.

2.2 Likewise, Section 140 of the GGST Act also envisages carry forward of the tax credits available to a dealer as on 30th June 2017; subject to certain conditions. Rule 117 of the GGST Rules also contains a provision for filing declaration electronically of the tax credit which, as initially prescribed, had to be within ninety days from the appointed day. This was also extended simultaneously with the CGST finally upto 27th December 2017 and beyond which there was no further extension.

2.3 Case of the petitioners is that in terms of Rule 117 of the CGST Rules, the petitioners tried to upload the declaration in TRAN­1 on the official portal on 27.12.2017, however, due to technical glitches in the portal, the petitioners could not upload the declaration. Similar difficulties were experienced by dealers across the country. The petitioners, therefore, approached the concerned authorities on 28.12.2017 and submitted physical declaration in the proper format. The authorities, however, conveyed that they have no power to accept physical declarations.

3. In this background, broadly stated, the petitioners’ grievances are as under :

[i] On account of technical glitches in the Government portal, despite efforts made by the petitioners for filing the declaration electronically, the same could not be done within extended time for no fault of the petitioners. Thus, the tax credit available in the accounts as on 30th June 2017 would be lost for ever, since in absence of such declaration within the time envisaged, tax credit would not be transferred to the GST regime;

[ii] Second proviso to Section 140 [1] of the CGST Act is unconstitutional. This proviso limits the right of a dealer to claim carry forward of the tax credit in relation to inter­State sales as well as branch transfers or export sales, unless necessary declarations in Forms­C, F & H are produced.

[iii] Rules 117 of the CGST Rules and GGST Rules which prescribe the time for making a declaration of available tax credits as on 30th June 2017 are ultra vires the Act and the rule making powers of the authority. Such time limit in any case should be read as directory and not mandatory.

4. Appearing for the petitioners, learned counsel Shri Vinay Shraff raised the following contentions :

[i] Second proviso to Section 140 [1] of the GGST Act is ultra vires the Constitution which imposes unreasonable restrictions on enjoyment of the petitioners’ property rights. It creates hostile discrimination between two classes of dealers who form a homogeneous group. The assesses are saddled with liability to produce declarations from the purchasers, dealers and other agencies, failing which the benefit of reduced tax would not be available, though the sales may have been made in the course of inter­State sell, by way of branch transfer, or for exports. In this context, our attention was drawn to the provisions of GVAT Act; and in particular, Section 11 thereof, which pertains to tax credit which a registered dealer could avail under the said Act. Our attention was also drawn to Section 100 of the GVAT Act which pertains to “Repeal and Savings”. Sub­section [2A] was inserted in Section 100 of the GVAT Act by the Gujarat Value Added Tax [Amendment] Act, 2017 which inter alia provides that nothing done in the amendment of the GVAT Act shall affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act prior to the coming into force of the said amendment. On this basis, it was argued that the tax credit at the disposal of the petitioners as on 30th June 2017 is in the nature of accrued or vested right which could not be taken away by putting restrictions in enjoyment thereof, as was done through the second proviso to Section 140 [1] of the GGST Act. In this context, reliance was placed on the following judgments :

[a] In case of Eicher Motors Limited v. Union of India., reported in 1999 [106] ELT 3 [SC] in which the Supreme Court, in the context of MODVAT credit, had observed as under :

“6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilized 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. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16­3­1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods.”

[b] In case of Collector of Central Excise, Pune v. Dai Ichi Karkaria Limited, reported in 1999 [112] ELT 353 [SC], in which the Supreme Court referring to the decision in case of Eicher Motors Limited [Supra] had observed as under :

“17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or if utilized, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co­relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.”

4.1 It was further contended that the second proviso to Section 140 [1] of the GGST Act is a charging provision but without machinery for computation of credit which would be denied. In absence of any machinery for such computation, the charging provision would fail. In this respect, reliance was placed on the decision of Supreme Court in case of Commissioner of Income Tax, Bangalore vs. B.C Srinivasa Setty, reported in 128 ITR 294. For the same purpose, reliance was also placed on the decision of the Supreme Court in case of Govind Saran Ganga Saran vs. Commissioner of Sales Tax & Ors., AIR 1985 SC 1041 and in case of Mathuram Agrawal vs. State of Madhya Pradesh, [1999] 8 SCC 667.

4.2 It was further contended that there was no allegation of the Department that there has been any default in payment of tax by the petitioners. Obtaining necessary forms from the purchasers and exporters often take a long time and only on this count, the assessee would suffer higher tax; as if the sales were made intra-State.

4.3 Our attention was also drawn to a decision of Allahabad High Court in the case of Yamaha Motor Escorts Limited v. State of U.P & Ors., reported in [2011] 38 VST 115 in which the Division Bench had observed that non production of form C or D would not make inter­State transaction illegal or void. It would only result in denying the manufacturer, the benefit of reduced rate of tax.

4.4 In this context, reliance was placed on the decision of Division Bench of this Court in the case of Indusur Global Limited v. Union of India, reported in 2014 [310] ELT 833 [Guj] in which, the Court struck down sub­rule [3A] of Rule 8 of the CENVAT Credit Rules which provides for withdrawal of the CENVAT credit facility for paying the duty in case of manufacturers who had not paid the duty in time. It was held that in such cases to insist that the assessee must pay such duty in cash without using Cenvat credit imposed unreasonable restriction.

4.5 Reliance was also placed on a decision of the Calcutta High Court in the case of Shiv Kumar Jain v. Union of India, reported in 2004 [168] ELT 158 [Cal.], in which, it was held that the Government cannot deprive the enjoyment of the property without due recourse to law.

4.6 In the context of time limit provided in Rule 117 of the GGST Rules and CGST Rules, counsel vehemently contended that the said provision is ultra vires the Act and is also arbitrary and unreasonable, and therefore, ultra vires Article 14 of the Constitution of India. It was contended that the provisions contained in the parent Act pertaining to transfer of un­utilized tax credits did not envisage any time limit for making a declaration for such purpose. Such time limit cannot be introduced through the rules unless specific powers for such purpose have been granted. Neither Section 140 of the parent Act nor the rule making powers envisage any authority in the delegated legislation to impose such condition.

4.7 In the alternative, it was contended that such time limit should be construed as directory and not mandatory. Any procedural provision which is framed for implementing the substantive provisions should ordinarily be directory in nature. By insisting on rigid time frame for making declaration, procedural provision is being given primary over substantive provision thereby a vested right is sought to be taken away merely because due to genuine reasons, declaration could not be made within time.

4.8 In the context of this contention, counsel relied on decision of the Supreme Court in case of State of Mysore & Ors. vs. Mallick Hashim & Co., AIR 1972 SC 1449 in which the validity of the time limit for filing revision applications contained in Rule 18 framed under the Mysore Sales Tax Act, 1957 came up for consideration. The Court was of the opinion that such rule is an attempt to deny the dealers, the refund to which they are entitled under the law or at any rate to make the enforcement of such right unduly difficult.

4.9 Reference was also made to a decision of the Supreme Court in the case of Sambhaji & Ors. vs. Gangabai & Ors., reported in [2008] 17 SCC 117, in which, referring to a three­Judge Bench decision of the Supreme Court in case of Salem Advocate Bar Association v. Union of India, reported AIR 2003 SC 189 and holding that time limit of ninety days provided in Rule 1 of Order VIII of CPC is directory in nature, it was observed that the procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice.

4.10 Reliance was also placed on the decision of Supreme Court in the case of Mangalore Chemicals & Fertilizers Limited v. Deputy Commissioner, reported in 1991 [55] ELT 437 [SC] in which it was observed that while interpreting condition for exemption, a distinction had to be made between the procedural condition of a technical nature and a substantive condition. For the same purpose, reference was also made to the decision of the Supreme Court in case of Commissioner of Customs & Excise, Madras v. Home Ashok Leyland Limited, 2007 [2010] ELT 178 [SC]. In this context, reliance was placed on a decision of Supreme Court in case of State of Himachal Pradesh & Ors. vs. Gujarat Ambuja Cement Limited & Anr., [2005] 142 STC 1 [SC].

5. On the other hand, learned Advocate General led the arguments on behalf of the respondents. In the context of challenge to the second proviso to Section 140 [1] of the GGST Act, he submitted that there is no lack of competence in the State legislature in framing the said statutory provisions. The further proviso merely imposes a condition for transfer of existing tax credit in the hands of a dealer from the old regime to new regime of furnishing necessary forms establishing the factum of inter­State sales, branch transfer or export sales. He drew our attention to the third proviso to Section 140 [1] and submitted that as and when such forms would be submitted by the dealer, the amount of excess tax would be refunded. Thus, all that this proviso does is to defer the right of a dealer to claim benefit of reduced tax till necessary declarations are produced before the authorities. This was also the situation in the earlier statutory scheme. Our attention was drawn to the provisions of the Central Sales Tax Act and the rules framed thereunder to highlight that in the earlier tax structure also, in absence of such forms, the dealer would suffer tax on the sale; as if it was an intra­State sale. As and when such forms are produced; even during the course of assessment, the benefit of concessional rate of tax would be available.

5.1 With respect to challenge to the time limit provided under Rules 117 of the CGST and GGST Rules, it was contended that the said rules were framed in exercise of rule making powers and were in consonance with the scheme of Section 140 of the Act. Right to enjoy tax credit is a kind of concession. Such concession can always be made subject to conditions. Initial time limit of 90 days was extended from time to time. All dealers across the country got time upto 27th December 2017 ie., nearly six months to manage their affairs and make necessary declarations. When the entire tax structure was being changed in order to bring uniformity, simplicity and common tax rates across the country, certain transitional difficulties are bound to surface. It was for such purpose that the migrating dealers were granted the benefit of left over tax credits. Interpreting the time limit provision as merely directory would not be conducive of efficient tax mechanism.

5.2 In support of his contentions, learned AG has relied on the following decisions :

[i] In case of Jayam & Company v. Assistant Commissioner & Anr., reported in [2016] 15 SCC 125 in which sub­section (20) of Section 19 of the Tamil Nadu Value Added Tax Act, 2006 was challenged. This provision provided that notwithstanding anything contained in the said section, where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him, the amount of the input tax credit over and above the output tax of those goods shall be reversed. In this context, while rejecting challenge, the Court observed as under:

“11. From the aforesaid scheme of section 19 following significant aspects emerge :

(a) ITC is a form of concession provided by the Legislature. It is not admissible to all kinds of sales and certain specified sales are specifically excluded.

(b) Concession of ITC is available on certain conditions mentioned in this section.

(c) One of the most important condition is that in order to enable the dealer to claim ITC it has to produce original tax invoice, completed in all respect, evidencing the amount of input tax.

12. It is a trite law that whenever concession is given by statute or notification, etc., the conditions thereof are to be strictly complied with in order to avail of such concession. Thus, it is not the right of the “dealers” to get the benefit of ITC but its a concession granted by virtue of section 19. As a fortiorari, conditions specified in section 10 must be fulfilled. In that hue, we find that section 10 makes original tax invoice relevant for the purpose of claiming tax. Therefore, under the scheme of the VAT Act, it is not permissible for the dealers to argue that the price as indicated in the tax invoice should not have been taken into consideration but the net purchase price after discount is to be the basis. If we were dealing with any other aspect de hors the issue of ITC as per section 19 of the VAT Act, possibly the arguments of Mr. Bagaria would have assumed some relevance. But, keeping in view the scope of the issue, such a plea is not admissible having regard to the plain language of sections of the VAT Act, read along with other provisions of the said Act, as referred to above.”

5.3 In the case of State of Gujarat v. Reliance Industries Limited, reported in [2017] 16 SCC 28, in which, in the context of provisions contained in the Gujarat Value Added Tax Act reducing the tax credit that has to be availed by the dealer, it was observed that how much tax credit has to be given and under what circumstances is the domain of the legislature and the courts are not to linker with the same. The Court noted with approval, the observations in the case of Godrej & Boyce Mfg. Company Prvt. Limited vs. Commissioner of Sales Tax & Ors., reported in [1992] 3 SCC 624 to the effect that it is only by virtue of the rules that the assessee was entitled to a set off. It is really a concession and an indulgence.

5.4 In case of Osram Surya [P] Limited v. Commissioner of Central Excise, Indore, reported in [2002] 9 SCC 20, in which, the Supreme Court considered the challenge to the substituted second proviso to Rule 57 [4] of the MODVAT Rules which provided that the manufacturer shall not take credit after six months from the date of issuance of any documents specified in the first proviso to the said sub­rule. Relying on decision of the Supreme Court in the case of Eicher Motors Limited v. Union of India [Supra] and Collector of Central Excise, Pune v. Dai Ichi Karkaria Limited [Supra], it was argued that this provision took away the existing rights. Rejecting such contention, it was observed that the plain reading of the said provision shows that it applies to those cases where the manufacturer is seeking to take the credit after introduction of the rules, and the cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer receives input. This rule does not operate retrospectively nor does it in any manner affect the right of those persons who have already taken credit before coming into force of the rule in question. It operates prospectively in regard to those manufacturers who seek to take credit after coming into force of the rule.

5.5 In case of USA Agencies [Represented by its Proprietrix, Attur Town, Salem District v. The Comercial Tax Officer, Attur [Rural] Assessment Circle, Attur., reported in [2013] 5 CST 63 in which validity of sub­section 11 of Section 19 of the Tamil Nadu Value Added Tax Act came up for consideration. Section 19 pertains to input tax credit in respect of any transaction of taxable purchases in any month and provides that the dealer shall make a claim before the end of financial year or before ninety days from the date of purchase; whichever is later. In the context of this challenge, the Court considered whether section was inconsistent with the charging section and whether the same was directory and not mandatory. While upholding the validity of the section, it was further held that the legislature consciously wanted to set up the time frame for availment of the input tax credit. Such conditions therefore must be strictly complied with.

5.6 In case of JCB India Limited v. Union of India., reported in [2018] 53 GSTR 197, in which Division Bench of the Bombay High Court had upheld vires of Clause (iv) of sub­section [3] of Section 140 of the CGST Act imposing a condition on the first stage dealers to avail tax credit, that such credit should be in relation to invoice which is dated not earlier then 12 months preceding the appointed day. We may, however, record that in case of Filco Trade Centre Private Limited vs. Union of India [SCA No. 18433 of 2017 with SCA 20185/2017 :: decided on 5th September 2018], the Gujarat High Court has taken a different view.

5.7 In case of R.K Garg v. Union of India & Ors., reported in [1981] 4 SCC 675 to contend that in the taxing statutes, the legislature enjoys greater latitude.

5.8 In the context of petitioners’ grievance regarding technical glitches in the official portal preventing making of declaration, the Union of India has filed an additional affidavit of one Dr. Ashir Tyagi, Commissioner, CGST dated 11th September 2018. In such affidavit, it is stated that the Government of India has come out with a Circular dated 3rd April 2018 providing certain guidelines to see that genuine cases of difficulties faced are resolved. Thereafter, sub­rule 1A is inserted in Rule 117 by Notification dated 10th September 2018, which reads as under :­

“[1A] Notwithstanding anything contained in sub­rule [1], the Commissioner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN­1 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.”

5.9 It is stated that corresponding amendment is made in sub-rule [4], wherein below Clause (b) in sub­clauses (iii), the following proviso is inserted :

“Provided that the registered persons filing the declaration in FORM GST TRAN-1 in accordance with sub-rule [1A], may submit the statement in FORM GST TRAN-2 by 30th April 2019.”

6. Before examining rival contentions, we may recall that the Government of India has amended Rule 117 of the CGST Rules by inserting sub­rule [1A] which provides that notwithstanding anything contained in sub­rule [1], the Commissioner may on recommendation of the Council, extend the date of submitting declaration electronically in FORM GST TRAN­1 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. Thus, in genuine cases of inability of a dealer to submit the declaration within the time originally permitted on account of technical difficulties on the common portal, powers have been vested in the Commissioner to extend the time maximum upto 31st March 2019. The petitioners’ grievance of not being able to file declaration on account of technical glitches in the portal; if genuine therefore, could be addressed under this rule. This would take care of the petitioners’ one of the grievances. This however does not mean that the petitioners’ challenge to vires of the statutory provisions does not survive. We would, therefore, address such issues raised by the petitioners.

7. Before taking up challenge to the vires of different statutory provisions, we may broadly state the powers of constitutional courts to annual a statute framed by the Union or the State legislature. It is well settled that there is a presumption of constitutionality of a statute. In case of State of Jammu & Kashmir vs. Triloki Nath Khosa & Ors., reported in AIR 1974 SC 1, the Constitution Bench of the Supreme Court upheld the legislation classifying Assistant Engineers into Degree­holders and Diploma holders for the purpose of promotion. It was observed that there is a presumption of constitutionality of a statute and the burden is on one who canvasses that certain statute is unconstitutional to set out facts necessary to sustain the plea of discrimination and to adduce cogent and convincing evidence to prove those facts.

8. It is equally well settled that the presumption of constitutionality would touch even the subordinate legislation. However, the grounds on which a statute framed by the Parliament or the State legislature are limited, as compared to the subordinate legislation. While a legislation framed by the subordinate legislature can also be questioned on the ground that the same is ultra vires the Act, or is beyond the rule making powers of the authority or that the same is wholly arbitrary and unreasonable, the law framed by the Parliament and the State legislature, it was held and observed in the case of State of A.P vs. Mc Dowell & Company & Ors., reported in [1963] 3 SCC 709 could be struck down only on two grounds viz., lack of legislative competence, or violation of the fundamental rights or any other constitutional provisions. It was further observed that no enactment can be struck down by just saying that it is arbitrary or unreasonable. In the later judgment in the case of Shayra Bano v. Union of India & Ors., reported in [2017] 9 SCC 1, Rohinton Fali Nariman, J., expressed a view in the following terms :

“101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspaper v. Union of India, [1985] 1 SCC 641, stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14. The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14.”

9. In recent judgment in case of Navtej Singh Johar & Ors. vs. Union of India, [W.P (Cri.) No. 76 of 2016], the Constitution Bench of the Supreme Court struck down a portion of Section 377 of the Indian Penal Code to the extent it criminalized consensus gay sex. Dipak Mishra, CJ., noted with approval, the above quoted observations made in the case of Shayra Bano [Supra] and held that Section 377 IPC so long as it criminalizes consensual sexual act of whatever nature between competent adults is manifestly arbitrary. Rohinton Fali Nariman, J., in his separate but concurring opinion also referred to the observations made in the case of Shayra Bano [Supra] that a statutory provision can be struck down on the ground of manifest arbitrariness. It was observed that Section 377 IPC in penalizing consensual gay sex is manifestly arbitrary.

10. Keeping in mind these principles, we may take closer look at the relevant provisions. As is well known, the GST statutes were activated w.e.f 1st July 2017. These statutes envisage uniform tax structure and subsume range of existing taxes such as Excise duty, Central Sales Tax and the Value Added Tax. Chapter 20 of the CGST Act pertains to transitional provisions. Section 139 contained in the said chapter envisages migration of registration of the persons who were registered under the existing laws. Section 140 pertains to transitional arrangements for input tax credits.

Relevant portion of which reads as under :

“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 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 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.”

“140. (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:

140. (10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.

9. Section 164 of the CGST Act pertains to power of the Government to make rules. We would refer to this provision at an appropriate stage. In exercise of such rule making powers, the Central Government framed CGST Rules. Chapter 14 of the CGST Rules contains transitional provisions. Rule 117 contained in the said Chapter pertains to tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day.

Relevant portion of this rule reads, thus­

“117 (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 [of eligible duties and taxes, as defined in Explanation 2 to Section 140] to which he is entitled under the provisions of the said section.

(3) The amount of credit specified in the application in FORM GST TRAN-1 shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal.”

10. The GGST Act also contains Chapter 20 pertaining to “Transitional Provisions”. Section 139 contained therein pertains to migration of existing taxpayers. Section 140 pertains to “transitional arrangements for input tax credit”. Relevant portion of which reads as under :

“140. Transitional arrangements for input tax credit.

(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 Value Added Tax, and Entry Tax, if any, 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 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 credit relates to goods sold under notification no. [GHN­51 GST­2001 S.49 [355] TH, dated the 31st December 2001, [GHN­24] VAT 20123/S.40 [1](8)­TH, dated the 11th October 2013 and any other notifications claiming refund of value added tax thereon :

Provided further that so much of the said credit as it attributable to any claim related to Section 3, sub­section [3] of Section 5, Section 6, Section 6A or sub­section [8] of Section 8 of the Central Sales Tax Act, 1956 which is not substantiated in the manner and within the period prescribed in rule 12 of the Central Sales Tax [Registration & Turnover] Rules, 1957 shall not be eligible to be credited to the electronic credit ledger :

Provided also that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law when the said claims are substantiated in the manner prescribed in rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957.”

11. Section 164 of the GGST Act gives rule making power to the Government, to which we would advert to at an appropriate stage.

In exercise of such powers, the State Government framed the GGST Rules. Rule 117 contained in the Rules, contain “Transitional Provisions”. Sub­rule [1] thereof reads as under :

“117. Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day :

(1) Every registered person entitled to take credit or input tax under Section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN­1, 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:

Provided that the Commissioner may, on the recommendation of the Council, extend the period of ninety days by a further period not exceeding ninety days. Provided further that in the case of a claim under Section (1) of Section 140, the application shall specify separately­

(i) the value of claim under Section 3, sub section (30 of the section 5 Section 6 and 6A and sub section (8) of section 8 of the Central Sales Tax Act, 1956 made by the applicant; and

(ii) the serial number and value of declaration in Form C or F and certificates in Forms E or H or Form I specified in Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 submitted by the applicant in support of the claims referred to in sub Clause (I).”

12. In the background of such statutory provisions, we may first examine petitioners’ challenge to the vires of second proviso to Section 140 [1] of the GGST Act. Under sub­section [1] of Section 140, a registered person, other than a person opting to pay tax under Section of the Act, would be entitled to take, in his electronic credit ledger, credit of the amount of Value Added Tax and Entry Tax; if any, 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, in the manner as may be prescribed. First proviso to sub­section [1] of Section 140 lays down circumstances under which such credit shall not be allowed. A further proviso which is referred to as the second proviso and which is under challenge provides that so much of the said credit; as is attributable to any claim relating to Section 3, sub-Section (3) of Section 5, Section 6, Section 6A or sub­section (8) of Section 8 of the Central Sales Tax, 1956 which is not substantiated in the manner and within the period prescribed in Rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957 shall not be eligible to be credited to the electronic credit ledger. In the simple terms, this further proviso provides that whenever the dealer has not furnished necessary forms supporting the interState sales, branch transfers or export sales, the credit related to such sales would not be available. The proviso, following this further proviso, however provides that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law, when the said claims are substantiated in the manner prescribed in Rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957.

13. The combined effect of further proviso and the proviso following such further proviso to sub­section (1) of Section 140 of the GGST Act is that a dealer who fails to issue necessary prescribed forms in support of inter­State sales, branch transfers or export sales would not be able to claim credit of the taxes. However, as and when such forms are furnished, the amount would be refunded to the dealer. In essence, thus, these two provisos bring about a situation under which, till necessary forms in the prescribed format and in the prescribed manner under rule 12 of the Central Sales Tax [Registration and Turnover] Rules, 1957 [hereinafter to be referred to as, “the Registration & Turnover Rules”] are furnished, the credit equivalent to reduced tax would not be available, but as and when prescribed forms are furnished, the amount would be refunded to the dealer.

14. We may compare this position with the erstwhile position obtaining under the earlier statute ie., the Central Sales Tax Act, 1956 [to be hereinafter referred to as, “the CST Act, 1956”]. Section 8 of the CST Act, 1956 pertains to “rates of tax on sales in the course of inter­State trade or commerce.” Sub­section [1] of Section 8 provides that every dealer, who in the course of interState trade or commerce, sells to a registered dealer, goods of the description referred to in sub­section (3), would be liable to pay tax, which shall be two per cent of his turnover, or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sale tax law of that State; whichever is lower. Sub­section [4] of Section 8, however, provides that the provisions of sub­section [1] shall not apply to any sale in the course of inter­State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner, a declaration duly filled and signed by the registered dealer to whom goods are sold containing prescribed particulars in the prescribed form obtained from the prescribed authority.

15. In exercise of powers under sub­section [1] of Section 13 of the CST Act, 1956, the Central Government has framed the Central Sales Tax [Registration and Turnover] Rules, 1957. Sub­rule (1) of Rule 12 contained therein provides that a declaration and the certificate referred to in sub­section [4] of Section 8 shall be in Forms C and D respectively. Sub­rule (5) of Rule 12 provides that the declaration referred to in sub­section (1) of Section 6A shall be in Form­F. This rule, thus, prescribes the forms in which necessary declarations of inter­State sales would be made. Sub­rule (7) of Rule 12 provides that declaration in Form­C or Form­F shall be furnished to the prescribed authority within three months after the end of the period to which the declaration or the certificate relates. Proviso to sub­rule (7) provides that if the prescribed authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, that authority may allow such declaration or certificate to be furnished within such further time as that authority may permit. Thus, combined reading of the provisions contained in the CST Act, 1956 and the Registration and Turnover Rules of 1957 which held the field during the earlier regime would show that the requirement of issuing necessary declarations in the prescribed forms establishing inter­State sales and other similar transactions inviting reduced tax, existed even then. As noted, sub­section [1] of Section 8 of the CST Act, 1956 envisaged tax at a reduced rate on the inter­State sales. Sub­section [4] of Section 8 of the CST Act, however, provided that sub­sec. [1] shall not apply to any sale in the course of inter­State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority necessary declarations in the prescribed forms. These forms have been prescribed under rule 12 of the Rules.

16. We are conscious of judicial trend that the benefit of reduced tax was made available even when such forms were furnished beyond the prescribed time, during the course of assessment proceedings or sometimes even at the appellate stage. In this respect, we may refer to judgment of the Supreme Court in case of Sales Tax Officer, Ponkunnam & Anr. vs. K.I Abraham, reported in AIR 1967 SC 1823, wherein, referring to the provisions contained in Sections 8 and 13 of the Central Sales Tax Act, 1956 and the Registration and Turnover Rules of 1957, it was held that the assessee was not bound to furnish declaration in Form­C before 16th February 1961; in the said case. In absence of any such time­limit, it was the duty of assessee to furnish declaration in Form­C within a reasonable time, and it was noted that in the said case, the assessee had furnished the declaration before the order of assessment was made by the Sales Tax Officer. It was, therefore, held that the benefit of such declaration had to be given to the assessee. In the case of Yamaha Motor Escorts Limited v. State of Uttar Pradesh & Ors., [Supra], the High Court held that non production of Form­C or D would not make the inter­State transaction illegal or void. It would only result in denying the manufacturer the benefit of reduced rate of tax. Thus, even in the erstwhile statutory provisions, the benefit of reduced rate of tax on inter­State sales, etc., was not taken away permanently for the failure of the dealer to produced necessary forms in the prescribed manner. The same was nevertheless delayed, till such forms and declarations were produced. The combined reading of sub­section (1) of Section 7 and sub­section (4) of Section 8 of the CST Act, 1956 and interpretation given to such provisions by the Courts ensured that even if such declarations were supplied at the later point of time, the benefit would not be denied permanently.

17. Effectively and essentially, this is what the present provisos of sub­section [1] of Section 140 of the GGST Act do. As per the main provision, credit would be available on the amount of Value Added Tax and Entry Tax carried forward in the return. As per the further proviso or the second proviso, such credit to that extent would not be transferred when necessary declarations are not furnished by the dealer. The proviso thereafter however ensures that as and when declarations are filed, the amount equivalent to credit specified in the second schedule would be refunded to the dealer. We do not find any major change in the effect of late production of the forms by a dealer in the present statutory provisions; as compared to the earlier position, nor the statutory provisions deny the benefit of such credit, even where necessary declarations are furnished. Thus, no existing or vested right can be said to have been taken away.

We do not think Section 140 [c] is a charging provision or that for want of mechanism for computing such charge, the provision itself would fail. The provision is in the nature of enabling the dealers to take credit of existing taxes paid by them but not utilized for discharging their tax liabilities. It contains conditions subject to which the benefit can be enjoyed.

18. This brings us to the petitioners’ challenge to rule 117 of the CGST Rules and GGST Rules. The statutory provisions being pari materia in both the Act and the Rules, in so far as this challenge is concerned, we may refer to provisions contained in the CGST Act.

19. As noted, under sub­section [1] of Section 140 of the CGST Act, a registered person, other than one who had opted for composition of tax would be entitled to take credit of 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 in such manner as may be prescribed. Under sub­section [3] of Section 140, a registered person, who was not liable to be registered under the existing law and other category of persons mentioned therein, would be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi­finished or finished goods held in stock on the appointed day; subject to conditions contained in clauses [i] to [v] therein. Sub­section [10] of Section 140 provides that the amount of credit under sub­sections [3], [4] and [6] shall be calculated in such manner as may be prescribed. Counsel for the petitioners had compared the language used by the legislature in sub­sections [1] and [3] of Section 140 to argue that the expression “in such manner as may be prescribed” used in sub­section [1] was missing in subsection [3].

20. In his contention, therefore, the rules that the subordinate legislature framed could not have prescribed a time limit for making necessary declarations; as referred to under sub­section [3] of Section 140. Rule 117 of the CGST Rules pertains to taxes or duty credit carried forward under any existing law or on goods held in stock on the appointed day. Sub­rule (1) of Rule 117 provides that every registered person entitled to take credit of the input tax under Section 140, shall within ninety days of the appointed day, submit a declaration electronically in the prescribed format, duly signed, on the common portal specifying separately the amount of input tax credit to which he is entitled under the provisions of the said section. Proviso to sub­rule [1] envisages extension of period for making the said declaration on the recommendations of the Council. We have noted that such time limit was extended from time to time and finally upto 27th December 2017. A limited extension has thereafter been granted by the Government by inserting sub­rule [1A] in Rule 117, authorizing the Commissioner to extend the date for submitting the declaration electronically 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 recommendation for such extension. Effectively thus, the last date for filing the declaration under sub­rule [1] of Rule 117 in general class of persons remained 27th December 2017. For cases falling under sub­rule [1A] of Rule 117, the same could be extended maximum upto 31st March 2019. As per the petitioners, this prescription of time limit per se is ultra vires the provisions of the Act and the Constitution of India.

21. In essence, sub­rule [1] of Rule 117 lays down a time­limit for making declaration only upon making of which, a person could take benefit of tax credit in terms of Section 140 of the CGST Act. We are conscious that sub­sections [1] and [3] of Section 140 of the CGST Act use somewhat different phraseology. Under sub­section [1] the legislature has provided that the benefit of credit in the electronic credit ledger would be available to a registered person in such manner; as may be prescribed. In contrast, sub­section [3] of Section 140 grants facility of credit in electronic ledger of the specified duties to the specified class of persons; subject to conditions laid down under clauses (i) to (v) of the said subsection. It is only in the proviso below clause (v) of sub­section [3] that the legislature has 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 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. For apparent reasons, this proviso does not apply to all cases and its effect is local, to cover cases where a person is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs.

22. We can however not be oblivious to Section 164 of the CGST Act, which is the rule making power and reads as under :

“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 sub­section (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.

(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 comes into force.

(4) Any rules made under sub­section (1) of subsection (2) may provide that a contravention thereof shall be liable to a penalty not exceeding ten thousand rupees.”

23. Under sub­section [1] of Section 164 of the CGST Act, thus, the Government on recommendations of the Council, by notification, could make rules “for carrying out the provisions of the Act”. This rule making power is thus couched in the widest possible manner empowering the Government to make the rules for carrying out the provisions of the Act.” Sub­section [2] to Section 164 is equally widely worded, when it provides that, “without prejudice to the generality of the provisions of sub­section (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 the rules.” Sub­section [3] of Section 164, to which we are not directly concerned, nevertheless provides that the power to make rules conferred in the said section would include the power to give retrospective effect to such rules.

24. It is in exercise of this rule making power, the Government has framed the CGST Rules, 2017 in which; as noted, sub­rule (1) of Rule 117 has prescribed, besides other things, the time limit for making declaration in the prescribed form for every dealer entitled to take credit of input tax under Section 140. Sub­rule [1] of Rule 117 thus applies to all cases of credits which may be claimed by a registered person under section 140 of the Act and is not confined to sub­section [3]. This plenary prescription of time limit within which necessary declarations must be made is, in our opinion, neither without authority nor unreasonable.

25. Section 140 of the Act envisages certain benefits to be carried forward during the regime change. As is well­settled, the reduced rate of duty or concession in payment of duty are in the nature of an exemption and is always open for the legislature to grant as well as to withdraw such exemption. As noted in case of Jayam & Company [Supra], 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 [Supra], 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 case of Godrej & Boyce Mfg. Co. Pvt. Limited [Supra], 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.

26. While the entire tax structure within the country was thus being replaced by a new frame­work, it was necessary for the legislature to make transitional provisions. Section 140 of the CGST Act, which is a transitional provision, essentially preserves all taxes paid or suffered by a dealer. Credit thereof is to be given in electronic credit register under the new statute, only subject to making necessary declarations in prescribed format within the prescribed time. As noted, sub­section [1] of Section 164 of the CGST Act authorizes the Government to make rules for carrying out the provisions of the Act on recommendations of the Council. Sub­section [2] of Section 164 further provides that without prejudice to the generality of the provisions of sub­section [1], the Government could also 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 the rules. Combined effect of the powers conferred to subordinate legislature under sub­sections [1] and [2] of Section 164 of the CGST Act would convince us that the prescription of time limit under sub­rule [1] of Rule 117 of the CGST Rules is not ultra vires the Act. Likewise, such prescription of time limit cannot be stated to be either unreasonable or arbitrary. When the entire tax structure of the country is being shifted from earlier framework to a new one, there has to be a degree of finality on claims, credits, transfers of such credits and all issues related thereto. The petitioners cannot argue that without any reference to the time limit, such credits should be allowed to be transferred during the process of migration. Any such view would hamper the effective implementation of the new tax structure and would also lead to endless disputes and litigations. As noted in case of USA Agencies [Supra], the Supreme Court had upheld the vires of a statutory provision contained in the Tamil Nadu Value Added Tax Act which provided that the dealer would have to make a claim for input tax credit before the end of the financial year or before ninety days of purchase; whichever is later. The vires was upheld observing that the legislature consciously wanted to set up the time frame for availment of the input tax credit. Such conditions therefore must be strictly complied with. Thus, merely because the rule in question prescribes a time frame for making a declaration, such provision cannot necessarily be held to be directory in nature and must depend on the context of the statutory scheme.

27. Issue can be looked at from slightly different angle. Granting tax credit is an integral part of computation and collection of tax. Tax collection is an important element of budgetary allocations and estimation of the Union and the States. Such consideration of tax credits at such large scale cannot be allowed to linger on indefinitely which would have a direct effect on the tax collection, estimates and budgetary allocations and in turn, revenue deficit. 28. In this context, we may refer to the Constitution Bench decision of the Supreme Court in the case of Mafatlal Industries Limited & Ors. vs. Union of India & Ors., reported in [1997] 5 SCC 536. In such judgment, various issues concerning the refund applications under the Central Excise and Customs and other taxing statutes came up for consideration before the Nine­Judge Bench of the Supreme Court. Before adverting to the majority opinion expressed by B.P Jeevan Reddy, J., we may note a short precursor to this judgment. In case of Sales Tax Officer, Banaras & Ors. vs. Kanhaiya Lal Mukundlal Saraf, [AIR 1959 SC 135], the Constitution Bench of the Supreme Court considered the term “mistake” used in Section 72 of the Contract Act, 1872 in the context of payment of tax. It was held and observed that true principle is that if one party under mistake – whether of fact or law, passed to another party money which is not due by contract or otherwise, that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake if established entitles the party who paid the money to recover it back from the party receiving the same. It was further observed that once it is established that the payment; even though it be of the taxes has been made by the party labouring under a mistake of law, the party is entitled to recover the same and no distinction can be made in respect of the tax liability and other liabilities. Merely because the State has not retained the monies paid as Sales tax by the assessee but merely expended it in ordinary course of business of the State will make no difference to the position under Section 72 of the Contract Act.

29. With the aid of this judgment in the case of re­Kanhaiya Lal Mukundlal Saraf [Supra], often times, the parties would bring a proceeding before the Court of law for refund of tax after a number of years of collection on the ground that some other party had challenged the levy before Court and succeeded therein. In case of Tilokchand Motichand v. H.B Munshi, CST, reported in [1969] 1 SCC 110, the Constitution Bench of the Supreme Court, however, expressed somewhat different view. It was a case in which the Sales Tax Officer had forfeited a sum of ₹ 26,563/= of the petitioner, who thereupon had filed a writ petition before the High Court challenging such order. The petition was dismissed on 28th November 1958. The appeal was dismissed by Division Bench of the High Court on 7th July 1959. Later on, by a judgment dated 2nd December 1963, the Gujarat High Court held that the relevant provision of the Bombay Sales Tax Act under which the amount was collected was valid. The Supreme Court, however, by judgment dated 29th March 1967 struck down the provision as being infringement of Article 19 [1] of the Constitution of India. The petitioner thereupon filed a petition directly before the Supreme Court under Article 32 of the Constitution. The Supreme Court dismissed the petition. Hidayatulla CJ., observed that, “the utmost expedition is the sine quo non for a claim under Article 32. The party aggrieved must move the Court at the earliest possible time and explain satisfactorily all semblance of delay.” It was further observed that, “..there is no question of a mistake of law entitling the petitioner to invoke analogy of the Article in the Limitation Act”.

30. Both these judgments of the Supreme Court in the case of Kanhaiya Lal Mukundlal Saraf [Supra] and Tilokchand Motichand v. H.B Munshi, CST [Supra] came up for consideration before the 9Judge Bench in the case of Mafatlal Industries Limited & Ors., [Supra]. Mr. Justice B.P Jeevan Reddy speaking for the majority, summarized the conclusions in para 108 of the judgment. Portions relevant for our purpose, read as under :­

“108. [i] Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff – whether before the commencement of the Central Excise and Customs Laws [Amendment] Act, 1991 or thereafter – by misinterpreting or misapplying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tarrif Act or by misinterpreting or misapplying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 – and of this Court under Article 32 – cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.

The said enactments including Section 11­B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute “law” within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self­contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11­B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 [Amendment] Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excise and Sale Act or the Customs Act, as the case may be. It is necessary to emphasize in this behalf that Act provides a complete mechanism for correcting any errors whether or fact or law and that not only an appeal is provided to a Tribunal – which is not a departmental organ – but to this Court, which is a civil court.

[ii] Where, however, a refund is claimed on the ground that the provisions of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception. Where a person approaches the High Court or the Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person’s case; this is the ratio of the opinion of Hidayatullah, CJ., in Trilokchand Motichand [Supra] and we respectfully agree with it.

Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying clause (c) of sub­section [1] of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview.

[iii] xx xx xx

[iv] It is not open to any person to make a refund claim on the basis of a decision of a court or tribunal rendered in the case of another person. He cannot also claim that the decision of the Court/Tribunal in another person’s case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another person’s case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17 [1](c) of the Limitation Act, 1963, has no application to such a claim for refund.

[v] Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Premable to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes like Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner­plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty.

[vi] xx xx xx xx

[vii] While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner­plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of larger claims, it may well result in financial chaos in the administration of the affairs of the State.

[viii] The decision of this Court in STO v. Kanhaiya Lal Mukundlal Saraf [Supra] must be held to have been wrongly decided in so far as it lays down or is understood to have laid down proportions contrary to the propositions enunciated in (i) and (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiya Lal [Supra] have also been wrongly decided to the above extent. This declaration – or the law laid down in Propositions (i) to (vii) above – shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any authority or Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an authority, Tribunal or Court or otherwise.”

31. As per this decision, thus, the time limit provisions contained in the Central Excise and Customs laws for seeking refund of excess duty were held to be sacrosanct and were seen as constituting law within the meaning of Article 265 of the Constitution. Consequently, the tax collected, retained or not refunded in accordance with such provisions would be seen as collected, retained and not refunded under the authority of law. The view expressed by the Supreme Court in Trilokchand Motichand [Supra] was affirmed. It was emphatically stated that it was not open to any person to make refund claim on the basis of a decision of the Court or Tribunal rendered in case of another person. Such a person cannot claim that the decision of the Court or Tribunal in another person’s case has led him to discover a mistake of law under which he had paid the tax. In this context, it was observed that any proposition to the contrary not only results in substantial prejudice to the public interest, but is offensive to several well established principles of law. It also leads to grave public mischief. In this context, it was also observed that while examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims would not be an irrelevant consideration. In case of large claims, the same may result in financial chaos in the administration of the affairs of the State. The decision in the case of STO vs. Kanhaiya Lal Mukundlal Saraf [Supra] to the extent “it lays down or is understood to have laid down proposition contrary to these propositions” was held to have been wrongly decided.

32. Thus, in the economic matters of such vast scale, the wider considerations of the State exchequer, while interpreting a statutory provisions cannot be kept out of purview. Quite apart from independently finding that the time limit provisions contained in sub­rule (1) of Rule 117 of the CGST Rules is not ultra vires the Act or the powers of the rule making authority, interpreting such powers as merely directory would give rise to unending claims of transfer of credit of tax on inputs and such other claims from old to the new regime. Under the new GST laws, the existing tax structure was being replaced by the new set of statutes, through an exercise which was unprecedented in the Indian context. The claims of carry forward of the existing duties and credits during the period of migration, therefore, had to be within the prescribed time. Doing away with the time limit for making declarations could give rise to multiple large­scale claims trickling in for years together, after the new tax structure is put in place. This would besides making the task of matching of the credits impractical if not impossible, also impact the revenue collection estimates. It is in this context that the Supreme Court in the case of Mafatlal Industries Limited (Supra), after rejecting the contention that a person can move proceedings for recovery of tax paid upon success of some other person before the Tribunal or Court in getting such tax collection declared illegal, was further influenced by the fact that any such situation could lead to utter chaos, if the claims are large. Under the circumstances, we do not find any substance in the petitioners’ challenge to rule 117 (1) of the CGST Rules as well as GGST Rules.

33. The contention of the counsel for the petitioners that the saving clause inserted in the Gujarat Value Added Tax Act would protect and preserve the tax credits of the past regime, after introduction of the Goods and Service tax is to be noted only for rejection. The saving clause provided that nothing done in the amendment of the Gujarat Value Added Tax Act shall affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act prior to coming into force of the said amendment. Such saving has to be read and appreciated in tune with the specific provisions made in the CGST & GGST Acts. Any interpretation of such provisions cannot run counter to the express legislative intent of restricting or limiting enjoyment of the existing rules, or in other wise to make continuous enjoyment of the rights, subject to certain safe guards and conditions.

34. Before closing, we would refer to some of the judgments relied upon by counsel for the parties and which we felt must be explained.

35. In the case of Eicher Motors Ltd [Supra] and Dai Ichi Karkaria [Supra], essentially, the conclusion of the Supreme Court, was that the MODVAT credit in the account of a manufacturer is in the nature of duty already paid and which cannot be taken away by retrospective rules.

36. Reference to a decision of the Supreme Court in the case of CIT v. B.S Srinivasa Setty [Supra] is of no avail. The ratio of the said decision can be seen as holding that there cannot be taxing provision without mechanism having been provided by the statute. We do not see Section 140 (1) of the GGST Act is a charging provision. It, in fact, enables a registered person who has not opted for composition of tax to take credit in his electronic credit ledger, the credit of the amount of value added tax and entry tax in relation to the period ending immediately preceding the appointed day. This section further provides for conditions; subject to which, the same could be claimed.

37. The decision of Supreme Court in the cases of : (a) Sambhaji & Ors. vs. Gangabhai & Ors. [Supra], and (b) Salem Advocate Bar Assocaition vs. Union of India [Supra] were rendered in the context of the time limit prescribed under the amended CPC for the defendant to file written statement. The Court held that the ninety days of period provided in Rule 1 of Order VIII of CPC was directory in nature. The situation in the said cases and the one on hand before us are vastly different and the ratio in the said decisions cannot be imported in the present facts of the case.

38. In the case of Mangalore Chemicals & Fertilizers Limited v. Deputy Commissioner [Supra], the Supreme Court had observed that while interpreting a condition precedent for exemption, there would be distinction to be made between a procedural condition of a technical nature and a substantive condition. We have given elaborate reasons that the time limit provision for making declarations in the present case is of considerable importance and cannot be seen merely as a technical requirement. Removing such time limit would have a potential to lead to utter economic chaos.

39. In case of State of Mysore & Ors. v. Mallick Hashim & Co. [1974] 3 SCC 251, it was the High Court which had struck down the rule framed by the Government providing the time limit for filing the refund application on the ground that the section which granted the benefit of refund did not envisage any such time limit that would be prescribed under the rules. The Supreme Court, however, did not proceed on this logic. The Court held that it was not necessary to go into this question, since sub­rules (2) and (3) of Rule 39A of the Mysore Sales Tax Rules, 1957 were wholly unreasonable, and therefore, cannot be sustained. Sub­rule (3) of Rule 39­A provides that before a person is entitled to refund, he must have to make the refund application within the time before which he should have submitted his Sales­tax return. It was observed that in many States, the dealers have to submit quarterly returns. Under rule 18 of the Rules, the dealer would have to submit its annual return within 30 days from the end of Financial Year. Thus, if there be a sale in the course of inter­State trade has been made on 31st March of a year, the refund application will have to be made within 30 days from that date. The Supreme Court was therefore of the opinion that the said rule was merely an attempt to deny the dealers, the refund to which they are entitled under the law, or at any rate to make the enforcement of that right unduly difficult.

40. In case of Sales Tax Officer, Ponkannam & Anr. v. K.I. Abraham, reported in AIR 1967 SC 1823, rule 6 of the Central Sales Tax (Kerala) Rules 1957 came up for consideration, particularly in the context of sub­section (4) of Section 8 of the CST Act, which as we have noted earlier, imposes the requirement of a dealer who has sold the goods in course of inter­State sale or Commerce, to furnish necessary declarations in prescribed manner. Rule 6 of the Central Sales Tax (Kerala) Rules, besides making other provisions, prescribes time limit for making declarations. Such rule was examined in light of rule making power contained in Section 13 (4) of the CST Act, clause (e) of which provided that the State Government may make rules for the purpose of the authority from whom, the conditions subject to which and the fees subject to payment of which any from 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. In this context, it was observed that the phrase, “in the prescribed manner” occurring in Section 8 (4) of the Act does not take into time­element. While concluding that the time limit prescribed in Rule 6 (1) was ultra vires, and therefore, assessee was not bound to furnish declarations in Form “C” before 16th February 1961 into said case, the duty of the assessee was to furnish declaration within a reasonable time. In the said case, since the assessee had already furnished C­Forms before the assessment was over, it was held that there was compliance with the requirement of Section 8 (4) of the Act. In the present case, we have noted the statutory provisions, the scale of operations and the possible repercussions; if such time limit contained in Rule 117 is annihilated and a registered person is allowed to make declarations of the left over residuary duty of credit at the time of migration to the new tax structure. The time limit provisions, we have already stated more than once, under such circumstances, cannot be seen as merely technical in nature.

In the result, petition is dismissed.