2025(03)LCX0499

Weatherproof Solution

Versus

State Of Gujarat

R/SPECIAL CIVIL APPLICATION NO. 9872 of 2024 decided on 20-03-2025

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 9872 of 2024

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY

M/S WEATHERPROOF SOLUTION & ANR.
Versus
STATE OF GUJARAT & ANR.

Appearance:
KUNTAL A PARIKH(7757) for the Petitioner(s) No. 1,2
MR RAJ TANNA, AGP for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 1,2

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                and
                HONOURABLE MR.JUSTICE D.N.RAY

Date : 20/03/2025

ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned advocate Mr.Kuntal A. Parikh for the petitioners and learned Assistant Government Pleader Mr.Raj Tanna for the respondent No.1.

2. Rule, returnable forthwith. Learned Assistant Government Pleader Mr.Raj Tanna waives service of notice of rule for and on behalf of the respondent No.1.

3. By this petition under Article 226 of the constitution of India, the petitioners have prayed for quashing and setting aside the letter/order dated 05.03.2024 whereby, application of the refund claimed by the petitioners which is rejected relying upon Section 34 of the Gujarat Value Added Tax Act, 2003 (for short ‘the VAT Act’). The petitioners have further prayed for directing the respondents to grant refund of Rs.3,90,762/- for the period 1st April, 2017 to 30th June, 2017 along with appropriate interest on such refund.

4. The brief facts of the case are as under:

4.1. The petitioner-firm which was registered under the VAT Act, filed quarterly return in VAT Form 201 of quarter 1st April, 2017 to 30th June, 2017 as per Section 29(1) of the VAT Act read with Rule 19(3B) of the Gujarat Value Added Tax Rules, 2003 (for short ‘the VAT Rules’).

4.2. It is the case of the petitioner that in the said return, the petitioner claimed unutilised excess input tax credit of Rs.3,90,762/- and shown as carried forward to the next tax period.

4.3. However, with effect from 01.07.2017, the Central/State Goods and Services Tax Act, 2017 (for short ‘the GST Act’) came into effect and the registration of the petitioner under the VAT Act was migrated under the GST Act as per the provisions of Section 139 of the said Act with effect from 01.07.2017, however, the petitioner did not transfer the excess input tax credit of the VAT Act by filing the Form GST TRAN-1 as per section 140 of the GST Act.

4.4. The petitioner therefore by letter dated 26.10.2020 addressed to the respondent No.2- State Tax Officer (1), Ghatak-7, Ahmedabad, requested to carry out the assessment for the Financial Year 2017-18 under the VAT Act and the Central Sales Tax Act (for short ‘the CST Act’) so that the refund of the unadjusted excess amount of input tax credit of Rs.3,90,762/- which remained unutilised under the VAT Act can be refunded to the petitioner. It is the case of the petitioner that no reply was received to the letter dated 26.10.2020 nor any Assessment Order was passed under Section 34(2) of the VAT Act by the respondent No.2. The petitioner therefore vide letter dated 29.03.2023 again requested the respondent No.2 to carry out the assessment for Financial Year 2017-18 under the VAT Act and the CST Act. The said letter was also neither replied nor responded by the respondent No.2.

4.5. The petitioner therefore again by letter dated 05.01.2024 requested the respondent No.2 to sanction the refund of unutilised excess credit of Rs.3,90,762/- on the ground that the time limit for carrying out the assessment under Section 34 of the VAT Act had expired and therefore, the petitioner is entitled to get the refund of such unutilised excess credit.

4.6. The respondent No.2 by letter dated 05.03.2024 informed the petitioner that as the time limit of assessment under Section 34 of the VAT Act has expired, the process to grant refund cannot be carried out and rejected the application of the petitioner. Being aggrieved, the petitioner has preferred this petition.

5. So as to consider whether the petitioner is entitled to the refund of Rs.3,90,762/- being unadjusted unutilised input tax credit under the VAT regime which was not carried forward in the GST regime by filing Form GST-TRAN-1 as required under Section 140 of the GST Act, it would be germane to refer to the relevant provisions of the GST Act, GST Rules and VAT Act and VAT Rules which read as under :

“ Section 139 of the GST Act:

Migration of existing taxpayers.

(1) On and from the appointed day, every person registered under any of the existing laws and having a valid Permanent Account Number shall be issued a certificate of registration on provisional basis, subject to such conditions and in such form and manner as may be prescribed, which unless replaced by a final certificate of registration under sub-section (2), shall be liable to be cancelled if the conditions so prescribed are not complied with.

Section 140 of the GST Act:

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 CENVAT credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and] in such manner as 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) here the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.

142. Miscellaneous transitional provisions.––

xxxx

(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit,duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944):

Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:

Provided further that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.

Section 174 of the GST Act:

174. Repeal and saving

(1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed.

(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994) (hereafter referred to as "such amendment" or "amended Act", as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not--

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:

Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or

(d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or

(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed; or

(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed.

(3) The mention of the particular matters referred to in subsections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal.

Rule 117 of the GST Rules:

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 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:

xxxx

Section 2(28) of the VAT Act:

"tax period" means a calendar month or a quarter as may be prescribed by the State Government.

Section 2(30) of the VAT Act:

"taxable turnover" means the turnover of all sales or purchases of a dealer during the prescribed period in any year, which remains after deducting therefrom,….

Section 29 of the VAT Act:

29 (1) Every Registered dealer shall furnish correct and complete returns of the goods in respect of his business and the transactions thereof in such form, for such period, by such dates and to such authority, as may be prescribed.

Section 33 of the VAT Act:

33. (1) Every registered dealer shall, by such dates and to such authority as may be prescribed, furnish annual return by way of self-assessment in the prescribed form, containing such particulars and accompanied by supporting documents, as may be prescribed.

(2) The amount of tax credit, exemptions and other claims by the dealer in the annual return for which no supporting tax invoice, declarations, certificates, or evidence required under this Act or the Central Act is furnished, shall be self-assessed by the dealer by disallowing such tax credits,exemptions and other claims and by levying the appropriate rate of tax as if the sales or purchases were taxable.

(3) Where,--

(a) a dealer has furnished all the returns, revised returns, if any, and annual returns by the date prescribed therefor and paid the amount of tax due according to such returns, and

(b) the Commissioner is satisfied that the returns or, as the case may be, revised returns and annual returns furnished by such dealer are correct and complete, and

(c) a notice for audit assessment under sub-section (2) of section 34 has not been served on such dealer within such period as may be prescribed, such dealer shall be deemed to have been assessed for that year:

Provided that the Commissioner of his own motion within a period of three years from the end of the year in respect of which or part of which the tax is assessable, may call for and examine the record of such dealer who has been deemed to have been assessed and after serving notice and giving the dealer an opportunity of being heard, pass such order thereon in accordance with the provisions of section 34, as the Commissioner may thinks just and proper.

Section 34 of the VAT Act:

(1) Subject to the provisions of sub-section (2), the amount of tax due from a registered dealer shall be assessed in the manner hereinafter provided, separately for each year, during which he is liable to pay tax.

(2) (a) Where,

(i) the Commissioner is not satisfied with the bonafides of any claim of tax credit, exemption, refund, deduction, concession, rebate; or genuineness of any declaration or evidence furnished by a dealer in support thereof with the self-assessment, or

(ii) the Commissioner has reason to believe that detailed scrutiny of the case is necessary, the Commissioner may, notwithstanding the fact that the dealer may have been assessed under section 33, serve on such dealer in the prescribed manner a notice requiring him to appear on a date and place specified therein, which may be his place of business or a place specified in the notice, either to attend and produce or cause to be produced the books of account and all evidence on which the dealer relies in support of his returns or to produce such evidence as specified in the notice.

(b) in respect of such class of dealers as the State Government may, by rules, specify;

xxxxx

(9) No assessment under subsections (2), (5), (6) or (7) shall be made after the expiry of four years from the end of the year in respect of which or part of which the tax is assessable.

(10) No assessment under subsection (8) shall be made after the expiry of eight years from the end of the year in respect of which or part of which the tax is assessable:

Provided that where any assessment is required to be made in pursuance of an order of any court or authority, such fresh assessment shall be made at any time within two years from the date of such order: Provided further that in computing the period of limitation for the purpose of this section, any period during which assessment proceedings are stayed by an order or injunction of any court or authority shall be excluded.

Section 36 of the VAT Act:

36. (1) Subject to other provisions of this Act and the rules, the Commissioner may refund to a person the amount of tax, penalty and interest, if any, paid by such person in excess of the amount due from him:

1. Provided that,the Commissioner shall first apply such excess towards the recovery of any amount due under this Act or the earlier laws and shall then refund only the balance amount, if any: Provided further that no such adjustment under the proviso shall be made towards a recovery of an amount due that has been stayed by an appellate authority

Rule 15 of the VAT Rules :

15. Calculation of tax credit under section 11.

xxxxxx

(6)Where the tax credit (other than tax credit on capital goods) admissible in the year remains unadjusted against the output tax as per section 11, such amount shall be refunded not later than expiry of two years from the end of the year in which such tax credit had become admissible:

Provided that the dealer claiming such refund shall have to prove to the satisfaction of the assessing authority that the purchases of the goods on which such tax credit had been calculated have been disposed off in the manner referred to in subsection (3) of section 11 within the period by which refund under this sub-rule becomes admissible

Rule 30 of VAT Rules

30. Particulars and supporting documents under section 33.-

(1) Every registered dealer, other than a dealer who has been granted permission to pay lump sum tax under section 14, shall furnish,-

(a) Form 201 alongwith the Forms Form 201. 201A, 201B and 201C appended to

(b) the forms on the strength on which he has availed exemption from or concession of tax under any provision of the Act or the Central Act along with the annual return in Form 205.

(c) Form 212 and Form 213 in case of a dealer dealing in the commodities mentioned in Schedule III to the Act.

(2) Notice required to be given under clause (c) of sub-section (3) of section 33 shall be in Form 302 and such notice shall be served on such dealer not later than two year from the date of closure of the year in respect of which the tax is assessable.”

SUBMISSIONS OF THE PETITIONERS:

6. Learned advocate Mr. Kuntal A. Parikh for the petitioners submitted that in absence of any notice being issued as per provisions of Section 33(3)(c) of the VAT Act read with Rule 30(2) of the VAT Rules, the petitioner-Firm is deemed to have been assessed because no notice for audit assessment under Section 34(2) of the VAT Act was also issued by the respondent No.2 and no Assessment Order has been passed. It was therefore submitted that in absence of any dispute regarding validity of the claim of the excess unutilised credit of Rs.3,90,762/- shown as carried forward to the next tax period, the petitioner is entitled to the refund of the same as the same has remained unadjusted against the output tax liability as per the last return filed under the VAT regime.

6.1. It was further submitted that the petitioner did not transfer such admissible unutilised input tax credit under the GST Act by filing Form GST TRAN-1 and therefore, in view of Rule 15(6) of the VAT Rules, it was incumbent upon the respondent No.2 to grant refund of such admissible tax credit to the petitioner not later than expiry of two years from the end of the year in which such tax credit became admissible.

6.2. It was further submitted that there is no provision under the VAT Act or the VAT Rules that the petitioner is liable to file refund application to claim refund of admissible tax credit which remained unadjusted and more particularly, when the petitioner is deemed to have been assessed under Section 34(2) of the VAT Act, there is a vested right to get the refund of the unutilised tax credit as per Rule 15(6) of the VAT Rules.

6.3 Learned advocate Mr. Kuntal Parikh therefore submitted that there is no dispute with regard to the input tax credit which has remained unadjusted to get the refund under the provisions of the VAT Act and the Rules. In support of his submissions, reliance was placed on the decision of the Eicher Motor Limited Versus Union of India reported in (1992) 2 SCC 361 and Collector of Central Excise Versus Dai Ichi Karkaria Limited reported in (1999) 7 SCC 448.

6.4 It was thereafter contended by learned advocate Mr.Kuntal Parikh that the deeming provision is to be given full effect and where the Section is created by provisions of law, then the Court must give full effect to such Section. It was therefore submitted that when the petitioner is deemed to have been assessed under Section 34(2) of the VAT Act and as per the Rule 15(6) of the VAT Rules, the respondent No.2 ought to have granted the refund of admissible tax credit which has remained unadjusted.

6.5. In support of his submissions, reliance was placed on the decision of the Hon’ble Apex Court in case of Union of India versus Jalyan Udyog reported in 1993 (68) ELT 9 (SC) and decision in case of State of Maharashtra versus Swanstone Multiplex Cinema Private Limited reported in (2009) 8 SCC 235.

6.6. It was further submitted that the petitioner has shown unadjusted excess credit under the head “amount of tax credit carried forward to the next tax period” and the term “tax period” has been defined under Section 2(28) of the VAT Act which reads as “tax period means calendar month or quarter as may be prescribed by the State Government”. It was thereafter submitted that the term “prescribed” means “prescribed by rules” as per Section 2(17) of the VAT Act. Reference was also made to Rule 2(g) of the VAT Rules which provides that the tax period for the purpose of returns to be furnished by the dealer under Act shall be a period of quarter ending on 30th June, 30th September, 31st December and 31st March in a year for the quarterly return. It was therefore submitted that in the facts of the case when the petitioner has shown unadjusted tax credit as carried forward to the next tax period and in absence of any next tax period in view of the coming into force of the GST Act with effect from 01.07.2017, under the VAT Act for the goods being traded by the petitioner as per provisions of the GST Act, the VAT Act is repealed except for the goods on which the GST is not applicable and therefore, the unadjusted tax credit could not be carried forward to the next tax period under the VAT Act and hence, petitioner is entitled to the refund of such admissible credit under Rule 15(6) of the VAT Rules.

SUBMISSIONS OF THE RESPONDENT:

7. Per contra, learned Assistant Government Pleader Mr.Raj Tanna for the respondents submitted that the petitioner filed the VAT return for the quarter ending on 30th June, 2017 has mentioned in the amount column as “carried forwarded to the next tax period” and has mentioned “zero” amount in the column of refund and hence, claim of the refund made by the petitioner in respect of the unadjusted input tax credit has rightly been rejected as it was a self-assessment return filed by the petitioner and the respondent is bound to presume that the petitioner would have carried forwarded the same under the GST regime by filing Form GST- TRAN-1.

7.1. It was therefore submitted that considering “zero” amount mentioned in the refund column in the VAT return, the respondent-Authority was justified in rejecting the refund application in absence of any order being passed under Section 34 of the VAT Act.

7.2. It was further submitted that the refund can be claimed in terms of Section 36 of the VAT Act mentioning the amount in refund column itself and in absence of such disclosure made by the petitioner in the selfassessment return, the petitioner is not entitled to the amount of refund on the ground that there was unadjusted input tax credit which could not be carried forward to the next tax period in view of the coming into force of the GST Act.

7.3. It was submitted that the respondent is required to generate audit task in the system if the petitioner had mentioned the amount in the refund column and any refund application is filed and in absence of such application filed by the petitioner to carry out the assessment proceedings, the respondent No.2 has rightly not entertained the application of the petitioner to grant the refund by the impugned letter/order dated 05.03.2024 rejecting such application.

7.4. It was also pointed out that the application dated 26.10.2020 filed by the petitioner was never received by the respondent. Reliance was placed on the copy of the inward register. It was pointed out that the respondent received an application of the petitioner for the assessment on 29.03.2023 and thereafter, on 05.01.2024 with similar request and the same were replied by the respondent No.2 vide impugned letter/order dated 05.03.2024.

7.5 . It was submitted that the decisions relied upon by the petitioner are not applicable in the facts of the case because once the petitioner has migrated to the GST regime then any ITC claim of the VAT regime has to be to be processed in terms of Section 140 of the GST Act read with Rule 117 of the Central Goods and Service Tax Rules, 2017 (for short ‘the CGST Rules’) and as the petitioner is deemed to have been assessed under the VAT Act, the petitioner was bound to carry forward such unutilised tax credit in the GST regime by showing the same in Form GST-TRAN-1 if the petitioner wanted to claim the carry forward of the same.

7.6. It was therefore submitted that as the petitioner has not shown such carry forward of unadjusted tax credit in Form GST-TRAN-1, the petitioner now cannot ask for refund of the same. Reliance was also placed on the decision of the Hon’ble Apex Court in case of Thirumalakonda Plywoods Versus AC, State Tax reported in (2023) 76 GSTL 172 (AP) as well as the Circular No.180/12/2022 issued by the CBIC.

7.7. It was submitted that there is no claim made by the petitioner for refund before the respondent No.2 and in absence of such claim, the respondent cannot process such refund claim and the reliance placed by the petitioner on Rule 15(6) of the VAT Rules is not applicable as the said Rule only refers to the “admissible credit in the year in which remained unadjusted against output tax”. It was submitted that carried forward ITC to the next period which is required to be adjusted against the future output tax liability because the objective, purpose and reason for carry forward of ITC itself is a mechanism to adjust and neutralize the taxes which are already paid on inputs to set-off against the future output tax liability. It was therefore submitted that once the petitioner has failed to show the carry forward of such unadjusted tax credit in Form GST-TRAN-1 as required under Section 140 of the GST Act, the petitioner cannot claim refund of the same under the provisions of the VAT Act.

7.8. It was further submitted that Section 142(3) of the GST Act is not applicable in the facts of the case as there was no claim for refund which is mandatory requirement under the said provision and under the proviso to said Section which stipulates that no refund is to be granted under the same as carried forward in the GST Act. It was further submitted that as the VAT Act is repealed and as the definition of tax period as per the provisions of Section 2(28) of the VAT Act is also repealed and in absence of no further tax period, the submission made on behalf of the petitioner is without any basis and as per the amendment to VAT Act in 2017, the definition of “tax period” as per Section 2(28) of the VAT Act and the definition of “year” under Section 2(36) of the VAT Act still exist and therefore, the tax period automatically continues in the GST regime and therefore, as per the provisions of Sections 139 to 142 of the GST Act, the petitioner was required to show the unutilised tax credit in Form GSTTRAN-1 so as to see that the same is carried forward in the electronic credit lesger as per the provisions of the GST Act.

7.9. Learned AGP Mr. Raj Tanna submitted that once the petitioner is migrated under the GST regime in terms of Section 139 of the GST Act, then the condition and time limit of Section 140 of the GST Act read with Rule 117 of the GST Rules are mandatorily applicable and even if the petitioner has filed Form GSTTRAN-1 with NIL amount, the petitioner is bound by the decision of the Hon’ble Apex Court in case of Union of India versus Filco Trade Private Limited dated September 2,2022 in Miscellaneous Application Nos. 1545- 1546/2022 in SLP(C)No. 32709-32710/2018, whereby time to file Form GST-Tran-1 was extended but the petitioner has failed to file a revised GST-TRAN-1.

7.10. It was therefore submitted that in view of the undisputed fact that the petitioner did not show the unadjusted unutilised tax credit in the Form GST-TRAN-1, the petitioner now cannot claim the refund as carry forward of ITC cannot be equated parallel with refund of ITC otherwise because in such circumstances, the respondent Department would lose the right of basic principle of verification, scrutiny and assessment on such refund claim.

7.11. It was therefore submitted that when there is no column in VAT return by which the respondent-Department could come to know about the refund claimed other than the amount mentioned in such column, then the petitioner is not entitled to refund of such amount more particularly, when the petitioner has failed to file revised Form GST-TRAN-1 in spite of the time limited extended by the Hon’ble Apex Court.

7.12. With regard to the contention of applicability of Rule 15(6) of the VAT Rules, it was submitted that even if it is presumed that the Rule 15(6) of the VAT Rule is applicable, then the proviso to said Rule mandates the dealers to prove to the Assessing Authority that such credit is disposed in terms of Section 11(3) of the VAT Act and in the facts of the case, the petitioner has failed to prove the same and on prima-facie seeing the credit ledger of the petitioner, the same is not reconciled and therefore the refund of unutilised tax credit which requires scrutiny by the Assessing Authority has rightly been rejected in view of the time period as prescribed under Section 34 of the VAT Act having been expired.

7.13 . It was further submitted that none of the provisions of the VAT Act talks about satisfying the condition prescribed in proviso to Rule 15(6) of the VAT Rules to submit Certificate of the Chartered Accountant and even otherwise such Certificate produced by the petitioner does not reflect or satisfy the condition mentioned in Rule 15(6) of the VAT Rules.

7.14. It was further submitted that the provisions of Section 174(2)(c) of the GST Act would also not be applicable as ITC is not a vested right and as such, no right can be said to have been accrued in favour of the petitioner as per the Rule 15(6) of the VAT Rules in terms of Section 174(2)(a) of the GST Act which cannot revive anything which was not in force and hence, admittedly, in absence of any application for refund filed by the petitioner, the same cannot be now granted by the respondent-Authority.

7.15. In support of his submissions, reliance was placed on the decision of this Court in case of Willowood Chemicals Private Limited versus Union of India reported in (2018) 98 taxmann.com 100 (Gujarat), decision of the Hon’ble Bombay High Court in case of JCB India Limited versus Union of India reported in (2018) 92 taxmann.com 131 (Bombay) as well as the decision of the Hon’ble Madras High Court in case of P.R.Mani Electronics Versus Union of India reported in (2020) 117 taxmann.com 868 (Madras) in which it was held that the ITC is a Concession and not a Vested/ Indefeasible/Constitutional Right and therefore, the claim cannot be for indefinite period and for lapsing of the credit, strict adherence to time limit, an application for refund has to be in existence.

7.16. It was therefore submitted that the reliance placed by the petitioner on provisions of Section 174(2)(c) of the GST Act being a saving clause cannot lead to an endless litigation if transitional provisions are not adhered to by the petitioner. It was therefore submitted that the petitioner is not entitled to the refund in absence of failure of the petitioner to disclose unadjusted unutilised tax credit in Form GST-TRAN-1.

7.17 . Reliance was placed on the decision of the Patna High Court in case of Graphite India Limited versus State of Bihar reported in (2024) 164 taxmann.com 556 (Patna) which talks about the ITC not carried forward from VAT to GST through GST-TRAN-1 and only be claimed as set-off against the output tax and not as cash refund. It was therefore submitted that the petition is liable to be rejected as the petitioner is not entitled to the refund of the amount of unadjusted tax credit.

REJOINDER OF THE PETIITONERS:

8. Learned advocate Mr. Kuntal Parikh for the petitioner in the rejoinder submitted that reliance placed by the respondent upon the VAT Act has not been repealed to show that the definition of the “tax period” under Section 2(28) of the VAT Act is in existence till date because it is not deleted under the amendment Act. It was submitted that with effect from 01.07.2017 when the GST Act came into force, it is not made applicable to goods namely Alcoholic Liquor for human consumption, Petroleum, Crud and High Speed Diesel, Motor spirit, Natural Gas and Aviation Turbine Fuel with effect from 01.07.2017 under the Charging Section 9 of the GST Act and therefore, by VAT Amendment Act, 2017, the definition of the “goods” under Section 2(13) got substituted which reads as “goods” means goods as covered under entry 54 of List II of the Seventh Schedule to the Constitution of India which provides for taxes on the sale of the aforesaid items.

8.1. It was therefore submitted that even after implementation of the GST Act, the State Government is empowered to levy tax on sale of the specified products under the VAT Act of the respective States and the VAT Act remained in force for the above specified goods and not for any other goods. It was therefore submitted that the petitioner does not deal with any of the goods on which the VAT Act continues even after 1st July, 2017 and in such circumstances, the contention of the respondent that term “tax period” has not been deleted from VAT Act even after 01.07.2017 and therefore, the petitioner cannot claim refund and it has to carry forward the ITC to next tax period as shown in his quarterly return, is without any basis and such interpretation of the law would not be applicable in the facts of the case of the petitioner.

8.2. It was further submitted that the petitioner has not filed Form GST-TRAN-1 for carry forward of excess unutilised unadjusted credit under the GST Act which is not in dispute and the petitioner has also discharged output tax liability for the month of July, 2017 and has not transferred any credit in the GST regime otherwise the petitioner would have excess the credit in the electronic credit ledger as on 1st July, 2017.

8.3. It was submitted that the petitioner has also filed an additional affidavit dated 19.12.2024 which is supported by the Certificate of the Chartered Accountant to demonstrate that the petitioner has not carried forward the unadjusted unutilised tax credit in the GST regime. Learned advocate Mr.Kuntal Parikh has also invited the attention of the Court to the screenshot of the GST Portal to show that the petitioner has not filed Form GST-TRAN-1 which is certified by the Chartered Accountant in the Certificate. It was therefore submitted that the reliance placed by the respondent on the various judgments are not applicable to the facts of the case because in none of the case it has been held that filing of Form GST-TRAN1 is mandatory.

8.4. It was further submitted that reliance placed by the respondent on of Section 174(2) (c) of the GST Act to deny the refund of unutilised tax credit under VAT Act, but the provision of section 174(2)(c) of the GST Act is also not applicable in the facts of the case as the Hon’ble Courts have dealt with the issue in a completely different perspective. It was further submitted that the issue regarding the time limit specified for taking/ claiming input tax credit under Section 16(4) of the GST Act would also not be applicable in the facts of the case. It was therefore submitted that the petitioner is entitled to the refund of Rs.3,90,762/- as the same is not granted by the respondent-Authority within the time specified under Rule 15(6) of the VAT Rules and the same is retained without authority of law.

DISCUSSION AND FINDINGS:

9. We have considered the rival submissions made by the learned advocates for the respective parties and have also perused the documents placed on record.

10. The undisputed facts emerging from the record can be summarised as under :

10.1. The petitioner filed quarterly return in VAT Form 201 for the period from 1st April,2017 to 30th June, 2017 (April to June, 2017) under Section 29(1) of the VAT Act read with Rules 19(3)B of the VAT Rules and shown amount of Rs.3,90,762/- as “amount of tax credit carried forward to the next tax period” (page 13 of the paper book).

10.2. On advent of GST Act coming into force from 01.07.2017, the petitioner-Firm migrated its registration from VAT regime to GST regime.

10.3. The petitioner did not file Form GSTTRAN-1 as envisaged by Section 140 of the GST Act by carrying forward the amount of tax credit shown in the VAT return filed under the VAT regime as amount of tax credit carried forward to next tax period.

10.4. The respondent has not carried out any assessment for the Financial Year 2017-18 more particularly, for the quarter 1st April, 2017 to 30th June, 2017 under Sub-section (2) of Section 34 of the VAT Act and therefore there is a deemed assessment so far as the return in VAT Form 201 filed by the petitioner is concerned.

11. This Court, in the case of Torrent Power Limited and Another Versus State of Gujarat and Another rendered on 15.04.2019 in Special Civil Application No.16211 of 2018 in similar situation has held as under :

“18. In the present case, the petitioners have made an application for refund for the first time on 11.8.2015 wherein it was stated that the assessment for the year 2006-2007 under section 34 of the GVAT Act was completed in February 2011 accepting the facts and figures as per annual return and VAT audit report. In August 2013, flying squad issued notice in Form 401 seeking details of amount collected towards maintenance of fly ash collection system. The petitioners voluntarily deposited the amount towards tax and interest on administrative charges collected for maintaining fly ash collection system under protest for FY 2006-2007 to 2010-2011 for five years. It was conveyed to the petitioners by the flying squad that the jurisdictional ward office would pass the necessary orders in this regard. The petitioners received notices for revision of assessment orders for the financial years 2007-2008 and 2008-2009. Reassessment proceedings for financial year 2009-2010 were completed covering the fly ash related transactions,whereas the transactions for the financial year 2010-2011 were covered under regular assessment order passed under section 34 of the GVAT Act. The petitioners therefore, submitted that no action was initiated so far by the department to adjudicate the matter pursuant to the amount collected for the year 2006-2007. The petitioners also submitted that the time limit for passing the order for revision/reassessment as per the provisions under the GVAT Act has already expired. Thus in facts of the case, respondent authorities are withholding the amount paid under protest by the petitioners for the year 2006-2007 without there being any assessment, reassessment or revision order being passed by the authorities under the provisions of Act. Since the action of the respondent authorities in retaining the amount deposited by the petitioners under protest, is not backed by any authority of law, in view of provisions of Article 265 of the Constitution of India, the respondents have no authority to retain the same. As the petitioners have made an application for refund within the period of limitation and as the respondent authorities have not decided the same till date, the two basic requirements are to be satisfied; one the amount of duty in relation to which refund is claimed is paid by the petitioners and two, the incidence of such tax has not been passed by the petitioners to any other person. So far as both the requirements are concerned, same are satisfied inasmuch as the petitioners have paid the amount under protest is not in dispute. It is also not in dispute that no assessment, re-assessment or revision order is passed and the time limit for passing such order has already been expired. It is also not in dispute that the petitioners have not passed over the incidence of such tax to any other person.

19. In facts of the case, the petitioners have no other alternative efficacious remedy but to approach this court as refund of the amount deposited by the petitioners under protest cannot be adjudicated under any provisions of the GVAT Act and the respondent authorities have no jurisdiction to grant such refund and, therefore, only remedy available to the petitioners is by way of filing the petition under Article 226 of the Constitution as the amount paid by way of deposit is neither a duty or tax to which the provisions of the GVAT Act would be applicable and as a consequence, the machinery provision under the GVAT Act would not apply to refund of such amount.

20. In the light of the above discussion, when the petitioners have deposited the amount ofRs.46,43,174/- under protest for which no adjudication order is passed by the authorities, such claim being outside the purview of enactment can be made either by way of a suit or by way of writ petition. As the amount is paid neither by way of self assessment or pursuant to any demand, it is always open for the petitioners to bring it to the notice of the authorities concerned and claim the refund of amount of such deposit. The authority concerned is also duty bound to refund such amount as retention of such amount would be hit by Article 265 of the Constitution which mandates that no tax shall be levied or collected except by authority of law. Since the amount is deposited under protest by the petitioners and no order of assessment, reassessment or revision is passed till date, the amount retained by the authority is not backed by any authority of law in the light of Article 265 of the Constitution of India and, therefore, the respondents have no authority to retain the same.”

12. In order to arrive at the above conclusion, the provisions of the VAT Act and various decisions have been analysed as under :

“13. On perusal of the documents produced on record, there is nothing to show that any reassessment order under section 35 of GVAT Act or any revision order under section 75 of theGVAT Act has been passed by the respondent VAT authorities. The petitioners have deposited the aforesaid amount under protest. There is no return filed by the petitioners which can be considered as self assessed tax in the year 2006- 2007. Therefore the question of payment of tax would arise only when VAT liability is crystallized, either by way of self assessment or by way of assessment by the authorities. In the present case, neither of these two situations have arisen. The amount of deposit of Rs.46,43,174/- made by the petitioners under protest is required to be seen in the light of its possible liability of tax which would have been ascertained at a future date. However, such ascertainment of liability has not fructified till date and as such amount of Rs.46,43,174/- deposited by the petitioners under protest would remain in the nature of a deposit only which the Government would hold in trust. Till any assessment order is framed, no such tax liability can be stated to have been ascertained and same therefore, cannot be treated as payment of tax. Therefore, application made by the petitioners for refund of such amount deposited under protest without being crystallized either by way of self assessment or by way of assessment by the authorities towards payment of tax, is liable to be granted.

14. In case of decision of this Court in Shree Associates (supra), an amount of Rs. 50 lakhs was deposited by the petitioner as per the order of the court with the Government and later on when the benefit of remission scheme was granted to the petitioner, the petitioner requested for refund of the amount deposited pursuant to the order of the court. This Court after considering the fact that refund of such amount cannot be denied when it is in the nature of deposit and not tax, allowed the petition by directing the respondents to refund the said amount with simple interest at the rate of 7% per annum. Similarly in case of Essar Steel Ltd.(supra), this court in facts of the said case, after analysing the provisions of sections 36 to 39 of the GVAT Act with regard to grant of refund, has held that though the expression “refund” may also be used for returning the amount of pre-deposit, there is a clear distinction between the character of the amount paid by way of tax and by way of pre-deposit pending the appeal. The court was in agreement with the view taken by the Bombay High Court in case of Nelco Ltd. v. Union of India reported in 2002 (144) ELT 56 that the amount deposited as a condition precedent does not bear the character of duty but bears the character only of a security deposit being a condition precedent for hearing of the appeal. The court therefore, held that assuming for the sake of argument that the provisions of section 39 of the GVAT Act are applicable to the facts of the present case, there is nothing to show that the commissioner has withheld the amount deposited by the respondent in exercise of powers under section 39 of the GVAT Act after recording satisfaction as envisaged therein. The court thereafter placed reliance on decision of Bombay High Court in case of Suvidhe Ltd. v. Union of India reported in 1996 (82) ELT 177 (Bom.), wherein it was held that a deposit under section 35F of the Central Excise Act, 1994 is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential reliefs. On the basis of same analogy, it was held that as the amount deposited by the assessee is in the nature of pre-deposit and not payment of tax under the provisions of the Sales Tax Act, the amount deposited by it is bound to be refunded in view of the fact that the appeal has been allowed by the Tribunal.

15. Decision in case of Maruti Wire Industries Pvt Ltd. (supra), is also applicable to the facts of the present case. In the said case, it has been held that tax can become due and payable on the date on which return was filed by the petitioner. Therefore, in the facts of the present case, the petitioners have not filed any return of income nor any assessment, reassessment or revision order is passed by the respondent adjudicating upon the amount deposited by the petitioners, therefore, same cannot be retained by the respondents.

16. Similarly Supreme Court in case of J.K. Synthetics Ltd. (supra), held that ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. When the return is actually filed by the assessee in order to see what is the full amount of tax due on the basis of such return, it is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed. In facts of the present case, when the petitioners have not filed any return of income and in absence of any adjudication of the amount deposited under protest by the petitioner, the respondent authorities cannot retain the same.

17. This court in case of Joshi Technologies International Inc-India Projects v. Union of India in Special Civil Application No.2556/2015 had an occasion to consider in detail similar controversy of granting refund along with interest to the petitioner of that case where the petitioner was not liable to pay education cess and secondary and higher secondary education cess on the petroleum/crude oil under the provisions of section 15 of the Oil Industry (Development) Act, 1974 pursuant to circular dated 7.1.2014 issued by Central Board of Direct Taxes clarifying that the education cess and secondary and higher secondary education cess are not to be calculated on cesses which are levied under the Acts administered by the department/ministries other than ministry of finance, department of revenue in terms of those Acts. This court considered the question of maintainability of petition under Article 226 of the Constitution of India for grant of refund as well as various provisions of the Central Sales Tax Act, 1944. The court relied upon the decision in case of U.P. Pollution Control Board v. Kanoria Industrial Ltd., reported in (2001) 2 SCC 549, wherein it is held that tax or money realised without the authority of law is bad under Article 265 of the Constitution and that the money or tax so collected is refundable. The court further relied upon the decision of Supreme Court in case of Salonah Tea Co. Ltd. v. Superintendent of Taxes, reported in (1988) 1 SCC 401, wherein it has been held thus :

“14.4 Thus, in view of the principles enunciated by the Supreme Court in Salonah Tea Co. Ltd. v. Superintendent of Taxes, Nowgong (supra), in case where money is paid by mistake, the period of limitation prescribed is three years from the date when the mistake was known. Besides, section 17 of the Limitation Act inter alia provides that when a suit or application is for relief from the consequences of a mistake, the period of limitation would not begin to run until the plaintiff or applicant has discovered the mistake, or could, with reasonable diligence, have discovered it. Therefore, in case where money is paid under a mistake, the limitation would begin to run only when the applicant comes to know of such mistake or with reasonable diligence could have discovered such mistake.”

13. Referring to the above decision, we are conscious that the facts of the present case are slightly different to the effect that the petitioner has not carried forward the unadjusted unutilised tax credit which was shown as amount of tax arrears to be carried forward in the return of income filed under the VAT Act. Therefore, the following questions would arise for determination in this petition :

(i) Whether it was mandatory for the petitioner to file Form GST-TRAN-1 under the provisions of the GST Act to carry forward the unadjusted unutilised input tax credit under the VAT regime?

(ii) Whether the petitioner is entitled to the refund of the amount which was shown as “amount of tax credit carried forward to the next tax period” in VAT Form No.201 after the mandatory period of assessment is over under Section 34(2) of the VAT Act or not?

(iii) Whether the respondent No.2 is liable to pay the refund of the amount under Rule 15(6) of the VAT Rules or not?

14. So far as the first question as to whether it is mandatory for the petitioner- assessee to file Form GST-TRAN-1 to carry forward the unadjusted unutilised input tax credit or not is concerned, the provisions of Section 140 of the GST Act provides for transitional arrangements for input tax credit. On perusal of the Sub-section (1) of Section 140 of the GST Act, it clearly provides that the assessee shall be entitled to take credit in his electronic credit ledger the amount of CENVAT credit or eligible duties carried forward in return relating to the period ending on 30th June, 2017. However, on perusal of the provision, it appears that it is not mandatory for the assessee to carry forward the CENVAT credit or eligible duties in the return filed under the various Acts.

15. Section 174 of the GST Act provides for repeal and savings. Sub-section (2) of the said Act provides for savings under the various Acts which were repealed by Subsection (1) of the GST Act. Clause (c) of the Sub-section (2) provides that the repeal of the said Acts shall not affect any right, privilege, obligation or liability acquired or accrued or incurred under the amended Acts or the repealed Acts or orders under such repealed or amended Acts. Therefore, it is required to be considered as to whether the petitioner who has admittedly not carried forward the unadjusted unutilised tax credit under the GST regime is entitled to refund of such tax credit or not under the VAT Act in view of the provisions of Section 174(2)(c) of the GST Act.

16. In the facts of the case, the petitioner has not been able to claim set-off of the unadjusted unutilised tax credit under the VAT Act in absence of next tax period. The next tax period does not exist in view of the coming into force of the GST Act from 01.07.2017. Therefore, the provisions of Section 2(28) which defines the “tax period” and provisions of Section 2(36) which defines the “year” would be inapplicable in the facts of the case as there is no tax period or year vis-a-vis the provisions of the VAT Act which has been repealed by the provisions of Section 174(1) of the GST Act.

17. In view of the above undisputed facts, it would therefore be germane to refer to and rely upon the provisions of Section 34 of the VAT Act which provides for audit assessment. Sub-section (1) of Section 34 stipulates that subject to the provisions of Sub-section (2), the amount of tax dues from the registered dealer shall be assessed in the manner provided therein, separately for each year, during which the dealer is liable to pay the tax. Sub-section (2) provides for such assessment when the Commissioner is not satisfied with the bona-fide of the claim in the tax credit, exemption, etc. Sub-section (9) of Section 34 provides that no assessment under Sections (2), (5), (6) or (7) shall be made after expiry of four years from the end of the year in respect of which or part of which the tax is assessable. Therefore, in the facts of the case, no audit assessment under Section 34(2) of the VAT Act after expiry of four years from the Financial Year 2017-18 can be carried out. The petitioner therefore, in absence of any assessment is entitled to refund of the unutilised tax credit as per the provisions of Section 36 of the VAT Act read with Rule 15(6) of the VAT Rules which provides that where the tax credit (other than credit on capital goods) admissible in the year remains unadjusted against the output tax as per Section 11 of the VAT Act, such amount shall be refunded not later than expiry of two years from the end of the year in which such tax credit had become admissible. The proviso to Rule 15(6) provides that the dealer claiming such refund shall have to prove to the satisfaction of the Assessing Authority that the purchases of the goods on which such tax credit has been calculated have been disposed of in the manner referred to in Subsection (3) of Section 11 of the VAT Act within the period of which the refund under Sub-rule becomes admissible.

18. On conjoint reading of the provisions of Rule 15(6) of the VAT Rules as well as the proviso thereto, and applying the same to the facts of the case, it is not in dispute that the petitioner has shown the amount of the credit to be carried forward in the next tax period and has not carried forward in Form GST-TRAN-1 and it is also not in dispute that the petitioner has discharged the liability under the GST Act for the month of July, 2017 onward and as no GST-TRAN-1 Form was filed by the petitioner, there is no credit in the electronic credit ledger of the petitioner vis-a-vis the credit which was shown to be carried forward in the next tax period in the VAT return filed in VAT Form 201. Therefore, as a natural corollary, the petitioner has been able to prove that the goods upon which such credit was shown to be carried forward to next tax period have been disposed of as per the provision of Sub-section (3) of Section 11 of the VAT Act and therefore, there is a compliance of the proviso to Rule 15(6) of the VAT Rules. It is therefore, incumbent upon the respondent No.2 to sanction the refund of Rs.3,90,762/- which has remained unadjusted unutilised tax credit as on 30th June, 2017 in the VAT return of the petitioner.

19. The respondent No.2 therefore could not have rejected the applications filed by the petitioner on 29.03.2023 and 05.01.2024 on the ground that the time to claim the refund has expired thogh the respondent No.2 was liable to pay the refund of the said amount within period of two years as per the Rule 15(6) of the VAT Rules. However, in the facts of the case, the period of more than four years have expired and even the time to make audit assessment under section 34 of the VAT Act has also expired and therefore, the respondent Authority cannot carry out any further inquiry under the provisions of the VAT Act, the petitioner would be entitled to the refund of the amount which has admittedly remained without being carried forward under the GST regime in view of the provision of Section 174(2)(c) of the GST Act.

20. For the foregoing reasons, the petition succeeds and is accordingly allowed. The respondent authority is directed to process the refund claim of the petitioner for Rs. 3,90,762/- in accordance with provisions of VAT Act read with section 174(2) (c) of the GST Act within twelve(12) weeks from the date of receipt of copy this order. Rule is made absolute to the aforesaid extent. No orders as to cost.

(BHARGAV D. KARIA, J)

(D.N.RAY,J)