M/S Bharat Heavy Electricals Limited Through Its Deputy Manager (Finance) Namely Mrinal Mondal vs. The State Of Jharkhand Through The Secretary State Tax Deptt

Held

The Court held that the petitioner's case is squarely covered by the judgment in W.P.(T) No. 2404 of 2020. The Court reiterated that the intention of Section 140(1) of the JGST Act was to allow migration of unadjusted tax paid under repealed enactments, including TDS amounts, which were adjustable against output tax under the JVAT Act. The Court found that the proviso to Section 140(1) should be interpreted harmoniously and does not prohibit migration of TDS credit, as the restriction applies only if there is an express prohibition under Section 17(5) of the JGST Act for claiming input tax credit. The Court also held that Rule 117 of the JGST Rules, being subordinate legislation, cannot restrict the scope of Section 140(1) of the JGST Act and that the Court is bound to ignore it if it restricts the parent Act. The Court further noted that unadjusted TDS would have been refundable with statutory interest, making the denial of migration unsustainable. Consequently, the adjudication order and the appellate order confirming the demand were quashed and set aside. The respondents were directed to allow the petitioner to avail the credit of Rs. 2,39,61,824/- under the JGST Act in terms of the transitional provisions.

Facts

The petitioner, M/s. Bharat Heavy Electricals Limited, filed a writ petition challenging an order dated 07.12.2022 by the Additional Commissioner of State Tax (Appeal), Hazaribagh, which confirmed a demand of Rs. 3,10,32,926.72/-. This demand arose from an adjudication order dated 15.12.2018 passed by the Deputy Commissioner of State Tax, Hazaribagh, which rejected the petitioner's claim to migrate Value Added Tax (VAT) credit of Rs. 2,39,61,824/- under Section 140(1) of the Jharkhand Goods and Services Tax Act, 2017 (JGST Act). The petitioner sought a declaration that the admitted excess amount of Tax Deducted at Source (TDS) constituted VAT credit or Input Tax Credit (ITC) eligible for migration under Section 140 of the JGST Act.

Key Issues

1. Whether the admitted excess amount of Tax Deducted at Source (TDS) qualifies as 'credit of amount of value added tax' for migration under Section 140(1) of the JGST Act, considering the proviso which states that credit is not admissible if it is not admissible as input tax credit under the GST Act? 2. Whether Rule 117 of the JGST Rules, which restricts transitional provisions to 'input tax credit' and not 'credit of value added tax and entry tax', can be enforced when it appears to restrict the scope of Section 140(1) of the JGST Act? Petitioner's Arguments: The petitioner contended that their case is squarely covered by a previous judgment of this Court in W.P.(T) No. 2404 of 2020. They argued that the intention of the legislature in enacting transitional provisions was to allow migration of unadjusted tax paid under repealed enactments, including TDS amounts which were adjustable against output tax under the erstwhile JVAT Act. They further argued that the proviso to Section 140(1) should be harmoniously interpreted and does not prohibit migration of TDS credit, as Section 17(5) of the JGST Act, which lists prohibited ITC, does not cover TDS. They also argued that Rule 117 of the JGST Rules, being subordinate legislation, cannot restrict the scope of the parent Act. Respondents' Arguments: The respondents contended that since TDS was in the nature of output tax, it was not admissible as input tax credit under the GST Act and hence could not be allowed to be migrated. They relied on the proviso to Section 140(1) and Rule 117 of the JGST Rules.