Carrying Forward Credit Of Excess Tax Deducted At Source In Electronic Credit Ledger Under Section 140 (1) Cannot Be Denied 

Facts of the Case: –

• That the petitioner is engaged in the manufacturing and selling of aluminium cable and conductor, having its manufacturing unit at Jamshedpur and is one of the main dealers of the Jharkhand Bijli Vitran Nigam Limited (JBVNL).
• That the JBVNL while releasing the payment to the petitioner used to deduct tax under Section 45 of the JVAT Act by way of advance recovery, Section 45 deals with “Special Provision relating to Advance Recovery of Tax on Sales and Supplies to Governments and the other persons”, which include the Electricity Board.
• The said amount so deducted is liable for adjustment from the tax liability of the person from whose bills such deduction has been made. Accordingly, the petitioner used to take credit of tax deducted and paid from his bills and remaining, if any, was being carried forward to next period as Tax Deducted at Source (TDS).
• On 26.09.2017, the petitioner while filing its VAT return for the period 01.04.2017 to 30.06.2017, found that after adjustment of VAT payable and other amounts, a balance amounting to Rs.1,24,68,378.36/- was auto populated in column 61 of the Return being “Excess Input Tax Credit to be C/F to next period”.
• That on 01.07.2017, GST Law was introduced, wherein section 140(1) of the JGST Act, 2017 makes every person 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 30.06.2017.
• That the petitioner following the prescribed procedure, filed Statutory form i.e., GST TRAN – 1, migrating Rs.1,19,41,397/- from VAT regime to GST regime and the same was duly accepted by the respondent-Department, and the petitioner was allowed to carry forward the amount deducted toward TDS under JVAT Act.
• That surprisingly after a lapse of 2 ½ years, a notice was issued to the petitioner granting opportunity of hearing in a revisional proceeding initiated under section 108 of the JGST Act suo-moto by the Commissioner, fixing a date of hearing on 10.02.2021. However, no reason was assigned therein for initiating the said proceeding.
• Complying with the said notice, the petitioner duly appeared, and it was informed to the petitioner that pursuant to audit objection revisional proceeding has been initiated against the petitioner for wrongly availing the TDS amount in its TRAN-1 not being ITC.
• That the petitioner on 15.02.2021 filed its reply raising a preliminary objection with respect to audit objections and other grounds. The Joint Commissioner, State Tax, without considering the objection raised and even without granting any opportunity of hearing, passed the Ex-Parte impugned order dated 30.07.2021 rejecting the TRAN-1 and directing the petitioner to refund excess ITC claimed amounting to Rs.1,19,41,937.86/- along with penalty under section 73(9)@10% and interest @24%, total amounting Rs. 1,60,02,196.69/-.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the present case before the Hon’ble Court is squarely covered with the judgment of this court in namely M/s Subhash Singh Choudhry & other analogous matter – W.P.(T) No.2404/2020 dated 09.01.2023. The issue involved in the present matter is same as in this case also the Respondent Authorities have denied the migration of TDS amount in term of section 140(1) of the JGST Act holding therein that the TDS is not an ITC and that the ITC for the Financial Year 2017-2018 as on 30.06.2017 is NIL.
• It was submitted that the amount so deducted from the bills of the petitioner is nothing but Tax Deducted at Source. Referring to the judgment of M.R constructions Vs. The Asst. Commissioner passed in W.P. No. 9991/2020 & others analogous matters, it was submitted that the amount credit in advance from the payer assumes the character of tax in the light of Article 265.
• That the advance recovery of tax under Section 45 of the JVAT Act deals with such situation “Payment of the amount deducted under sub-section (1) into the Government Treasury by the person making the deduction shall be deemed to be a payment by or on behalf of the seller or supplier concerned.” Thus, the petitioner is duly entitled for migration of TDS amount in term of section 140(1) of JGST Act as held by this Court in W.P(T) No. 2404/2020 vide order dated 09.01.2023.

Respondents’ Submissions: –

• It was submitted on the behalf of the respondents that the records of the petitioner Anvil Cables (P) Ltd. for F/Y 2017-18 in Adityapur Circle, Jamshedpur were audited by the Accountant General Jharkhand, Ranchi vide I.R. 48/2018-19, wherein it was pointed out that has claimed transitional credit of I.T.C. for Rs. 1, 31, 77, 963.63 by TRAN-1 dated 23.12.2017 and had wrongly claimed and availed ITC of Rs.1,19,41,937/-, which was to be reversed and deposited along with interest under section 50(3) and penalty under section 73(9) of the JGST Act.
• That perusal of audit report by Revisional authority shows that the adjudicating authority had passed an order dated 17.01.2019 and consequently issued a demand notice on the company in DRC-07 for Rs.1,81,577.15 each for SGST & CGST and revised DRC-08 was served on the company. However, after receipt of the I.R. by Accountant General proceeding was initiated on 03.04.2019 by the DCST Adityapur.
• Further, it appears from the perusal of records that the order dated 29.01.2019 passed by the adjudicating authority required to be revised. Therefore, it was decided to initiate proceeding under section 108 of the JGST Act, 2017 for Revision of the order passed by the DCST Adityapur Circle.
• It was submitted that in revision proceeding notice was issued under section 108 dated 05.02.2021 and 06.03.2021 to the Petitioner Company as well as DCST, Adityapur Circle. The revisionary authority after going through the entire records of the case and the judgment of Bombay High Court, relied upon by the petitioner, revised the order under Section 108 holding and observing that the facts of the judgment of Kiran Gems Private limited are different from the present case.
• Lastly, it was submitted that the revisional order dated 30.07.2021, it is crystal clear that petitioner-company was issued notice and the petitioner- company appeared and filed its written submission in the case and after considering the same order dated 30.07.2021 was passed giving proper opportunity of hearing to the petitioner-company.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case, found that the issue involved in this case is “whether the petitioner is entitled to migrate in its electronic credit ledger the credit of amount of Excess Tax Deducted at source under section 45 of the JVAT Act, 2005 amounting to Rs. 1,19,41,937/- available as on 30.06.2017 under section 140(1) of the JGST Act being “a credit of the amount of the Value Added Tax’ which a registered person is entitled to migrate in its electronic credit ledger.”
• That this Court in W.P. (T) No. 2404/2020 dealt with a issue ‘Where the amount deducted towards TDS under section 44 of the Jharkhand Value Added Tax is a credit of the amount of Value Added Tax which a registered person is entitled to migrate in its electronic credit ledger’. This Court interpreted the proviso to Section 140(1) of the JGST Act, and held that the proviso restricts the migration of credit, if the credit pertains to transactions which were prohibited under section 17(5) of the JGST Act in which no input tax credit is available. Any contrary interpretation given to the proviso would have an effect of nullifying and/or setting at naught the real object of the transitional provision.
• Further, this court in the succeeding paras observed that one provision under statute cannot be used to defeat another and it should not be lightly assumed that what legislation has given with one hand has taken away the same with other. Accordingly, it was held that action of respondent Authority denying the migration of TDS amount and consequently, levying interest and penalty thereupon is not sustainable in the eye of law and has quashed impugned order and the demand Notice.
• The Hon’ble Court taking note of the facts of the case, found that the issue involved in this case is squarely covered by the judgment passed by this Court in W.P. (T) No. 2404 of 2020. Therefore, the impugned order dated 30.07.2021 passed in revision and Demand Notice dated 31.07.2021 are quashed and set aside.

The Hon’ble Court with the above findings & observations, allowed the writ petition by setting aside the impugned order and demand notice. The amount, if any, recovered or paid shall be refunded or adjusted for future liabilities.

To read the complete judgment 2023 Taxo.online 219