Willowood Chemicals Pvt. Ltd. Vs Union of India

(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 inter-State sales as well as branch transfers or export sales, unless necessary declarations in Forms-C, 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 mandator

The High Court ruled that

1. 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, sub-section [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. Sub-section [2] of Section 164 further provides that without prejudice to the generality of the provisions of sub-section [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 sub-sections [1] and [2] of Section 164 of the CGST Act would convince us that the prescription of time limit under sub-rule [1] of Rule 117 of the CGST Rules is not ultra vires the Act.
2. 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.