Case: M/s. Vishnu Aroma Pouching
Pvt. Ltd. vs. Union of India (2020)
Citation:
- Case
Name: M/s. Vishnu Aroma Pouching
Pvt. Ltd. vs. Union of India
- Court: Gujarat High Court
- Citation: 2020 (41) G.S.T.L. 385 (Guj.)
- Date
of Judgment: 7th October 2020
Detailed Case Overview:
Facts of the Case:
1.
Petitioner: M/s. Vishnu Aroma Pouching Pvt. Ltd., a company engaged in
the manufacturing and packaging business.
2.
Context: The petitioner challenged the denial of Input Tax Credit
(ITC) by the tax authorities due to procedural lapses.
3.
Provision
Challenged: The petitioner faced issues due to
the interpretation of various provisions under the CGST Act, 2017, including
Sections 16 and 39, which deal with ITC and filing of returns respectively.
4.
Grievance: The petitioner argued that ITC was denied on procedural
grounds, even though the substantive conditions for availing ITC were met,
i.e., the tax was actually paid on the supplies.
Submission by the Petitioner:
1.
Substantive
Compliance:
o The petitioner contended that they had complied with all
substantive conditions for availing ITC, including payment of tax and receipt
of goods and services.
o It was argued that ITC should not be denied merely due to
procedural non-compliance or minor errors in the returns.
2.
Principle
of Natural Justice:
o The petitioner claimed that denying ITC on procedural
grounds violates the principles of natural justice.
o They argued that the substantive right to ITC, which is a
vested right, should not be defeated due to procedural lapses.
3.
Legislative
Intent:
o The petitioner submitted that the legislative intent behind
the GST law was to ensure seamless flow of ITC to avoid cascading of taxes.
o They contended that a strict interpretation of procedural
compliance defeats this purpose.
4.
Constitutional
Grounds:
o The petitioner argued that the denial of ITC on procedural
grounds is arbitrary and violates Article 14 (Right to Equality) and Article
19(1)(g) (Right to Practice Any Profession or to Carry on Any Occupation,
Trade, or Business) of the Indian Constitution.
Submission by the Respondent (Union
of India):
1.
Necessity
of Procedural Compliance:
o The government argued that procedural compliance is crucial
for the proper functioning of the GST system.
o They contended that procedural requirements ensure timely
and accurate tax reporting and prevent tax evasion.
2.
Legislative
Framework:
o The respondents defended the legislative framework, stating
that both substantive and procedural requirements are equally important.
o They argued that the provisions under the CGST Act, 2017, including
the ones related to ITC, have been designed to ensure a balance between
compliance and facilitation.
3.
Prevention
of Abuse:
o The government emphasized that strict adherence to
procedural requirements is necessary to prevent misuse and abuse of the ITC
mechanism.
o They contended that allowing ITC despite procedural lapses
could lead to significant revenue losses and potential fraud.
Court's Analysis:
1.
Substantive
vs. Procedural Compliance:
o The court examined the balance between substantive
compliance (i.e., actual payment of tax and receipt of goods/services) and
procedural compliance (filing accurate returns and adhering to timelines).
o It acknowledged the importance of both but emphasized that
procedural lapses should not defeat the substantive right to ITC.
2.
Principle
of Natural Justice:
o The court highlighted the importance of natural justice and
fairness in tax administration.
o It noted that the denial of ITC on purely procedural
grounds, especially when the tax has been paid, is unjust and against the principles
of natural justice.
3.
Legislative
Intent and Purpose:
o The court analyzed the legislative intent behind the GST
laws, which aim to facilitate seamless credit flow and avoid tax cascading.
o It opined that procedural requirements should not hinder the
primary objective of the GST regime.
4.
Constitutional
Validity:
o The court assessed the constitutional validity of denying
ITC on procedural grounds.
o It ruled that such denial is arbitrary and violates the
right to equality and the right to carry on business under Articles 14 and
19(1)(g) of the Constitution.
Judgment:
- Outcome: The Gujarat High Court ruled in favor of the
petitioner, M/s. Vishnu Aroma Pouching Pvt. Ltd.
- Ruling: The court held that ITC should not be denied solely on
procedural grounds if the substantive conditions are met.
- Reasoning: The court concluded that denying ITC due to procedural
lapses, despite fulfillment of substantive conditions, is against the
principles of natural justice and the legislative intent of the GST law.
Conclusion:
The judgment in M/s. Vishnu Aroma Pouching Pvt. Ltd. vs.
Union of India underscores the importance of balancing procedural compliance
with substantive compliance in the GST regime. The court's decision reinforces
the principle that procedural lapses should not defeat the substantive right to
ITC, especially when the tax has been duly paid. This case highlights the need
for a fair and just approach in tax administration, aligning with the broader
objectives of the GST law.
Disclaimer: All the
Information is based on the notification, circular and order issued by the
Govt. authority and judgement delivered by the court or the
authority information is strictly for educational purposes and on the
basis of our best understanding of laws & not binding on anyone.
