Union of India vs Bharti Airtel Ltd. & Ors.

4 of the Circular dated 29.12.2017 specifies “...It may be noted that while making adjustment in the output tax liability or input tax credit, there can be no negative entries in the FORM GSTR-3B – The amount remaining for adjustment, if any, may be adjusted in the return(s) in FORM GSTR-3B of subsequent month(s) and, in cases where such adjustment is not feasible, refund may be claimed...” – Respondent No. 1 was, however, keen on availing of the dispensation specified in the Circular dated 01.09.2017 for the relevant period (July to September 2017) – After Form GSTR-2A became operational in September 2018, respondent No. 1 realized that it had sufficient amount in the ITC ledger account (electronic credit ledger) during the relevant period – Further, due to nonfunctionality of GSTR-2A, respondent No. 1 had to discharge its OTL by depositing/paying in cash – Respondent No.1 urged to rectify Form GSTR-3B – However, the impugned Circular dated 29.12.2017 came in the way of respondent No. 1 in doing so – Resultantly, respondent No.1 approached the High Court by way of writ petition – High Court allowed the writ petition and read down paragraph 4 of circular dated 29.12.2017 to the extent it restricted the rectification of Form GSTR-3B in respect of period in which the error had occurred – Before the Supreme Court respondent no. 1 contended that the circular dated 29.12.2017 was issued without any authority of law – Held: The decision was taken by the Board after considering various representations received seeking clarifications on various aspects of return filing such as return filing dates, applicability of quantum of late fee, amendment of errors in submitting/filing of Form GSTR-3B and other related queries – In strict sense, it is not the direction issued by the Commissioner (GST) as such, but it is notifying the decision(s) of the Board taken in exercise of its powers conferred u/s. 168(1) of the 2017 Act – The circular was issued under the signatures of Commissioner (GST), but in essence, it was notifying the decision(s) of the Board, which has authority and power to issue directions – The stipulations in the stated circular including paragraph 4 are consistent with the provisions of the 2017 Act and the Rules – The express provision in the form of s. 39(9) clearly posits that omission or incorrect particulars furnished in the return in Form GSTR-3B can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed – Accordingly, the argument that the impugned Circular dated 29.12.2017 was issued without authority of law is rejected.

Central Goods and Services Tax Act, 2017 – ss. 16, 39, 49 and 59 – Central Goods and Services Tax Rules, 2017 – rr. 59, 60 and 61 – Rectification of Form GSTR-3B – The grievance of the writ petitioner-respondent no.1 before the High Court was that due to non-operability of Form GSTR-2A at the relevant time (July to September 2017), it was denied of access to the information about its electronic credit ledger account and consequently, availing of Input Tax Credit (ITC) for the relevant period and instead to discharge the Output Tax Liability (OTL) by paying cash to its vendors – Thus, it has resulted in payment of double tax and unfair advantage to the tax authorities because of their failure to operationalize the statutory forms enabling auto-populating statement of inward supplies of the recipient and outward supplies including facility of matching and correcting the discrepancies electronically – The High Court allowed the writ petition for the period to which the ‘error relates’ i.e. July to September 2017 – High Court also allowed writ petitioner to rectify Form GSTR-3B for the period in which error had occurred – On appeal, held: The writ petitioner being a registered person, was under a legal obligation to maintain books of accounts and records as per the provisions of the 2017 Act and Chapter VII of the 2017 Rules regarding the transactions in respect of which the OTL would occur – Even in the past (till recently upto the 2017 Act came into force), during the pre-GST regime, the writ petitioner (being registered person/assessee) had been maintaining such books of accounts and records and submitting returns on its own – No such auto-populated electronic data was in vogue – It is the same pattern which had to be followed by the registered person in the post-GST regime – Further, as per scheme of the 2017 Act, registered person is obliged to do self-assessment of ITC, reckon its eligibility to ITC and of OTL including the balance amount lying in cash or credit ledger primarily on the basis of his office record and books of accounts required to be statutorily preserved – That he could do without the common electronic portal as was being done in the past till recently pre-GST regime – The factum of non-operability of Form GSTR-2A, therefore, is a flimsy plea taken by the writ petitioner – The writ petitioner with full knowledge and information had done selfassessment and assessed the OTL for the relevant period and chose to discharge the same by paying cash – Having so opted, now it was not open to the respondent to resile from option already exercised – As far as rectification of errors is concerned, the matching and correction process happens on its own as per mechanism specified in ss.37 and 38, after which Form GSTR-3 is generated for the submission of returns; and once submitted any changes may have a cascading effect – Therefore, law permits rectification of error and omissions only at the initial stages of Form GSTR-1 and GSTR-3, but in a specified manner – The direction of the High Court to allow the rectification cannot be sustained – The impugned judgment and order of the High Court is set aside. Allowing the appeal, the Court

HELD: 1. At the outset, the preliminary issue raised by the appellant regarding jurisdiction of the Delhi High Court to entertain the writ petition or that the writ petition suffered from the vice of non-joinder of the necessary parties including that the High Court could not have issued a writ of mandamus, need not detain us. As regards the jurisdiction of the Delhi High Court, the registered office of respondent No. 1 is in Delhi. The appellant (respondent in the writ petition) also has its office in Delhi. The relief claimed in the writ petition amongst others, was to challenge provisions of the central Act and the circulars issued by the competent authority having its office in Delhi. Hence, the jurisdiction of the Delhi High Court cannot be a matter of any doubt. Similarly, the argument of the appellant that State Governments/Union Territories are necessary parties, does not take the matter any further. As aforesaid, the writ petitioner was not challenging the individual action of the States or the Union Territories, but a policy decision of the Central authority who had issued the impugned Circular, namely, the Commissioner (GST). If the writ petitioner succeeded in that challenge, the consequential relief would follow. In opinion of this Court, nonimpleadment of respective States/Union Territories would not come in the way of the writ petitioner to pursue the cause brought before the High Court by way of subject writ petition. If the conclusion reached by the High Court regarding the efficacy of impugned Circular was to be upheld, no fault can be found with the directions issued. Accordingly, the preliminary objections regarding the maintainability of the writ petition and the jurisdiction of the Delhi High Court deserve to be rejected. [Para 30][852-H; 853-A-E]

2. Another issue that needs to be decided at the threshold is whether the impugned Circular dated 29.12.2017 issued by the Commissioner (GST) is without authority of law. Indisputably, the Circular has been issued to notify the clarification given by the Board in exercise of its powers conferred under Section 168(1) of the 2017 Act in order to consolidate the information in various notifications and circulars regarding return filing and to ensure uniformity in implementation across field formations. The decision was taken by the Board after considering various representations received seeking clarifications on various aspects of return filing such as return filing dates, applicability of quantum of late fee, amendment of errors in submitting/filing of Form GSTR-3B and other related queries. In strict sense, it is not the direction issued by the Commissioner (GST) as such, but it is notifying the decision(s) of the Board taken in exercise of its powers conferred under Section 168(1) of the 2017 Act. It is a different matter that a circular is issued under the signatures of Commissioner (GST), but in essence, it is notifying the decision(s) of the Board, which has had authority and power to issue directions. Accordingly, the argument that the impugned Circular dated 29.12.2017 has been issued without authority of law, needs to be rejected. [Para 31][853-E-H; 854-A]

3. Reverting to the analysis of the issues and contentions done by the High Court, it is primarily focused on the grievance of the writ petitioner that due to non-operability of Form GSTR2A at the relevant time (July to September 2017), it had been denied of access to the information about its electronic credit ledger account and consequently, availing of ITC for the relevant period and instead to discharge the OTL by paying cash to its vendors. Thus, it has resulted in payment of double tax and unfair advantage to the tax authorities because of their failure to operationalize the statutory forms enabling auto-populating statement of inward supplies of the recipient and outward supplies including facility of matching and correcting the discrepancies electronically. The High Court, however, did not enquire into the cardinal question as to whether the writ petitioner was required to be fully or wholly dependent on the auto generated information in the electronic common platform for discharging its obligation to pay OTL for the relevant period between July and September 2017. The answer is - an emphatic No. In that, the writ petitioner being a registered person, was under a legal obligation to maintain books of accounts and records as per the provisions of the 2017 Act and Chapter VII of the 2017 Rules regarding the transactions in respect of which the OTL would occur. Even in the past (till recently upto the 2017 Act came into force), during the pre-GST regime, the writ petitioner (being registered person/assessee) had been maintaining such books of accounts and records and submitting returns on its own. No such auto-populated electronic data was in vogue. It is the same pattern which had to be followed by the registered person in the post-GST regime. [Para 32][854-B-F]

4. As per the scheme of the 2017 Act, it is noticed that registered person is obliged to do self-assessment of ITC, reckon its eligibility to ITC and of OTL including the balance amount lying in cash or credit ledger primarily on the basis of his office record and books of accounts required to be statutorily preserved and updated from time to time. That he could do even without the common electronic portal as was being done in the past till recently pre-GST regime. As regards liability to pay OTL, that is on the basis of the transactions effected during the relevant period giving rise to taxable event. The supply of goods and services becomes taxable in respect of which the registered person is obliged to maintain agreement, invoices/challans and books of accounts, which can be maintained manually/electronically. The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing selfassessment. The primary source is in the form of agreements, invoices/challans, receipts of the goods and services and books of accounts which are maintained by the assessee manually/electronically. These are not within the control of the tax authorities. This was the arrangement even in the pre-GST regime whilst discharging the obligation under the concerned legislation(s). The position is no different in the post-GST regime, both in the matter of doing self-assessment and regarding dealing with eligibility to ITC and OTL. Indeed, that self-assessment and declarations would be any way subject to verification by the tax authorities. The role of tax authorities would come at the time of verification of the declarations and returns submitted/filed by the registered person. [Para 33][854-F-H; 855-A-C]

5. Section 16 of the 2017 Act deals with eligibility of the registered person to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. The input tax credit is additionally recorded in the electronic credit ledger of such person under the Act. The “electronic credit ledger” is defined in Section 2(46) and is referred to in Section 49(2) of the 2017 Act, which provides for the manner in which ITC may be availed. Section 41(1) envisages that every registered person shall be entitled to take credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger. [Para 34] [855-D-E]

6. Section 59 does make reference to Section 39, which deals with furnishing of returns, but the fact remains that for furnishing of returns, preparatory work has to be done by the assessee himself and is not fully or wholly dependent on the common electronic portal for that purpose. Just couple of weeks before the relevant period between July and September 2017, the writ petitioner/respondent No. 1 had been doing that exercise which it was expected to continue even under the post-GST scheme. The factum of non-operability of Form GSTR-2A, therefore, is flimsy plea taken by the writ petitioner/respondent No. 1. Indeed, if the stated form was operational, the same would have come handy to the writ petitioner for doing self-assessment regarding eligibility of ITC and availing thereof. But it is a feeble excuse given by the writ petitioner/respondent No. 1 to assail the condition specified in impugned Circular dated 29.12.2017 regarding the rectification of the return submitted manually in Form GSTR-3B for the relevant period (July to September 2017). [Para 36][856-A-D]

7. The question of reading down paragraph 4 of the said Circular would have arisen only if the same was to be in conflict with the express provision in the 2017 Act and the Rules framed thereunder. The express provision in the form of Section 39(9) clearly posits that omission or incorrect particulars furnished in the return in Form GSTR-3B can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed. This very position has been restated in the impugned Circular. It is, therefore, not contrary to the statutory dispensation specified in Section 39(9) of the Act. The High Court, however, erroneously noted that there is no provision in the Act, which restricts such rectification of the return in the period in which the error is noticed. [Para 37] [856-D-F]

8. The entire edifice of the grievance of the writ petitioner (respondent No. 1) was founded on non-operability of Form GSTR2A during the relevant period, which plea having been rejected as untenable and flimsy, it must follow that the writ petitioner/respondent No. 1 with full knowledge and information derived from its books of accounts and records, had done self-assessment and assessed the OTL for the relevant period and chose to discharge the same by paying cash. Having so opted, it is not open to the respondent to now resile from the legal option already exercised. It is for that reason, the respondent has advisedly propounded a theory that in absence of (electronic-auto populated record) mechanism made available as per Sections 37 and 38, return filed in Form GSTR-3B is not ascribable to Section 39(9) of the 2017 Act read with Rule 61(5) of the 2017 Rules. This is yet another untenable plea taken by respondent No. 1. For, the appellant having realized that the mechanism specified in Sections

37 and 38 of the 2017 Act cannot be put in place due to nonoperability of the forms governing such mechanism, had to amend the rules to make a stop-gap arrangement until the entire mechanism became operational. Appellant not only amended the statutory rule but also provided for filing of return manually in Form GSTR-3B electronically through the common portal with effect from July 2017. This is manifest from the circulars/notifications issued from time to time including the timeline for submitting the returns. [Para 38][857-C-F]

9. Significantly, the registered person is not denied of the opportunity to rectify omission or incorrect particulars, which he could do in the return to be furnished for the month or quarter in which such omission or incorrect particulars are noticed. Thus, it is not a case of denial of availment of ITC as such. If at all, it is only a postponement of availment of ITC. The ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year. It is a different matter that despite the availability of funds in the electronic credit ledger, the registered person opts to discharge OTL by paying cash. That is a matter of option exercised by the registered person on which the tax authorities have no control, whatsoever, nor they have any role to play in that regard. Further, there is no express provision permitting swapping of entries effected in the electronic cash ledger vis-a-vis the electronic credit ledger or vice versa. [Para 47][861-E-G]

10. A priori, despite such an express mechanism provided by Section 39(9) read with Rule 61, it was not open to the High Court to proceed on the assumption that the only remedy that can enable the assessee to enjoy the benefit of the seamless utilization of the input tax credit is by way of rectification of its return submitted in Form GSTR-3B for the relevant period in which the error had occurred. Any unilateral change in such return as per the present dispensation, would have cascading effect on the recipients and suppliers associated with the concerned transactions. There would be complete uncertainty and no finality could ever be attached to the self-assessment return filed electronically. We agree with the submission of the appellant that any indulgence shown contrary to the statutory mandate would not only be an illegality but in reality, would simply lead to chaotic situation and collapse of tax administration of Union, States and Union Territories. Resultantly, assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR-3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records. [Para 48] [861-G-H; 862-A-C]

11. The matching and correction process happens on its own as per the mechanism specified in Sections 37 and 38, after which Form GSTR-3 is generated for the purposes of submission of returns; and once it is submitted, any changes thereto may have cascading effect. Therefore, the law permits rectification of errors and omissions only at the initial stages of Forms GSTR-1 and GSTR-3, but in the specified manner. It is a different dispensation provided than the one in pre-GST period, which did not have the provision of auto-populated records and entries. [Para 49][862-D-E]

12. Suffice it to conclude that the challenge to the impugned Circular No. 26/26/2017-GST dated 29.12.2017, is unsustainable for the reasons noted hitherto. This Court holds that stipulations in the stated Circular including in paragraph 4 thereof, are consistent with the provisions of the 2017 Acts and the Rules framed thereunder. Having said that, it must follow that there is no necessity of reading down paragraph 4 of the impugned Circular as has been done by the High Court vide impugned judgment. In any case, the direction issued by the High Court being in the nature of issuing writ of mandamus to allow the writ petitioner to rectify Form GSTR-3B for the period - July to September 2017, in the teeth of express statutory dispensation, cannot be sustained. [Para 50][862-E-G]

MRF Ltd., Kottayam vs. Asstt. Commissioner

(Assessment), Sales Tax & Ors (2006) 8 SCC 702: [2006] 6 Suppl. SCR 417 – referred to.

AAP & Co., Chartered Accountants through Authorized Partner vs. Union of India & Ors. 2019-TIOL-1422HC-AHM-GST; Panduranga Stone Crushers vs. Union of India & Ors. 2019-TIOL-1975-HC-AP-GST; Saji S. Proprietor, Adithya and Ambadi Traders & Anr. vs. The Commissioner, State GST Department & Anr. dated 12.11.2018 in W.P.(C) No. 35868/2018; Adfert

Technologies Pvt. Ltd. vs. Union of India & Ors. 2019TIOL-2519-HC-P&H-GST; Siddharth Enterprises vs. The Nodal Officer 2019-TIOL-2068-HC-AHM-GST;

Krish Authomotors Pvt. Ltd. vs. Union of India & Ors. 2019-TIOL-2153-HC-DEL-GST; Blue Bird Pure Pvt. Ltd. vs. Union of India & Ors. 2019 SCC OnLine Del 9250; Lease Plan India Private Limited vs. Government of National Capital Territory decided on 13.9.2019 in W.P.(C) No. 3309/2019 – referred to.