Case Note & Summary
A group of manufacturers and traders, including JCB India Limited, manufacturers of excavators and loaders, filed writ petitions before the Bombay High Court challenging the constitutional validity of Section 140(3)(iv) of the Central Goods and Services Tax Act, 2017. The petitioners maintained a depot where demo machines cleared from the factory on payment of excise duty were stored and sold after a business cycle of two to three years. As on the GST implementation date of 1 July 2017, the petitioners had stock of such machines that were older than twelve months, i.e., procured before 30 June 2016. Under the transitional provisions, Section 140(3) allowed input tax credit only for goods held in stock that were purchased after 30 June 2016. The petitioners argued that this cut-off was arbitrary and discriminatory, as they had valid duty-paid documents but were denied credit solely on the ground of the age of stock. This, they contended, resulted in double taxation, as excise duty already paid could not be transitioned, and GST would be levied again on supply. They submitted that the denial frustrated the GST objective of eliminating cascading effect and violated Article 14 of the Constitution. The respondents, represented by the Additional Solicitor General, filed an affidavit supporting the provision. The High Court issued rule, heard the parties together, and disposed of the petitions by a common judgment. The detailed reasoning and final decision are not captured in the provided excerpt.
Issue of Consideration
Whether Clause (iv) of Section 140(3) of the CGST Act is unconstitutional and arbitrary, violating Article 14 of the Constitution, by imposing a cut-off date of 30-06-2016 for transitional input tax credit on stock.
Law Points
- Transitional provisions under GST must ensure seamless input tax credit
- cut-off date for credit eligibility should not be arbitrary
- denial of credit for stock older than one year leads to double taxation and violates Article 14
- legislative classification must have reasonable nexus with object
