Page 87 - GSTL_6th August 2020_Vol 39_Part 1

2020 ] P.R. MANI ELECTRONICS v. UNION OF INDIA 13
scribe to this view. The fact that such time-limit may be extended under circum-
stances specified in Rule 117, including Rule 117A, does not lead to the sequitur
that there is no time-limit for transitioning credit. In this context, reference may
be made to Section 16(4) of the CGST Act which provides as follows :
“Section 16(4) : A registered person shall not be entitled to take input tax
credit in respect of any invoice or debit note for supply of goods or services
or both after the due date of furnishing of the return under Section 39 for
the month of September following the end of the financial year to which
such invoice or debit note pertains or furnishing of the relevant annual re-
turn, whichever is earlier.”
The above provision is indicative of the legislative intent to impose time-limits
for availing ITC. Besides, Section 19(3)(d) of the TNVAT Act itself imposed a
time-limit for availing ITC and further provided that it would lapse upon expiry
of such time-limit. In our view, keeping the above statutory backdrop in mind, in
the context of Transitional ITC, the case for a time-limit is compelling and disre-
garding the time-limit and permitting a party to avail Transitional ITC, in perpe-
tuity, would render the provision unworkable. In this regard, we concur with the
conclusion of the Bombay High Court in NELCO that both ITC and Transitional
ITC cannot be availed of except within the stipulated time-limit. Such time-limits
may, however, be extended through statutory intervention. As stated earlier, in
SKH Sheet Metals, the Delhi High Court observed that ITC is the heart and soul of
GST legislations inasmuch as such legislations are designed to prevent the cas-
cading of taxes. There can be no quarrel with this conceptual position; however,
it is not a logical corollary thereof that time-limits for availing ITC and, in partic-
ular, Transitional ITC, are inimical to the object and purpose of the statute.
18. In judgments such as Union of India v. A.K. Pandey [(2009) 10 SCC
552] and Bachhan Devi v. Nagar Nigam [(2008) 12 SCC 372], the Supreme Court
held that the use of words such as “shall” or “may” are not conclusive or deter-
minative of the mandatory or permissive nature of a provision. In C. Bright v. The
District Collector [2019 SCC Online Mad 2460], after considering a number of
judgments of the Supreme Court, a Division Bench of this Court captured the
relevant factors to determine whether a provision is directory or mandatory, il-
lustratively, in paragraph 20. In summary, those factors are : the use of peremp-
tory or negative language, which raises a rebuttable presumption that the provi-
sion is mandatory; the object and purpose of the statute and the provision con-
cerned; the stipulation or otherwise of the consequences of non-compliance;
whether substantive rights are affected by non-compliance; whether the time-
limits are in relation to the exercise of rights or availing of concessions; or wheth-
er they relate to the performance of statutory duties. In this case, the peremptory
word “shall” is used. The relevant rule deals with the time-limit for availing
Transitional ITC by carrying it forward from the credit balance under tax legisla-
tions which have been repealed and replaced by the CGST Act. Thus, the object
and purpose of Section 140 clearly warrants the necessity to be finite. ITC has
been held to be a concession and not a vested right. In effect, it is a time-limit re-
lating to the availing of a concession or benefit. If construed as mandatory, the
substantive rights of the assessees would be impacted; equally, if construed as
directory, it would adversely impact the Government’s revenue interest, includ-
ing the predictability thereof. On weighing all the relevant factors, which may be
not be conclusive in isolation, in the balance, we conclude that the time-limit is
mandatory and not directory.

GST LAW TIMES  6th August 2020  87