Issue: Is imposition of time limit to avail credit under Section 140(3) of CGST Act harsh/unjust? Isn't such a condition also arbitrary and discriminatory?
Background: Assessee (who was a First Stage Dealer/"FSD" under the erstwhile Central Excise Law) could pass on the credit of excise duty paid on their purchases to the customers, who could utilize such credit against their duty liability on product manufactured by them. Also, this was without any restriction on time during which the goods must be sold. However, Section 140(3)(iv) of the CGST Act has imposed a time-limit for availing such benefit, which also acts retrospectively.
Ruling: The benefit of credit of eligible duties on purchases by FSD as per the erstwhile CENVAT credit rules was a vested right. But, due to Section 140(3)(iv) ibid, such right has been taken away with retrospective effect in relation to goods which were purchased prior to one year from the appointed day. This retrospectivity has no rational or reasonable basis for imposition of the condition. Though the impugned provision does not make hostile discrimination between similarly situated persons, the same does impose a burden with retrospective effect without any justification. Hence, Section 140(3)(iv) ibid is struck down as unconstitutional.