Allowed

M/S Tkt Hightech Cast Private Limited v. Commissioner of Gujarat, GST

Gujarat HC3 Feb 2022SCA/6721/2019

Case brief

AI extract

What is this about?

The High Court of Gujarat allowed a writ petition seeking transitional GST credit. It held that Rule 117 of the CGST Rules regarding the deadline for filing Form TRAN-1 is directory, not mandatory, and that accrued input tax credit is a vested property right under Article 300(A) protected from forfeiture by rules.

What did the court decide?

Petitioner permitted to file Form GST TRAN-1 electronically or manually; respondent directed to verify and process within two weeks.

M/S Tkt Hightech Cast Private Limited Vs Commissioner… — GST and Indirect Tax | Gujarat HC (2022)

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C/SCA/6721/2019 ORDER DATED: 03/02/2022

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 6721 of 2019

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============================================= M/S TKT HIGHTECH CAST PRIVATE LIMITED

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Versus

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COMMISSIONER OF GUJARAT, GST

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=============================================

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Appearance:

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MR D K TRIVEDI(5283) for the Petitioner(s) No. 1,2 MR ANKIT SHAH(6371) for the Respondent(s) No. 2,4 MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 2 NOTICE SERVED for the Respondent(s) No. 1,3

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CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and

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HONOURABLE MS. JUSTICE NISHA M. THAKORE

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Date : 03/02/2022 ORAL ORDER

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(PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE)

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By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs:

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“a) Your Lorships may be pleased to admit this petition;

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b) Your Lordships may be pleased to allow this petition;

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c) Your Lordships may be pleased to issue writ of mandamus or any necessary writ(s), direction(s) and/or pass necessary order(s) directing the Respondent Nos.01, 02 & 03 to allow the Petitioner the benefits of transitional credit of Rs.2,41,33,827/by allowing them to file delcaration electronically in Form GST TRAN-1;

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d) Your Lordships be pleased to issue order(s), direction(s), writ(s) or any other relief(s) as this Hon’ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice.”

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The facts as emerging from the record are summarized as under:

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2.1 The writ applicant No.1 is a private limited company,

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incorporated under the provisions of the Companies Act, 1956 and the writ applicant No.2 is the Director of the said company. The writ applicant company is engaged in the business of manufacturing of cast articles of iron or steel falling under Central Excise Tariff sub heading No.73259910.

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2.2 It is the case of the writ applicant that under the erstwhile regime, the writ applicant company was a registered dealer and had availed Input Tax Credit of the accumulated CENVAT credit as of 30.06.2017. The writ applicant No.1 claims to have filed ER-1 returns i.e. return of excisable goods and the availment of CENVAT credit was in accordance with the provisions of the prevailing statute. Pursuant to the introduction of the Central Goods and Service Tax Act, 2017 (herein after referred to as ‘the Act, 2017’) with effect from 01.07.2017, the writ applicant company got itself registered as a “registered dealer” under the Act, 2017 vide Registration bearing GSTN No.24AADCT4916E1ZL. Since the writ applicant company meets with all the conditions as set out for the availment of benefit of Input Tax Credit upon the accumulated CENVAT credit as of 30.06.2017, applied for the same by filing declaration FORM TRAN – 1.

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2.3 It is the case of the writ applicant that the writ applicant company was facing financial constrains and in fact, the bank account of the writ applicant company was declared as NPA (Non Performing Assets) by COSMOS Co-operative Bank Ltd. and in absence of sufficient staff, the writ applicant company could not filed TRAN – 1 on or before the notified date i.e. 27.12.2017. In such circumstances, since the last date for filing TRAN – 1 having lapsed, the writ applicant company

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approached the respondent authority. However, the help desk of the respondent authority responded vide E-mail dated 08.04.2018 that the window for uploading TRAN -1 is closed.

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2.4 It is the case of the writ applicant that subsequently, CBIC had issued Notification bearing No.48/2018, dated 10.09.2018 thereby reopening the portal for loading FORM TRAN -1 in case of registered persons, who could not earlier filed their forms. Even the due date for submitting GST TRAN – 1 was extended up to 31.03.2019. In such circumstances, the writ applicant once again approached with a request letter dated 12.09.2018 addressed to the Commissioner of GST, Ahmedabad to consider his case for uploading the TRAN – 1 Form in light of the aforesaid Notification. However, the respondent No.1 having not responded to such request of the writ applicant company, the writ applicants have approached this Court with a prayer to direct the respondent authorities to allow the benefits of transitional credit of an amount of Rs.2,41,33,827/by permitting them to file declaration electronically in Form GST TRAN – 1.

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We have heard Mr. D.K. Trivedi, the learned counsel appearing for the writ applicants and Mr. Utkarsh Sharma, the learned Senior Standing Counsel appearing for the respondent authorities. We have also perused the documents annexed with the writ application as well as have also carefully gone through the affidavit-in-reply filed by the Commissioner, CGST and CX, Ahmedabad North.

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Regardless the respondent’s objection with regard to the tax payer having failed to submit Form TRAN-1 electronically within the specified time limit more particularly, contending

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and by relying upon Section 140 of the Act read with Rule 117 of the CGST Rules that the tax payer cannot claim the credit accumulated under the erstwhile taxation regime as a vested right for transition under the GST Act, is without any basis. This Court on number of occasions has come across similar controversy wherein in past, the respondent authorities have refused to extend the availment of the Input Tax Credit on account of delayed filing of Form TRAN – 1. So far as the contention of the respondent authorities as regard vested right is concerned, the same is subject to certain conditions safeguards and limitations as provided and prescribed under the statutes and the rules framed thereunder. However, at the same time, this Court as well as the other High Courts on number of occasions have considered the aforesaid aspect and have ultimately, held that the credit standing in favour of an assessee is “property” and the assessee cannot be deprived of such property saved by authority of law in terms of Article 300(A) of the Constitution of India.

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So far as core issue with regard to delay in filing Form TRAN-1 is concerned, the same is no more res-integra. In one of such decision, the High Court of Delhi had an occasion to consider the similar objections raised by the respondent authorities more particularly, that there was no technical anomalies to the tax payers from filing of Form TRAN-1 on the common GST portal. The stand of the department was that the writ applicant, in absence of sufficient explanation of delay in submitting Form TRAN – 1, were not entitled to availing of Input Tax Credit on the accumulated CENVAT credit as of 30.06.2017. The issue was examined and relevant observations of the High Court of Delhi, in the case of Brand

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Equity Treaties Ltd. & Ors. vs. Union of India , reported in [2020] 116 taxmann.com 415 (Delhi) , are reproduced as under:

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“12. On 1st July, 2017, the new indirect tax regime was introduced in the country by way of enactments, including the Central Goods and Services Tax Act, 2017 (CGST Act). The CGST Act introduced transitionary provisions to enable the taxpayers to migrate from the erstwhile indirect tax regime to the new GST regime. Section 140 of the CGST Act deals with the transitionary provisions. Section 140 has several sub-clauses, however, since all the four petitioners are covered by sub clause (1) of the Section 140, we are focusing on the said provision alone, and the same reads as under:

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“140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed:

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Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:—

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(i) where the said amount of credit is not admissible as input tax credit under this Act; or

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(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

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(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.”

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In pursuance of the above noted provision, respondent No.1 framed the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’). Rule 117 of the said rules imposed a time limit of 90 days for availing benefit of the accumulated CENVAT credit as provided under Section 140 (1) in its input tax credit register under the CGST Act. The said Rule reads as under:

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“117. Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day.-

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(1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to

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which he is entitled under the provisions of the said section: Provided that the Commissioner may, on the recommendations of the Council, extend the period of ninety days by a further period not exceeding ninety days. Provided further that where the inputs have been received from an Export Oriented Unit or a unit located in Electronic Hardware Technology Park, the credit shall be allowed to the extent as provided in sub-rule (7) of rule 3 of the CENVAT Credit Rules, 2004.

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[(1A) Notwithstanding anything contained in subrule (1), the Commissioner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN-1 by a further period not beyond [31st December, 2019], in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension.]

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(2) Every declaration under sub-rule (1) shall-

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(a) in the case of a claim under sub-section (2) of section 140, specify separately the following particulars in respect of every item of capital goods as on the appointed day- (i) the amount

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of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and (ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day;

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(b) in the case of a claim under sub-section (3) or clause (b) of sub-section (4) or sub-section (6) or sub-section (8) of section 140, specify separately the details of stock held on the appointed day;

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(i) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law;

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(ii) the description and value of the goods or services;

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(iii) the quantity in case of goods and the unit or unit quantity code thereof;

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(iv) the amount of eligible taxes and duties or, as the case may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services; and

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(v) the date on which the receipt of goods or services is entered in the books of account of the recipient.”

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The transition from the erstwhile regime to GST for the availment of the CENVAT credit was to be by way of a declaration to be submitted electronically in Form GST TRAN-1. The date prescribed for filing of the said Form was extended several times by way of orders issued from time to time, finally till 27th December, 2019. Several taxpayers however could not meet the deadline. This was on account of several factors - predominantly being inadequacies in the network of the respondents, which failed to meet the expectations and serve the needs of taxpayers. Thousands of taxpayers complained that there was low bandwidth and despite several attempts being made on the GST Network, they were unsuccessful in filing the statutory GST TRAN-1 Form online. Scores of complaints were made on the portal and it was also brought to the notice of the government. The technical difficulties faced by the taxpayer were acknowledged and an IT Grievance Redressal Committee was constituted and assigned the task of redressing the grievance of the taxpayers. The recommendations of the Grievance Redressal Committee were also brought to the notice of the GST Council and the matter was deliberated upon. Several cases got settled at the government level, however some cases were contested on the ground that taxpayers did not put forward any evidence to suggest that they faced any technical glitch on the portal that prevented them to submit the GST TRAN-1 Form within the prescribed time limit. Many such matters travelled to courts. Majority of them were allowed in favour of the taxpayers, and directions were issued to the respondents to permit the filing of TRAN-1 Form beyond the extended date. Some cases where such reliefs have been granted by this Court are M/s Blue Bird Pure Pvt. Limited vs. Union of India 2019 SCC OnLine 9250; SARE Realty Projects Pvt. Limited vs. Union of India [W.P.(C) 1300/2018decided on 1st August, 2018] ,Bhargava Motors vs. Union of India [W.P.(C) 1280/2019 decision dated 13th May, 2019] ; Kusum Enterprises Pvt. Limited vs. Union of India [W.P. (C) 7423/2019 decided on 12th July, 2019]. It would also be worthwhile to note that in this period, the government also acknowledged that on account of technical difficulties, the taxpayers were indeed unable to file the statutory form within time and CBIC vide notifications issued from time to time, extended the date prescribed for filing of Form GST TRAN-1 under Rule 117 (1A) of the CGST Rules. This period, as on date, is being extended by various notifications. Notably, vide Notification 48/2018-CT dated 10th September, 2018, the government inserted Sub-rule (1A) to Rule 117, whereby, on the recommendation of the Council, it is now permissible for the

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Commissioner to extend the date for submitting the declaration electronically in Form GST TRAN-1, by a further period in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension. The said Sub-rule, reads as under:

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“[(1A) Notwithstanding anything contained in sub-rule (1), the Commissioner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN-1 by a further period not beyond [31st December, 2019], in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension”

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The insertion of Sub-rule 1(A) and, thereafter, extensions being granted for filing of GST TRAN-1, notwithstanding the period envisaged under sub rule (1) of Rule 117, demonstrates that the respondents recognize the fact that the registered persons were not able to upload GST TRAN-1 due to technical difficulties on the common portal. This also substantiates that the period for filing the TRAN-1 is not considered – either by the legislature, or the executive as sacrosanct or mandatory.

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In the above factual background, in some of the cases that came up before this Court, the petitioners cited difficulties in filing the TRAN-1 Form which were of a different nature. In some cases, there were bonafide errors on the part of the taxpayer and in others, the difficulty arose on account of lack of understanding of the complete overhaul of the indirect tax system; or complicated filing procedure and the statutory forms resulting in erroneous information being stated therein. Even in such cases, to note a few, this Court has declined to make a differentiation and given the benefit of the doubt to the taxpayers, realizing that Respondent’s network and system, and the change, had posed multifarious problems that require a reasonable approach. One such petition has been preferred by the Sales Tax Bar Association [W.P (c) No. 9575/2017] narrating scores of technical problems being faced on the portal. We adopted a proactive approach in the said matter and have endeavoured to identify root cause for failure of the network to work seamlessly. In the said proceedings, we had also held a special hearing inviting the senior officials from the GSTN network as well as the officers of the Council and the policy makers. As a result of such deliberations, some headway has been made and recently we were informed that the respondents have revamped the GST redressal mechanism so as to address the problems at a grass-root level. The upshot of this experience is that the GSTN network, indeed, is riddled with shortcomings and inadequacies. This is palpably evident from the sheer number of cases being presented before us, in relation to such technical difficulties and inadequacies. The benchmark, in our view, is that the online system brought into force by the GSTN

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Ltd. should be able to perform all functions and should have all flexibilities/options, which were available in the pre-GST regime.The problems on the GSTN cannot be wished away, and have to be resolved in the right earnest. This requires sensitivity on the part of the Government which has, unfortunately, not been exhibited in adequate measure.

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The above decision would also cover the case of the Petitioners, and there can be no two views about this proposition and we would like to extend similar benefit to them. Nevertheless, let’s delve into the more fundamental question - Whether the Government could curtail the accrued and vested right, and restrict it to 90 days by a subordinate legislation? To answer this vexed query, let’s first examine the legal provisions. Sub-section (1) of Section 140 which deals with the transitory provision, permits carry forward of the CENVAT credit. This presupposes that the amount of CENVAT credit of eligible duties has therefore accrued and is existing and reflected in the CENVAT credit register. Sub-Section (1) of Section 140 enables a registered person to carry forward such credit in the return relating to the period ending with the day (30th June, 2017) immediately preceding the appointed date which is 1st July, 2017 furnished by him under the existing law. The provisions of the Service Tax under Chapter V of the Finance Act stood repealed by virtue of the GST legislation as provided under Section 174 of the CGST Act. Thus, on the appointed date, the credits which existed under the previous regime were required to be transitioned to the new regime. This credit in every sense stood accumulated, acquired and vested on the appointed date as it was reflected in the said CENVAT credit register in the previous regime. On enactment of the CGST Act, no mechanism was provided for the refund of the credit that existed on the said date. The only mechanism was for utilization of such credit by migrating the same to the GST regime by way of filing declarationForm TRAN-1. The manner and procedure to carry forward the said CENVAT credit under SubSection (1) of Section 140 was to be ‘prescribed’. The word ‘prescribed’ has also been defined under Section 2(87) to mean “prescribed by Rules made under this act on the recommendation of the council”. This brings us to Rule 117 of CGST Rules, the relevant provision prescribing the manner in which the CENVAT credit has to be transitioned. Initially, the time limit prescribed under Rule 117 for transitioning was 90 days, as explained above, was extended from time to time. Evidently, there is no other provision in the Act prescribing time limit for the transition of the CENVAT credit, and the same has been introduced only by way of Rule 117. This provision also contains a proviso, which vests power with the Commissioner to extend the period on the recommendations of the Council. Indeed, the Commissioner has exercised such power and time period which was initially to expire after 90 days, has been, as a matter of fact, extended till 29th December, 2017. In fact, as noticed above, under Sub-Rule (1A) of Rule 117, for a specific class of persons, the time limit has gone way beyond the period originally envisaged, and has still not expired. Thus, there is nothing sacrosanct about the time limit so provided. It is not as if the Act completely restricts the transition of CENVAT credit in

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the GST regime by a particular date, and there is no rationale for curtailing the said period, except under the law of limitations. The period of 90 days has no rationale and as noted above, extensions have been granted by the Government from time to time, largely on account of its inefficient network.

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In above noted circumstances, the arbitrary classification, introduced by way of sub Rule (1A), restricting the benefit only to taxpayers whose cases are covered by “technical difficulties on common portal” subject to recommendations of the GST Council, is arbitrary, vague and unreasonable. What does the phrase “technical difficulty on the common portal” imply? There is no definition to this concept and the respondent seems to contend that it should be restricted only to “technical glitches on the common portal”. We, however, do not concur with this understanding. “Technical difficulty” is too broad a term and cannot have a narrow interpretation, or application. Further, technical difficulties cannot be restricted only to a difficulty faced by or on the part of the respondent. It would include within its purview any such technical difficulties faced by the taxpayers as well, which could also be a result of the respondent’s follies. After all, a completely new system of accounting; reporting of turnover; claiming credit of prepaid taxes; and, payment of taxes was introduced with the implementation of the GST regime. A basket of Central and State taxes were merged into a single tax. New forms were introduced and, as aforesaid, all of them were not even operationalised. Just like the respondents, even the taxpayers required time to adapt to the new systems, which was introduced as a completely online system. Apart from the shortcomings in the system developed by GSTN Ltd., the assessees also faced the challenges posed by low bandwidth and lack of computer knowledge and skill to operate the system. It is very unfair on the part of the respondents, in these circumstances, to expect that the taxpayers should have been fully geared to deal with the new system on day-one, when they themselves were completely ill-prepared, which led to creation of a complete mess. The respondents cannot adopt different standards – one for themselves, and another for the taxpayers. The GST regime heralded the system of seamless input tax credits. The successful migration to the new system was a formidable and unprecedented task. The fractures in the system, after its launch, became visible as taxpayers started logging in closer to the deadline. They encountered trouble filing the returns. Petitioners who are large and mega corporations - despite the aid of experts in the field, could not collate the humongous data required for submission of the statutory forms. Courts cannot be oblivious to the fact that a large population of this country does not have access to the Internet and the filing of TRAN-1 was entirely shifted to electronic means. The Nodal Officers often reach to the conclusion that there is no technical glitch as per their GST system laws, as there is no information stored/logged that would indicate that the taxpayers attempted to save/submit the filing of Form GST TRAN-1. Thus, the phrase “technical difficulty” is being given a restrictive meaning which is supplied by the GST system logs. Conscious of the circumstances that are prevailing, we feel that taxpayers cannot be robbed of

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their valuable rights on an unreasonable and unfounded basis of them not having filed TRAN-1 Form within 90 days, when civil rights can be enforced within a period of three years from the date of commencement of limitation under the Limitation Act, 1963.

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The introduction of Sub rule (1A) in Rule 117 is a patchwork solution that does not recognise the entirety of the situation. It sneaks in an exception, without addressing situations taken note of by us. This exception, as worded, is an artificial construction of technical difficulties, limiting it to those existing on the common portal. It is unfair to create this distinction and restrict it to technical snags alone. In our view, there could be various different types of technical difficulties occurring on the common portal which may not be solely on account of the failure to upload the form. The access to the GST portal could be hindered for myriad reasons, sometimes not resulting in the creation of a GST log-in record. Further, the difficulties may also be offline, as a result of several other restrictive factors. It would be an erroneous approach to attach undue importance to the concept of “technical glitch” only to that which occurs on the GST Common portal, as a pre-condition, for an assesee/tax payer to be granted the benefit of SubRule (1A) of Rule 117. The purpose for which Sub-Rule (1A) to Rule 117 has been introduced has to be understood in the right perspective by focusing on the purpose which it is intended to serve. The purpose was to save and protect the rights of taxpayers to avail of the CENVAT credit lying in their account. That objective should also serve other taxpayers, such as the petitioners. The approach of the Government should be fair and reasonable. It cannot be arbitrary or discriminatory, if it has to pass the muster of Article 14 of the Constitution. The government cannot turn a blind eye, as if there were no errors on the GSTN portal. It cannot adopt different yardsticks while evaluating the conduct of the taxpayers, and its own conduct, acts and omissions. The extremely narrow interpretation that the respondents seek to advance, of the concept of “technical difficulties”, in order to avail the benefit of Sub Rule (1A), is contrary to the statutory mechanism built in the transitory provisions of the CGST Act. The legislature has recognized such existing rights and has protected the same by allowing migration thereof in the new regime under the aforesaid provision. In order to avail the benefit, no restriction has been put under any provisions of the Act in terms of the time period for transition. The time limit prescribed for availing the input tax credit with respect to the purchase of goods and services made in the pre-GST regime, cannot be discriminatory and unreasonable. There has to be a rationale forthcoming and, in absence thereof, it would be violative of Article 14 of the Constitution. Further, we are also of the view that the CENVAT credit which stood accrued and vested is the property of the assessee, and is a constitutional right under Article 300A of the Constitution. The same cannot be taken away merely by way of delegated legislation by framing rules, without there being any overarching provision in the GST Act. We have, in our judgment in A.B. Pal Electricals (supra) emphasized that the credit standing in favour of the assessee is a vested property right under Article

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300A of the Constitution and cannot be taken away by prescribing a time-limit for availing the same.

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Lastly, we also find merit in the submissions of the petitioners that Rule 117, whereby the mechanism for availing the credits has been prescribed, is procedural and directory, and cannot affect the substantive right of the registered taxpayer to avail of the existing / accrued and vested CENVAT credit. The procedure could not run contrary to the substantive right vested under sub Section (1) of Section 140. While interpreting Order VIII Rule 1 CPC, the Supreme Court has observed that the time limit for filing written statement is directory in nature and not mandatory, and that “procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice” [Ref: Salem Advocates Bar Association v. Union of India AIR 2003 SC 189]. Reference may also be made to Commissioner of Central Excise, Madras v Home Ashok Leyland (2007) 4 SCC 41, wherein it was observed that the Rule 57E of the Central Excise Rules, 1944 was a procedural provision, which provides procedure for adjustment of MODVAT credit available to the taxpayer and, hence, the right available under the substantive provision cannot be deprived for non-compliance with the procedural provision. There is no consequence provided in Rule 117 of GST Rules on account of failure to file GST TRAN-1. The argument of the respondents is that the consequence is provided in Sub-Section (1) of Section 140 by way of a pre-condition for being entitled to transit the CENVAT credit in his electronic credit register under the GST regime. We do not agree. Section 140 (1) is categorical. It states that the registered person “shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day….”. Only the manner i.e. the procedure of carrying forward was left to be provided by use of the words “in such manner as may be prescribed”. The limitation on the right to carry forward the CENVAT credit is substantively provided by the proviso to the said section. Those are the only limitations on the said statutory right. Under the garb of framing Rules – which are subordinate legislation, the width of those limitations could not have been expanded as is sought to be done by introduction of Rule (1A). In absence of any consequence being provided under Section 140, to the delayed filing of TRAN-1 Form, Rule 117 has to be read and understood as directory and not mandatory. Further, even in ALD Automotive Pvt. Ltd. v Commercial Tax Officer(2019) 13 SCC 225, while dealing with the question of whether the provision prescribing time limit for claim of Input Tax Credit is directory or mandatory in nature, it was observed that “whether particular provision is mandatory or directory has to be determined on the basis of object of particular provision and design of the statute” and “such interpretation should not be put which may promote the public mischief and cause public inconvenience and defeat the main object of the statute”. Therefore, in the present cases, the purport of the transitory provisions is to allow a smooth migration from the erstwhile service tax regime to the new GST regime and the interpretation must be in consonance with the said purpose.

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We, therefore, have no hesitation in reading down the said provision [ Rule 117] as being directory in nature, insofar as it prescribes the time-limit for transitioning of credit and therefore, the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. This however, does not mean that the availing of CENVAT credit can be in perpetuity. Transitory provisions, as the word indicates, have to be given its due meaning. Transition from pre-GST Regime to GST Regime has not been smooth and therefore, what was reasonable in ideal circumstances is not in the current situation. In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit.

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Accordingly, since all the Petitioners have filed or attempted to file Form TRAN-1 within the aforesaid period of three years they shall be entitled to avail the Input Tax Credit accruing to them. They are thus, permitted to file relevant TRAN-1 Form on or before 30.06.2020. Respondents are directed to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually. Respondents shall thereafterprocess the claims in accordance with law. We are also of the opinion that other taxpayers who are similarly situated should also be entitled to avail the benefit of this judgment. Therefore, Respondents are directed to publicise this judgment widely including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 till date are permitted to do so on or before 30.06.2020.”

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Thus, in the aforesaid case, the High Court of Delhi ultimately held that Rule 117 of the CGST Rules is directory in nature in so far as it prescribes the time limit for transitioning of credit is concerned and at the same time the Court has held that the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. Ultimately, the Court after considering the terms of residuary provisions of the Limitation Act held that the period of three years should be the guiding principle and thus, a period of three years from the appointed date would be the maximum period for availing of such credit.

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It appears that the aforesaid decision of the High Court of

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Delhi was challenged by the respondent authorities by filing SLP before the Supreme Court bearing No. SLP (C) No. 22386/2020, whereby the Supreme Court vide order dated 07.01.2021 was pleased to dismissed the aforesaid appeal on the ground of delay as well as on merits.

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Even this Court had an occasion to deal with similar issue in the case of M/s Siddharth Enterprises through partner Mahesh Liladhar Tibdewal vs. The Nodal Officer , in a batch of writ applications being Special Civil Application No.5758 of 2019 and allied matters. This Court vide order dated 06.09.2019 has allowed the aforesaid batch of writ applications with a direction to the respondent authorities to permit the writ applicants filing of declaration Form GST TRAN-1 and GST TRAN – 2 to enable them to claim transitional credit of the eligible duties in respect of the inputs held in the stock as on the appointed date in terms of Section 140(3) of the Act. At the same time, this Court further held that the due date as contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit are held to be procedural in nature and should not be construed mandatory. It transpires that the aforesaid order was challenged by the respondent authorities by preferring Special Leave Petition before the Supreme Court of India. It further transpires that pending the aforesaid SLPs, Misc. Civil Applications being MCA No.3 of 2020 seeking direction for implementation/effect of the order, were preferred by the respective original petitioners. In the said Misc. Civil Applications after various deliberations and orders passed from time to time, pursuant to the efforts made by the learned Additional Solicitor General, the controversy was resolved in asmuch as that in light of the suggestion of the

¶98

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¶99

C/SCA/6721/2019 ORDER DATED: 03/02/2022

¶100

High Court of Calcutta, the assessees facing similar difficulties were permitted to file Individual Tax Credit in GSTR-3B Forms and the concerned authority/Assessing Officer were given liberty to verify the genuineness of such claim. In light of the aforesaid suggestion, the batch of Misc. Civil Applications came to be disposed of vide common order dated 12.01.2022.

¶101

Indisputably, the writ applicant company at relevant stage though, belatedly had applied for filing of Form TRAN – 1 to avail the Input Tax Credit of the accumulated CENVAT credit as of 30.06.2017 as reflected in their letter dated 05.04.2018. The reason explained by the writ applicant for the delayed uploading of the Form appears to be genuine as the bank account of the writ applicant company was declared Non Performing Account. We find that the writ applicant company had sufficient cause to not to apply for the availment of Input Tax Credit during transitional period. Even otherwise, the respondent authority considering the technical glitches faced by the various assessees on its own had come with the Circular more particularly, Notification No.48/2018, dated 10.09.2018 issued by the CBIC, whereby the due date for submitting the GST TRAN-1 was extended up to 31.03.2019 and the portal was reopened for the registered persons, who could not filed it earlier. It is not in dispute that substantial amount to the tune of Rs.2,41,33,827/- were lying in the account of erstwhile regime and pursuant to the Notification dated 10.09.2018, the writ applicant had immediately approached to the respondent authority namely the Commissioner of GST vide letter dated 12.09.2018 to give him an opportunity to upload Form TRAN-1 by reopening the portal.

¶102

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¶103

C/SCA/6721/2019 ORDER DATED: 03/02/2022

¶104

Thus, in the given facts and circumstances of the case as well as the legal position as settled in the above decisions of this Court as well as other Courts, we have no hesitation in reiterating that Rule 117 of the CGST Rule being directory in nature, the prescribed time limit for transitioning of credit would in no manner result in forfeiture of the rights of the writ applicants even though, when the credit is not availed within the period prescribed. Even otherwise, we find that the period of three years as described by the High Court of Delhi to be a guiding principle for availing of such credit from the appointed date, the case of the writ applicant falls within the aforesaid period of three years.

¶105

Thus, the writ application succeeds and is hereby allowed. We direct the respondent authorities to permit the writ applicant to file Form GST TRAN-1 either by opening the online portal so as to enable the writ applicant to file declaration TRAN-1 electronically or to accept the same manually. Needless to say that the writ applicant shall furnish necessary details as may otherwise be required in accordance with law. The respondent authorities shall verify and process such Form in accordance with law within a period of two weeks from the date of receipt of copy of the writ of this order.

¶106

(NISHA M. THAKORE,J)

¶107

NEHA

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Page 16 of 16

M/S Tkt Hightech Cast Private Limited v. Commissioner of Gujarat, GST

Case brief

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M/S Tkt Hightech Cast Private Limited v. Commissioner of Gujarat, GST

Case brief

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What the court decided

A compact analysis

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