FILING OF TRAN-1 NOT MANDATORY TO CLAIM REFUND OF UNUTILISED CENVAT CREDIT UNDER VAT REGIME: A CRITICAL ANALYSIS

In a landmark decision, the Gujarat High Court  M/s. Weatherproof Solution & Anr. Versus State Of Gujarat & Anr. - 2025 (6) TMI 1840 - GUJARAT HIGH COURT, ruled that filing Form GST TRAN-1 is not a mandatory precondition to claim refund of unutilised input tax credit (ITC) under the erstwhile VAT regime. The judgment offers significant relief to dealers who failed to migrate such credit into the GST regime via TRAN-1 but had substantiated their refund claims under the old law.

1.  Background of the Case

The Petitioner, M/s Weatherproof Solution, a registered assesse under the Gujarat VAT Act filed a refund application for Rs. 3,90,762/-of un adjusted ITC shown in VAT Form 201 instead of filing Form TRAN-1 as provided under GST Act, 2017 for the VAT Credit available for the period April 2017 to 30 June 2017. The department rejected refund citing absence of TRAN-1 and expiry of assessment timeline under VAT.

2.  Key Legal Issues

The Court examined:

• Whether filing GST TRAN-1 is mandatory to claim unutilised VAT credit as refund?
• Whether refund claim is barred by limitation under VAT/GST?
• Whether rights under repealed VAT law can survive by virtue of Section 174(2)(c) of the CGST Act?

3.  Court’s Findings

A. Not Mandatory to File TRAN-1 for Refund

Section 140 of the CGST Act allows carry forward of credit, but does not mandate it as the exclusive route. Rule 15(6) of Gujarat VAT Rules allows refund of unutilised credit within two years, provided goods are disposed of per Section 11(3). The petitioner had not availed the credit under GST; hence, there was no double benefit for the Assesse or duplication of claim.

B. Deemed Assessment and Refund Right

As no assessment was made under Section 34(2) of VAT Act within 4 years, the VAT return filed by the Assesse stood deemed assessed. Since the credit remained unadjusted and was never claimed under GST Act/ Rules, the Court held that refund could not be denied merely because TRAN-1 was not filed.

C. Savings Clause Supports the Refund

The Court observed that Section 174(2)(c) of CGST Act preserves vested rights under repealed laws. Hence the right to refund accrued under VAT law was held to survive repeal, and denial would violate Article 265 of Indian Constitution (no tax without authority of law).

4.  Distinguished Case Law Referred

The Hon’ble Court relied on the following case laws:

EICHER MOTORS LTD. Versus UNION OF INDIA  - 1999 (1) TMI 34 - Supreme Court - CENVAT credit is a vested right unless taken away by law.

COLLECTOR OF CENTRAL EXCISE, PUNE Versus DAI ICHI KARKARIA LTD. - 1999 (8) TMI 920 - Supreme Court (LB). – Input credit once validly accrued cannot be arbitrarily denied.

UNION OF INDIA Versus FILCO TRADE CENTRE PVT. LTD. - 2022 (9) TMI 514 - SC Order – TRAN-1 filing deadline extensions; held not mandatory for refund cases.

TORRENT POWER LTD. And 1 other (s) Versus STATE OF GUJARAT And 1 other (s) - 2019 (6) TMI 893 - GUJARAT HIGH COURT. – Refunds are maintainable where no adjudication is possible due to limitation.

5.  Implications of the Ruling

Relief to thousands of dealers who missed TRAN-1 filing but had valid unutilised credit.

 Reinforces the non-abrogation of vested rights under repealed tax regimes.

Aids equitable enforcement and prevents unjust enrichment of the state exchequer.

 May trigger review or re-opening of similar refund rejections across India, especially in cases where GST TRAN-1 was not filed, but VAT returns were duly filed.

This judgment has to act as a textbook reaffirming of the constitutional mandate under Article 14 and 265 — that tax administration must operate with equity and legality. At least Training institutes like NACIN and other State entities will teach the officer trainees about this case. The High Court rightly emphasized that substantive rights cannot be denied by procedural defaults, especially in transitory phases like GST rollout. The ruling sets a progressive precedent by distinguishing between carry forward and refund, and reinforces that TRAN-1 is a procedural facilitation, not a gatekeeper of rights.

 Conclusion

The Gujarat High Court’s verdict in Weatherproof Solution paves the way for rightful recovery of stranded tax credits under the pre-GST regime, ensuring that procedural lapses do not defeat legitimate economic entitlements. It is a vital precedent in the ongoing litigation on transitional credit and refund rights, and will likely shape future jurisprudence on transitory justice in tax laws.

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By

G. Jayaprakash, Advocate