2019 (5) TMI 899 - HC - GST

Court addresses procedural glitches in GST Network impacting input tax credit claims under Section 140(3) of CGST Act.

The court addressed procedural glitches in the GST Network affecting an input tax credit claim by a trader and distributor under Section 140(3) of the ... Transitional input tax credit - form TRAN-1 - technical glitch in the GSTN portal - entitlement under Section 140(3) of the CGST Act to claim credit of eligible duties on inputs held on appointed day - revision/rectification under Rule 120A - judicial direction to reopen portal or accept manually filed TRAN-1 - electronic credit ledger visibility and acknowledgementTechnical glitch in the GSTN portal - form TRAN-1 - judicial direction to reopen portal or accept manually filed TRAN-1 - electronic credit ledger visibility and acknowledgement - Relief where a procedural/technical defect in the GSTN portal prevents the TRAN-1 credit from being reflected in the electronic ledger - HELD THAT: - The Court found that the dispute concerned a procedural/technical failure of the portal which impeded reflection of the TRAN-1 entries in the electronic ledger and thereby precluded the authorities from examining the claim on merits. Noting that assessees could not save, print or obtain a pre-submission screenshot of the filled TRAN-1 and that the portal's design limited rectification, the Court concluded that such genuine filing difficulties should not bar adjudication of substantive claims. In the exercise of its supervisory jurisdiction the High Court directed the Respondents to either reopen the portal to enable the petitioner to re-file TRAN-1 electronically or to accept a manually filed TRAN-1 on or before 31st May 2019 and thereafter to process the petitioner's claims in accordance with law. The Court also directed consideration of software improvements (save, review, print and automated acknowledgement features) to prevent recurrence of similar difficulties. [Paras 9, 11, 12]Respondents directed to reopen the portal or accept manually filed TRAN-1 by 31st May 2019 and to process the petitioner's claims; respondents to consider portal enhancements for saving, review, printing and acknowledgements.Transitional input tax credit - entitlement under Section 140(3) of the CGST Act to claim credit of eligible duties on inputs held on appointed day - revision/rectification under Rule 120A - Adjudication on the merits of the petitioner's claim to input tax credit and entitlement under Section 140(3) is not decided and is to be examined by the authorities - HELD THAT: - The Court expressly refrained from deciding whether the petitioner is entitled to the claimed input tax credit under Section 140(3) of the CGST Act, observing that the authorities had not examined supporting documents because the TRAN-1 entries did not reflect the claimed amount in the electronic ledger. The Court's directions remedied the procedural impediment but left the substantive question of eligibility and the assessment of supporting evidence to the competent tax authorities for determination under law, noting that revision under Rule 120A was a limited facility and did not amount to adjudication on entitlement. [Paras 9, 11]Substantive entitlement to the claimed transitional credit left open for examination and decision by the authorities after submission/process of TRAN-1.Final Conclusion: Petition disposed by directing the respondents to enable refiling or accept manual TRAN-1 and to process the petitioner's claimed transitional input credit; substantive entitlement under Section 140(3) to be examined and decided by the tax authorities. Dasti. Issues: Procedural glitch in GST Network affecting input tax credit claim.Analysis:1. The petitioner, a trader and distributor, sought input tax credit under Section 140(3) of the CGST Act for excise duty paid on goods in stock. The petitioner faced technical glitches while filing TRAN-1 form on the GST Network within the prescribed period, leading to the credit not reflecting in the electronic ledger despite successful filing confirmation.2. The court noted the petitioner's genuine claim for credit based on real transactions but highlighted the lack of a review provision before form submission, complicating the issue. The authorities were directed to disclose the petitioner's filled TRAN-1 form details and basis for rejecting the credit claim, emphasizing the need for a thorough examination.3. Affidavits filed by GSTN and Commissioner, Central Tax GST, Delhi revealed that the petitioner's claim documents were yet to be examined due to discrepancies in the filled TRAN-1 form. The court acknowledged the technical limitations hindering rectification of errors in the system, impacting dealers' ability to ensure accurate form submissions.4. While refraining from determining the entitlement to input tax credit, the court addressed the systemic challenges in the GST Network, emphasizing the ongoing trial and error phase in its implementation. Referring to a Madras High Court decision, the court directed the authorities to allow the petitioner to refile TRAN-1 electronically or manually, ensuring due processing of the claim.5. To prevent future glitches, the court directed the respondents to enhance the software by enabling traders to save, review, and print filled forms, along with providing acknowledgment upon correct form submission. The judgment concluded by disposing of the petition with the outlined directions to address the technical issues and ensure fair processing of input tax credit claims.