Court Grants Relief for Late GST TRAN-1 and TRAN-2 Filings, Transitional Credit Claims Allowed.

The HC allowed the writ applications, directing respondents to permit filing of GST TRAN-1 and TRAN-2 forms, enabling petitioners to claim transitional credit. It declared the due date under Rule 117 of the CGST Rules as procedural, not mandatory, and made the rule absolute, granting the reliefs sought by petitioners.

---

---

Issues Involved:
1. Whether Section 140(3) of the CGST Act provides a substantive right that cannot be curtailed by procedural lapses.
2. Whether the entitlement to carry forward the credit of eligible duties is a vested right.
3. Whether the rights accrued under the existing law have been saved by the CGST Act.
4. Whether the right to carry forward the CENVAT credit is a constitutional right.
5. Whether it is arbitrary, irrational, and unreasonable to discriminate in terms of the time limit for availing input tax credit between pre-GST and post-GST regimes.
6. Whether the doctrine of legitimate expectation is violated.
7. Whether not allowing the right to carry forward the CENVAT credit impacts the working capital and violates Article 19(1)(g) of the Constitution.
8. Whether the liability to pay GST on stock carried forward from the previous tax regime without corresponding input tax credit leads to double taxation.
9. Whether the action is violative of Article 300A of the Constitution of India.

Detailed Analysis:

1. Substantive Right under Section 140(3):
Section 140(3) of the CGST Act allows the carry forward of eligible duties in respect of inputs held in stock, subject to certain conditions. The court held that this section provides a substantive right that cannot be curtailed by procedural rules. The court cited several judgments, including those from the Madras High Court and the Supreme Court, emphasizing that substantive rights cannot be defeated by procedural lapses.

2. Vested Right to Carry Forward Credit:
The entitlement to carry forward the credit of eligible duties is a vested right. The court referred to the Supreme Court's decision in Eicher Motors Ltd. v. Union of India, which recognized the provision for the facility of credit as a vested right. The credit is indefeasible and cannot be taken away by procedural rules.

3. Rights Saved by CGST Act:
The rights accrued under the existing law have been saved by the CGST Act. The court noted that the right to carry forward credit is a right or privilege acquired under the repealed Central Excise Act and has been saved under Section 174(2)(c) of the CGST Act.

4. Constitutional Right to Carry Forward CENVAT Credit:
The right to carry forward the CENVAT credit is a constitutional right. The court emphasized that this right is protected under Article 300A of the Constitution, which states that no person shall be deprived of property except by authority of law.

5. Arbitrary Discrimination in Time Limits:
The court found it arbitrary, irrational, and unreasonable to discriminate between the time limits for availing input tax credit for purchases made in the pre-GST and post-GST regimes. This discrimination was held to be violative of Article 14 of the Constitution, which guarantees equality before the law.

6. Doctrine of Legitimate Expectation:
The doctrine of legitimate expectation was found to be violated. The court held that it is legitimate for a going concern to expect that it will be allowed to carry forward and utilize the CENVAT credit after satisfying all conditions under the Central Excise Law.

7. Impact on Working Capital and Violation of Article 19(1)(g):
Not allowing the right to carry forward the CENVAT credit for failing to file the form GST TRAN-1 within the due date could severely impact the working capital of businesses, thereby violating Article 19(1)(g) of the Constitution, which guarantees the right to practice any profession or carry on any occupation, trade, or business.

8. Double Taxation:
The liability to pay GST on stock carried forward from the previous tax regime without corresponding input tax credit would lead to double taxation, which is arbitrary and irrational. The court referred to C.B.E. & C. Flyer No. 20, which clarified that it is not the intention of the Government to collect tax twice on the same goods.

9. Violation of Article 300A:
The action was also found to be violative of Article 300A of the Constitution, which protects the right to property. The CENVAT credit earned under the erstwhile Central Excise Law is considered the property of the taxpayers and cannot be appropriated without proper authority of law.

Conclusion:
The court allowed the writ applications and directed the respondents to permit the filing of declarations in form GST TRAN-1 and GST TRAN-2 to enable the petitioners to claim transitional credit. It declared that the due date under Rule 117 of the CGST Rules is procedural and not mandatory. The court made the rule absolute to the extent of allowing the reliefs sought by the petitioners.

---