2019 (11) TMI 710 - HC - GST

Petitioner Granted Permission to Rectify GST TRAN-1 Error, Court Rules Retention of Funds Unconstitutional.

The HC allowed the petition, directing the respondents to enable the petitioner to rectify Form GST TRAN-1 either by reopening the online portal or ... Transitional input tax credit - Entitlement to carry forward CENVAT credit under section 140 of the CGST Act - FORM GST TRAN-1 - procedural requirement under rule 117 of the CGST Rules - Revision of TRAN-1 under rule 120A of the CGST Rules - Rectification of inadvertent errors in transitional declaration - Retention of tax credit vis-a -vis article 265 of the Constitution - Writ remedy under Article 226 of the ConstitutionTransitional input tax credit - FORM GST TRAN-1 - procedural requirement under rule 117 of the CGST Rules - Revision of TRAN-1 under rule 120A of the CGST Rules - Rectification of inadvertent errors in transitional declaration - Retention of tax credit vis-a -vis article 265 of the Constitution - Whether the petitioner, despite having incorrectly filled FORM GST TRAN-1 within the prescribed period and being unable to revise it after the statutory revision period expired, is nevertheless entitled to carry forward the admitted transitional CENVAT credit and obtain rectification by the authorities. - HELD THAT: - The court found that the petitioner had filed FORM GST TRAN-1 within the time permitted but, due to an inadvertent mistake, recorded the balance CENVAT credit in the wrong column which resulted in short transfer of credit. The respondents acknowledge that, on merits, the petitioner was otherwise entitled to the withheld amount. The court noted precedents where similar bona fide filing errors were held to merit rectification and observed that the GST portal did not provide an effective mechanism to rectify such genuine mistakes because the revision facility's deadline coincided with the last date for filing, rendering the revision option impractical. Retention of the credit by the respondents despite the petitioner's substantive entitlement was held to lack legal authority and to be inconsistent with article 265 of the Constitution, which permits levy or collection of tax only by authority of law. Applying these principles, the court concluded that the procedural lapse in revision time could not be allowed to extinguish the petitioner's substantive right to transitional credit and that the respondents were obliged to permit rectification or accept corrected submission so that the admitted credit could be processed. [Paras 23, 24, 25, 26, 27]Petition allowed; respondents directed to either re-open the online portal to enable the petitioner to file a rectified FORM GST TRAN-1 electronically or to accept the manually filed FORM GST TRAN-1 with corrections on or before 30th November, 2019.Final Conclusion: The High Court allowed the petition and ordered the respondents to permit rectification of the TRAN-1 declaration (either electronically by re-opening the portal or by accepting a corrected manual TRAN-1) so that the petitioner may obtain the transitional input tax credit to which it is otherwise entitled. Issues Involved:1. Entitlement to Input Tax Credit (ITC) under Section 140 of the CGST Act.2. Procedural compliance with Rule 117 of the CGST Rules.3. Inadvertent errors in filing Form GST TRAN-1.4. Legal provisions for revision of Form GST TRAN-1 under Rule 120A.5. Substantive rights vs. procedural requirements.6. Judicial precedents on similar issues.Detailed Analysis:1. Entitlement to Input Tax Credit (ITC) under Section 140 of the CGST Act:The petitioner sought the grant of input tax credit in terms of Section 140 of the CGST Act, 2017, read with Rule 117 of the CGST Rules, 2017. The petitioner was engaged in the manufacture of electrical wiring accessories and had transitional credit to be claimed under various subsections of Section 140. The petitioner was entitled to input credit of closing balance under ER-1, unavailed credit of capital goods, and input or input services for which duty was already paid under the erstwhile Central Excise Act and service tax under the Finance Act, 1994.2. Procedural compliance with Rule 117 of the CGST Rules:Rule 117 provides a mechanism to avail credit carried forward under any existing law or on goods held in stock on the appointed day. The petitioner was required to file Form GST TRAN-1 within 90 days of the appointed day, which could be extended for another 90 days. The petitioner filed Form GST TRAN-1 but due to a misunderstanding, entered the details of Rs. 83,99,136/- in the wrong column, resulting in the denial of this credit.3. Inadvertent errors in filing Form GST TRAN-1:The petitioner inadvertently mentioned the balance cenvat credit in the wrong column of Form GST TRAN-1 due to misunderstanding the form's language. This error led to the petitioner being granted only Rs. 8,64,055/- as transitional credit, while the remaining Rs. 83,99,136/- was denied. Despite several communications to the respondents, the petitioner’s grievance remained unaddressed.4. Legal provisions for revision of Form GST TRAN-1 under Rule 120A:Rule 120A allows for the revision of Form GST TRAN-1 within the specified period. However, the last date for filing and revising Form GST TRAN-1 was 27th December 2017. The petitioner filed the form on 23rd December 2017 and noticed the error only after the deadline had passed, making it impossible to revise the form within the stipulated time.5. Substantive rights vs. procedural requirements:The petitioner argued that the substantive right to claim input tax credit should not be curtailed by procedural lapses. The petitioner contended that the time limits prescribed under Rule 117 and Rule 120A are beyond the mandate of Section 140 of the CGST Act, which only allows the government to prescribe the manner of claiming credit but not to impose conditions for denial of credit.6. Judicial precedents on similar issues:The petitioner relied on decisions from the Delhi High Court, which addressed similar issues. In cases like M/s Blue Bird Pure Pvt. Ltd. and M/s Aadinath Industries, the court held that the respondents should provide a facility for rectification of bona fide errors and that the credit standing in favor of an assessee is a property right protected under Article 300A of the Constitution of India. The court directed the respondents to either open the online portal for filing rectified forms or accept manually filed forms with corrections.Judgment:The court noted that the petitioner had filed Form GST TRAN-1 within the prescribed time but due to an inadvertent error, mentioned the details in the wrong column. The court observed that the respondents should have provided a facility for rectification of such bona fide errors. Retaining the amount of Rs. 83,99,136/- to which the petitioner was entitled would violate Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law.Conclusion:The court allowed the petition, directing the respondents to either open the online portal to enable the petitioner to file the rectified Form GST TRAN-1 electronically or to accept the manually filed Form GST TRAN-1 with corrections by 30th November 2019. The rule was made absolute with no order as to costs.