2020 (2) TMI 795 - HC - GST

Court allows transitional credit upload recognizing GST challenges

The court directed the respondent to permit the petitioner to upload Tran-1 for transition of credit, recognizing the challenges faced by taxpayers in ... Reopening of portal for filing of Form Tran-1 - transitional credit - transition to GST regime - HELD THAT:- A Division Bench of the Gujarat High Court in M/S SIDDHARTH ENTERPRISES THROUGH PARTNER MAHESH LILADHAR TIBDEWAL VERSUS THE NODAL OFFICER [2019 (9) TMI 1320 - GUJARAT HIGH COURT] has considered the question as to whether a claim for transition of credit is only a procedural requirement or a mandatory one. After an exhaustive discussion of the matter, the prayer of the petitioner therein was acceded to, the Bench holding that Cenvat credit earned under the erstwhile Central Excise Law is the property of the writ-applicants and it cannot be appropriated for merely failing to file a declaration in the absence of Law in this respect. It could have been appropriated by the government by providing for the same in the CGST Act but it cannot be taken away by virtue of merely framing Rules in this regard. (i) the era of GST is in a nascent stage and both the Department as well as assessees are still learning the ropes (ii) a rigid view should thus not be taken in matters involving procedural requirements such as availment of credit; (iii) it is common knowledge that assessees pan India are facing difficulties in accessing the system and uploading Forms to seek transition of credit, and (iv) three Division Benches have taken the view that the time lines set out for transition of credit cannot be very firmly enforced in so far as they are not mandatory. The respondents were directed to permit the petitioner to file the Declaration in Form Tran-1 so as to enable them to claim transitional credit of eligible duties as prayed for - writ petition is disposed directing the respondent to permit the petitioner to access the portal for uploading of Tran-I, forthwith. Issues:1. Challenge to the decision of the IT Grievances Redressal Committee regarding filing Tran-1.2. Interpretation of Rule 117 and extension of time limit for uploading Tran-1.3. Whether transition of credit is a procedural requirement or mandatory.4. Judicial precedents regarding transition of credit under GST.5. Discretion of the court in permitting uploading of Tran-1 for transition of credit.Analysis:1. The petitioner challenged the IT Grievances Redressal Committee's decision not to allow filing of Tran-1 due to the absence of evidence of technical/system error. The petitioner claimed facing glitches in the GSTN portal hindering the filing/uploading process but did not provide screenshots as evidence.2. Rule 117 extended the time limit for uploading Tran-1 until 31.12.2019 for those facing technical difficulties, subject to a recommendation from the GST Council. The petitioner's request for extension was rejected by the respondent, rendering the benefit of extension unavailable. However, the court acknowledged the technical glitches faced by the petitioner and emphasized the challenges in transitioning to the new GST regime.3. The court referred to the Gujarat High Court's decision in Siddarth Enterprises vs. Nodal Officer, where it was held that transition of credit is not merely a procedural requirement but a constitutional right. The court directed the respondent to permit the petitioner to file the Declaration in Form Tran-1 to claim transitional credit, citing similar rulings by other High Courts.4. Previous judgments by the Punjab and Haryana High Court and the Delhi High Court supported the view that time limits for transition of credit cannot be strictly enforced as mandatory, especially considering the challenges faced by taxpayers in adapting to the GST system.5. In light of the evolving nature of GST implementation and the difficulties experienced by taxpayers nationwide, the court exercised discretion to allow the petitioner to upload Tran-1 for transition of credit, emphasizing the distinction between availing credit and its utilization, which falls under assessment.In conclusion, the court disposed of the writ petition by directing the respondent to permit the petitioner to upload Tran-1 for transition of credit, considering the unique circumstances and challenges faced by taxpayers in the nascent stage of GST implementation.