2020 (3) TMI 728 - HC - GST

Court upholds Rule 117 in GST Tran-1 petitions, denies relief to petitioners.

The court dismissed the petitions as the petitioners failed to prove technical glitches and attempts to file Form GST Tran-1 within the prescribed period. ... Transitional credit under Section 140 CGST Act - Rule 117 CGST Rules-time bar and limitation - technical glitches on GSTN portal and evidence requirement - GST Council/ITGRC certification for reopening portal - judicial compliance with earlier directions (Jodhpur Truck criteria) - vested right and limitation-Osram Surya principleTransitional credit under Section 140 CGST Act - Rule 117 CGST Rules-time bar and limitation - technical glitches on GSTN portal and evidence requirement - judicial compliance with earlier directions (Jodhpur Truck criteria) - Entitlement to transitional credit where Form GST TRAN-1 was not filed within the time limit due to alleged technical glitches on the common portal. - HELD THAT: - The Court applied the specific parameters previously laid down by this Court (following Jodhpur Truck) which permitted offline or belated acceptance of TRAN 1 only upon satisfaction of three conditions: (i) failure to upload due to technical glitches on the common portal, (ii) the attempt was made during the currency of the transitional period, and (iii) GST Council recommendation/certificate. The petitioners' representations did not furnish material showing that attempts to upload TRAN 1 during the transitional period failed due to portal glitches. The GST Council/ITGRC considered system logs and classified the petitioners' cases as B 1 (no evidence in system logs of error or submission), and on that factual basis refused reopening. The Court held that, in view of the directions given and the factual finding by the respondents that there was no evidence of error or prior submission, the petitioners were bound by that outcome and could not be granted relief.The petitions claiming entitlement to transitional credit despite non-filing of TRAN 1 because of alleged portal glitches were dismissed for failure to satisfy the Jodhpur Truck criteria and for lack of evidentiary proof of system error.Vested right and limitation-Osram Surya principle - Rule 117 CGST Rules-time bar and limitation - Whether denial of credit on account of non-compliance with the time-limit under Rule 117 infringes any vested right of the petitioners who had paid the pre-GST duties. - HELD THAT: - Relying on the principle in Osram Surya, the Court reiterated that prescription of a limitation period does not take away vested rights but only prescribes the time within which those rights must be enforced. Since the constitutional validity of the limitation under Rule 117 and the second proviso to Section 140(1) had been upheld in earlier decisions, the petitioners' plea that their vested right was taken away by application of the time bar was rejected.The plea of denial of a vested right by application of the limitation under Rule 117/Section 140 was negatived and could not support relief for the petitioners.Final Conclusion: The writ petitions were dismissed: petitioners failed to demonstrate that they attempted and failed to upload Form GST TRAN 1 during the transitional period due to portal glitches and did not obtain the requisite GST Council recommendation; the time bar under Rule 117/Section 140 stands and the vested right argument is untenable. Issues Involved:1. Non-filing of Form GST Tran-1 due to technical glitches.2. Validity of Rule 117 of the CGST Rules.3. Entitlement to transitional credit under Section 140 of the CGST Act.4. Requirement of proof of technical glitches and attempts to file Form GST Tran-1.5. Vested rights and limitation period for claiming credit.6. Rejection of petitioners' representations by GST Council.Issue-wise Detailed Analysis:1. Non-filing of Form GST Tran-1 due to technical glitches:The petitioners were aggrieved by their inability to file Form GST Tran-1 on the common portal due to various system errors/technical glitches. This resulted in the denial of transitional credit of central excise paid on goods amounting to Rs. 23,27,063/- and Rs. 85,41,755/- as on the appointed date, 01.07.2017, under Section 140 of the CGST Act. Despite several attempts and seeking help from the GST network portal, the petitioners could not file the form within the stipulated time.2. Validity of Rule 117 of the CGST Rules:The petitioners challenged the validity of Rule 117, which imposed a time limit for taking credit of eligible duties in the electronic credit ledger. However, the court had previously declared Rule 117 intra vires, and the issue of technical glitches was referred to a Single Judge for adjudication.3. Entitlement to transitional credit under Section 140 of the CGST Act:The petitioners argued that Section 140 of the CGST Act is a complete code in itself and does not provide for eligibility subject to any further conditions. They contended that they had a vested right to seek credit once the duties/taxes had been paid and that the denial of credit due to technical glitches was unjustified.4. Requirement of proof of technical glitches and attempts to file Form GST Tran-1:The court had directed the petitioners to submit proof that they had tried to upload Form GST Tran-1 prior to 27.12.2017 and that such attempts failed due to technical glitches. The petitioners were also required to obtain a certificate/recommendation from the GST Council. The GST Council, however, found no evidence of error or submission/filing of Form GST Tran-1 by the petitioners, categorizing their cases under 'B-1' where no technical glitches were recorded.5. Vested rights and limitation period for claiming credit:The petitioners argued that they had a vested right to claim credit and that the limitation period imposed by Rule 117 should not bar their entitlement, especially due to the department's failure to provide a functional system. The court, however, referred to the Supreme Court's judgment in Osram Surya (P) Ltd., which held that the statute had not taken away any vested rights but merely restricted the time within which the right had to be enforced. Thus, the plea regarding the denial of vested rights was not upheld.6. Rejection of petitioners' representations by GST Council:The GST Council rejected the petitioners' representations, stating that there was no evidence of technical glitches or attempts to file Form GST Tran-1. The court noted that the petitioners had not provided material evidence to support their claims of technical glitches during the transitional period. Consequently, the petitioners were bound by the outcome of the GST Council's findings and were not entitled to any relief.Conclusion:The court dismissed the petitions, stating that no case for interference was made out. The petitioners failed to provide sufficient proof of technical glitches and attempts to file Form GST Tran-1 within the prescribed period. The court upheld the validity of Rule 117 and the limitation period for claiming transitional credit, rejecting the petitioners' arguments on vested rights. The GST Council's findings, which showed no evidence of technical errors, were decisive in denying the relief sought by the petitioners. No order as to costs was made.