2020 (6) TMI 385 - HC - GST

Court orders revision of tax form and processing of claims in compliance with the law

The court allowed the petition, permitting the petitioner to revise the TRAN-1 form by a specified date and transition the entire Input Tax Credit amount, ... Transitional input tax credit - Form GST TRAN-1 - directory versus mandatory timelines - technical difficulty on the common portal - vested right to CENVAT credit - IT Grievance Redressal Committee (ITGRC) - revision of TRAN-1 and Rule 120A - Section 140 of the CGST Act - power to prescribe time for migration - writ of mandamus under Article 226Directory versus mandatory timelines - Section 140 of the CGST Act - power to prescribe time for migration - Form GST TRAN-1 - Procedural timelines for filing Form GST TRAN-1 under Rule 117 are directory and not mandatory in the circumstances of this case. - HELD THAT: - Having regard to the object of Section 140 to save accrued and vested CENVAT/ITC on transition to GST, the Court held that the timeline in Rule 117 is procedural and intended to expedite migration rather than to divest vested rights. The statutory scheme and absence of any prescribed forfeiture consequence for non-compliance, the history of multiple extensions under Rule 117 and the narrow, undefined carve-out in sub rule (1A) demonstrate that treating the time limit as inflexible would defeat the legislative purpose of safeguarding ITC. Accordingly, procedural timelines must be construed as directory so as to avoid irrational and arbitrary denial of vested tax credits. [Paras 21, 23, 24, 25, 26]The timelines prescribed for filing TRAN-1 are directory and not mandatory for the purpose of rejecting a claim of transitional ITC in the facts of this case.Transitional input tax credit - Form GST TRAN-1 - revision of TRAN-1 and Rule 120A - technical difficulty on the common portal - Petitioner is entitled to revise its originally filed TRAN-1 to correct a clerical error and to avail the full transitional ITC, subject to verification by the respondents. - HELD THAT: - The Court found that petitioner filed TRAN-1 within the prescribed period and that the short transitioning resulted from a clerical misplacement of entries in the form rather than from a substantive ineligibility. Revision of the TRAN-1 is not to be treated as a fresh filing but as correction relatable to the original timely submission; Rule 120A provides an enabling mechanism for revision. Given the purpose of Section 140 to protect vested ITC and the recorded efforts of the petitioner to bring the error to the respondents' notice, the Court directed that petitioner be permitted to revise TRAN-1 and transition the entire credit, with the respondents empowered to verify the claim in accordance with law. [Paras 15, 16, 26, 29]Petitioner may revise TRAN-1 on or before 30.06.2020 and transition the full ITC claimed, subject to verification by the respondents.IT Grievance Redressal Committee (ITGRC) - vested right to CENVAT credit - writ of mandamus under Article 226 - The rejection by ITGRC (and absence of reasons) was arbitrary and non speaking; respondents were required to provide a restitutive remedy and to process the petitioner's claim. - HELD THAT: - The Court observed that the ITGRC rejected the petitioner's representation without disclosing cogent reasons despite prior assurances given before the Bombay High Court and notwithstanding that the jurisdictional commissioner had recommended the case. Non communication of reasons and a one line rejection demonstrated non application of mind and arbitrariness. In view of the grievance, the Court issued a writ mandamus directing respondents either to open the online portal to enable electronic revision or to accept the revised TRAN-1 manually and to process the claim in accordance with law. [Paras 9, 27, 28, 29]ITGRC's rejection was arbitrary and non speaking; respondents must permit revision (electronically or manually) and process the claim, giving due verification and reasons as required by law.Final Conclusion: Writ petition allowed: petitioner permitted to revise Form GST TRAN-1 on or before 30.06.2020 to claim the full transitional ITC; respondents directed to enable electronic revision or accept manual submission and to process the claim in accordance with law after verification. The Court declared procedural timelines directory in the circumstances and found the ITGRC rejection arbitrary for lack of reasons. Issues Involved:1. Short transitioning of Input Tax Credit (ITC).2. Technical and human errors in filing GST TRAN-1 form.3. Retrospective amendment to Section 140 of the CGST Act, 2017.4. Arbitrary distinction of timelines under Rules 117 & 117(1A).5. Procedural timelines for filing TRAN-1.6. Non-disclosure of reasons for rejecting the claim.Issue-wise Detailed Analysis:1. Short transitioning of Input Tax Credit (ITC):The petitioner sought a writ of mandamus under Article 226 of the Constitution of India, directing the respondents to allow the short transitioning of ITC amounting to Rs. 5,51,33,699/- either by updating the electronic credit ledger at their back end or by allowing them to revise the Form GST TRAN-1. The petitioner had filed the GST TRAN-1 form on 27th August 2017, but only Rs. 1,01,24,382/- was reflected on the common GST portal, leaving a shortfall of Rs. 5,51,33,699/-.2. Technical and human errors in filing GST TRAN-1 form:The petitioner claimed that the short transitioning was due to a bona fide error while filling the GST TRAN-1 form. Despite several representations and complaints, the issue was not resolved. The court noted that the error occurred because the petitioner failed to fill in the correct details in the right column, which led to the short transitioning of the credit.3. Retrospective amendment to Section 140 of the CGST Act, 2017:The respondents argued that the petitioner could not avail the benefit of the judgment in Brand Equity Treaties Ltd. due to the retrospective amendment to Section 140 of the CGST Act, 2017, introduced by the Finance (Amendment) Act, 2020. This amendment inserted the words 'within such time' in Section 140(1), giving the Central Government the power to prescribe a time limit for filing TRAN-1. However, the court held that the decision in Brand Equity Treaties Ltd. was not entirely based on the absence of a prescribed time limit and that the amendment did not negate other grounds and reasons enumerated in the said decision.4. Arbitrary distinction of timelines under Rules 117 & 117(1A):The court found the distinction between timelines under Rules 117 and 117(1A) to be arbitrary and unreasonable. Rule 117(1A) allows the Commissioner to extend the date for submitting the declaration electronically in FORM GST TRAN-1 for those who faced technical difficulties on the common portal. The court observed that the term 'technical difficulties' should not be interpreted narrowly and should include various challenges faced by taxpayers, including human errors.5. Procedural timelines for filing TRAN-1:The court held that the timelines prescribed under Rule 117 are procedural and not sacrosanct. The Central Government had extended the time period for filing TRAN-1 multiple times for those covered by Rule 117(1A). The court emphasized that the timelines should be interpreted as directory and not mandatory, to avoid prejudice to taxpayers.6. Non-disclosure of reasons for rejecting the claim:The court criticized the respondents for not providing specific reasons for rejecting the petitioner's claim. Despite numerous representations and an RTI application, the reasons for rejection were not disclosed. The court found this approach to be grossly unjust and arbitrary, violating Article 14 of the Constitution.Conclusion:The court allowed the petition, permitting the petitioner to revise the TRAN-1 form on or before 30.06.2020 and transition the entire ITC, subject to verification by the respondents. A writ mandamus was issued to the respondents to either open the online portal for filing the revised TRAN-1 form electronically or to accept it manually and process the claims in accordance with the law.