2020 (10) TMI 463 - HC - GST

High Court dismisses Revenue's appeal, imposes costs on Appellants, directs input credit benefit

The High Court dismissed the Revenue's appeal, imposed a cost of Rs. 15,000 on the Appellants, and directed that the Assessee be allowed to avail the due ... Transitional input tax credit - manual filing of Form TRAN-1 and online re-submission - technical glitches on GST common portal - directory nature of procedural timelines - obligation of tax authorities to enable filing and grant relief - costs for frivolous appealsTransitional input tax credit - technical glitches on GST common portal - directory nature of procedural timelines - Assessee entitled to relief for inability to file Form TRAN-1 on account of technical glitches and may not be deprived of transitional credit for failure to meet the portal deadline where bona fide attempts to file are shown. - HELD THAT: - The Court found on the material placed that the assessee made bona fide and documented efforts to file Form TRAN-1 on the GST common portal and that a support request (ID No.20171228912950) was registered but not effectively responded to by the authorities. The Court held that procedural timelines for filing the transitional declaration under Rule 117 should not operate to frustrate the substantive right to carry forward unutilized credit where online filing was prevented by technical defects and the assessee pursued available remedies, including approaching the jurisdictional officer and lodging grievances with the helpdesk. The Court endorsed a liberal approach to the phrase 'technical difficulties on the common portal' so as to ensure that taxpayers are not penalised for failures attributable to the portal or departmental machinery, observing that transition is intended to avoid double taxation and procedural formalities ought not to defeat that object (paragraphs 12 and 13). [Paras 12, 13]Relief granted to assessee - inability to file due to technical glitches established; assessee cannot be denied transitional credit for that reason.Manual filing of Form TRAN-1 and online re-submission - obligation of tax authorities to enable filing and grant relief - Revenue directed to accept the assessee's transitional claim either by accepting the offline TRAN-1 submitted or by enabling re-submission on the GSTN portal and to grant the benefit of input credit as on the appointed day. - HELD THAT: - After concluding that the assessee had made genuine attempts to file TRAN-1 and that departmental processes had failed to assist or respond, the Court directed the authorities to give effect to the assessee's entitlement to transitional credit by either accepting the offline copy of Form TRAN-1 already submitted to the jurisdictional office or by providing the assessee an opportunity to re-submit the declaration on the GSTN e-portal. The direction was framed to secure the substantive right of the assessee to credit as on the appointed day and to place the assessee in a position to avail the credit which the law contemplates (paragraph 14). [Paras 14]Department to accept offline TRAN-1 or enable e-portal re-submission and allow input credit as on the appointed day.Costs for frivolous appeals - Intra-court appeal by Revenue dismissed as frivolous and costs awarded against the Appellants. - HELD THAT: - The Court criticised the Revenue for pursuing an unnecessary intra-court appeal against an innocuous order directing facilitation of filing and relief to the assessee, describing the appeal as frivolous and a waste of public resources. In exercise of its supervisory jurisdiction, the Court imposed a token cost on the Appellants to be deposited with the Registrar General for transfer to the State Legal Services Authority for legal aid (paragraphs 3, 13 and 15). [Paras 3, 13, 15]Writ Appeal dismissed; token costs imposed on the Appellants to be deposited as directed.Final Conclusion: The writ appeal filed by the Revenue is dismissed. The assessee is entitled to the transitional input tax credit as on 1 July 2017; the authorities are directed to accept the offline Form TRAN-1 already submitted or permit re-submission on the GSTN portal and to grant the benefit of credit. The Appellants are directed to pay a token cost which will be utilised for legal aid. Issues Involved:1. Technical difficulties in uploading Form Tran-1 for availing unutilized credit under the new GST regime.2. Requirement of evidence for technical glitches as per Circular dated 03.04.2018.3. Distinction between transition of credit and its utilization.4. Frivolous litigation by the Revenue Department.Issue-wise Detailed Analysis:1. Technical difficulties in uploading Form Tran-1:The Assessee faced difficulties in uploading Form Tran-1 to avail unutilized credit under the new GST regime. Despite multiple attempts and communications with the GST helpdesk, the Assessee could not file the form due to technical glitches. The Department's initial response redirected the Assessee to the GSTN helpdesk, but the issue remained unresolved. The Assessee then submitted a manual Tran-1 form to the local GST authority, which was not accepted.2. Requirement of evidence for technical glitches:The learned Single Judge noted that the requirement for an Assessee to establish technical difficulty, as per Circular dated 03.04.2018, was unreasonable. The Judge questioned how the Assessee could have anticipated the need to collect proof of technical glitches. The Assessee's diligent efforts to file the form and subsequent communications with the Department were acknowledged, but the Department rejected the Assessee's request due to the lack of evidence of technical glitches.3. Distinction between transition of credit and its utilization:The learned Single Judge emphasized that the transition of credit does not vest any right in the Assessee. It is the utilization of credit, subject to verification and assessment by an Assessing Officer, that matters. The Judge highlighted the importance of distinguishing between the transition and utilization of credit.4. Frivolous litigation by the Revenue Department:The High Court criticized the Revenue Department for filing a frivolous appeal against the innocuous order of the learned Single Judge. The Court observed that the Department's actions were a sheer waste of time and resources. The Assessee's bona fide efforts to upload the Tran-1 form were evident, and the Department's failure to resolve the technical issues was noted. The Court strongly deprecated the Department's practice of raising technical and hyper-technical pleas, which contradicted the Government's clear intention to allow credit of unutilized input credit under the new GST regime.Conclusion:The High Court dismissed the Revenue's appeal, imposed a cost of Rs. 15,000 on the Appellants, and directed that the Assessee be allowed to avail the due benefit of input credit of stocks as on 1.7.2017, either by accepting the offline copy of Form Tran-1 or by allowing resubmission on the E-portal. The Court emphasized the need for the Department to act in aid of the Government's intention and avoid wasting judicial resources on frivolous litigation.