2021 (3) TMI 953 - HC - GST

Appeals Dismissed: Respondents Can File TRAN-1 Forms by 31.03.2021; Court Emphasizes Flexibility in GST Transition.

The Court dismissed the appeals, permitting the respondents to file or revise TRAN-1 forms electronically or manually by 31.03.2021. It allowed the ... Transitional credit - Carry forward of Input Tax Credit - allowing any balance in their credit account under the earlier regime by filing or revising the GST who had already filed - respondents-assessees herein not filing their TRAN-1 or revised TRAN-1 within the period prescribed under Rule 117 of the Rules - HELD THAT:- Co-ordinate Bench of the Delhi High Court in SKH Sheet Metals [2020 (6) TMI 385 - DELHI HIGH COURT] held, despite the judgment in Brand Equity Treaties Limited [2020 (6) TMI 517 - SC ORDER] being stayed by the Supreme Court, the aforesaid reasoning still holds good. In addition, it was also observed that Rule 117(1A) suffers from the vice of vagueness as the expression “technical difficulties on the common portal” and its applicability had not been adequately defined nor its parameters asserted. As a result, there was no certainty or predictability about the application of this Rule for the class of cases to which it would apply. Further, in the absence of there being defined criteria, the application of the said provision would suffer from arbitrariness. It was also noted that the GST Council itself had found that there can be certain errors apparent on the face of the record and that could be non-technical in nature which would predicate leniency in the matter. The entire country was in a transitional mode insofar as the new regime of GST being implemented with effect from 01.07.2017. It would be relevant to note that in each State earlier, there were independent and separate Sales Tax Regime in the form of VAT (Value Added Tax) Act. Although, there were different enactments in various States of the country, there was an over-all pattern, which emerged inasmuch as there were several similarities that could be found under various VAT enactments of the respective States. But, the Parliament thought it fit that the entire country must be covered under a single tax regime and by amendment made to the Constitution by insertion of Article 246-A and by exercising power under Article 249, brought under one umbrella in the form of the Goods and Service Tax Act, not only the indirect taxation regime under the various State VAT Acts but also the Central Sales Tax, Central Excise and Service Tax in the form of a single Code. There should be certainty and a time-prescription within which the transition could be made. But, it is also noted that the initial time-frame prescribed, being 27.12.2017, had to be extended from time to time by virtue of the amendments made and ultimately, sub-rule (1A) to Rule 117 was inserted. The said Rule incorporates the expression 'technical difficulties on the common portal'. The Rule does not define as to what is a technical difficulty on the common portal. The reason for not defining the same is because the rule making authority was conscious of the fact that there could be a variety of technical difficulties on the common portal which could not be explained under the Rule or envisaged by the Rule making Authority - In the absence of such a definition being given under the Rule, question is, whether, the same would have to be viewed in a myopic or narrow, pedantic way or to give a liberal interpretation to the said expression so that all reasons which would come in the way of uploading Form TRAN-1 or Revised Form TRAN-1, could be considered within the scope and ambit of the expression 'technical difficulty of common portal'. No doubt, it is the policy of the Central Government that there should be digitalization, as far as possible, even with regard to simple transactions, such as buying of household articles and including other complex transactions, such as entering into various types of agreements concerning infrastructure development projects. But, the reality is that the Indian society is not yet so well-versed and adept at utilising online methods, whether it is a simple transaction, or for the purpose of filings, etc., under the taxation enactments. Ultimately, insertion of sub-rule (1A) to Rule 117 with effect from 10.09.2018 was effected. Even thereafter, the sub-rule was amended not once, but thrice so as to extend the time from 31.03.2019 to 31.03.2020 and ultimately, it was extended to 31.08.2020. The last extension upto 31.08.2020 was in exercise of the powers conferred under Section 168A of the Act by insertion of Section 117(1A) of the Act by way of an amendment. This was on the recommendation of the GST Council whereby, earlier Notification No.35/2020-CT dated 03.04.2020 was amended. This was done by extending the time period granted upto 30.06.2020 by the Notification dated 03.04.2020 issued in the interregnum - the assessees herein must be granted relief by giving them another opportunity to file/revise TRAN-1 either electronically or manually on or before 31.12.2020. We find that the reasoning of the learned single Judge and the relief granted would not call for any interference except to the extent of extending the time within which they would now have to file TRAN-1. The said time-frame has now expired even after successive extensions on 30.08.2020. Therefore, the respondents-assessees are permitted to file/revise TRAN-1 either electronically or manually on or before 31.03.2021. There are no reason to interfere with the order of the learned single Judge - appeal dismissed. Issues Involved:1. Validity of the time limit for filing/revising TRAN-1 under Rule 117 of the Central Goods and Services Tax Rules, 2017.2. Whether the phrase 'technical difficulties on the common portal' should be interpreted narrowly or broadly.3. Whether the assessees should be allowed to file/revise TRAN-1 beyond the prescribed time limit due to technical difficulties.4. The applicability of judicial precedents and the interpretation of Section 140 and Rule 117 of the Act.Detailed Analysis:1. Validity of the Time Limit for Filing/Revising TRAN-1The appeals challenged the common order passed by the learned Single Judge, which allowed the writ petitions and directed the appellants to permit the respondents to file/revise TRAN-1 either electronically or manually on or before 31.12.2019. The appellants contended that the statutory benefit of input credit must be availed within the time frame prescribed under Section 140 read with Rule 117 of the Rules. The learned Single Judge observed that Rule 117(1A) permitted the registered persons who could not submit the declaration within the due date on account of technical glitches on the common portal, by a further period not beyond 31.03.2019. The Judge categorized two types of cases: those who did not file TRAN-1 by 27.12.2017 and those who filed but intended to revise it.2. Interpretation of 'Technical Difficulties on the Common Portal'The learned Single Judge and the respondents argued for a broad interpretation of 'technical difficulties,' including human errors and systemic issues. The appellants contended that the phrase should be narrowly interpreted to mean only technical glitches on the common portal. The Division Bench of the Bombay High Court in Nelco Ltd. v. Union of India held that the phrase should be interpreted narrowly, focusing on technical difficulties evidenced from system logs.3. Allowing Filing/Revising TRAN-1 Beyond Prescribed Time LimitThe respondents argued that the learned Single Judge rightly allowed the filing/revising of TRAN-1 beyond the prescribed time limit due to technical difficulties. They cited several High Court judgments, including Adfert Technologies Pvt. Limited v. Union of India and SKH Sheet Metal Components v. Union of India, which permitted the filing/revising of TRAN-1 beyond the time limit. The appellants, however, relied on judgments like P.R. Mani Electronics v. Union of India, which held that the time limit is mandatory and cannot be extended indefinitely.4. Applicability of Judicial Precedents and Interpretation of Section 140 and Rule 117The learned Single Judge relied on judgments like Adfert Technologies and SKH Sheet Metal Components to grant relief to the respondents. The appellants cited judgments like Nelco Ltd. and P.R. Mani Electronics to argue that the time limit is mandatory. The Court noted that the Supreme Court had not interfered with the judgment in Adfert Technologies, thus persuading it to apply the same reasoning. The Court also considered the historical context and the transitional nature of the GST regime, emphasizing the need for a liberal interpretation of 'technical difficulties.'Conclusion:The Court dismissed the appeals, allowing the respondents to file/revise TRAN-1 either electronically or manually on or before 31.03.2021. The revenue was given the liberty to verify the genuineness or merits of the claims in accordance with the law. The Court emphasized a liberal interpretation of 'technical difficulties' and noted the transitional challenges faced by assessees in moving to the new GST regime.