2021 (6) TMI 108 - HC - GST

Tax Court Orders Reopening of Portal for GST Credit Transition

The court allowed the petitions related to the transition of CENVAT credit to the GST system. It directed the respondents to reopen the online portal or ... Transition of CENVAT credit - Form GST TRAN-1 - technical glitches on GST portal - right to carry forward input tax credit as vested property under Article 300A - reopening of portal and manual filing - rectification/revision of TRAN-1 - Rule 117(1A) and deadline treated as directory - IT Grievance Redressal Committee (ITGRC)Form GST TRAN-1 - technical glitches on GST portal - transition of CENVAT credit - right to carry forward input tax credit as vested property under Article 300A - Petitioners who produced digital evidence of attempts to file Form GST TRAN-1 before the cut-off date are entitled to relief permitting them to file TRAN-1 electronically or manually and have their transitional credit claims processed. - HELD THAT: - The Court found that the petitioners in this batch had placed screenshots and communications evidencing genuine attempts to file Form GST TRAN-1 prior to the prescribed cut-off of 27th December, 2017. Considering the systemic difficulties in the online portal and prior decisions of this Court granting relief in comparable cases, the accumulated credit was recognized as a protected right under Article 300A which should not be lost on account of technical failures. The Court noted that earlier decisions have directed reopening of the portal or permitting manual filing where taxpayers adduced evidence of attempts to file, and applied that rationale to allow relief to these petitioners. [Paras 12, 13, 15, 28]Allow petitioners with digital evidence to file TRAN-1 electronically or manually and direct respondents to process claims in accordance with law.Form GST TRAN-1 - technical glitches on GST portal - Rule 117(1A) and deadline treated as directory - transition of CENVAT credit - Petitioners who lack contemporaneous digital proof of attempts to file TRAN-1 but assert genuine attempts and delayed grievance-raising are nonetheless entitled to relief permitting them to file TRAN-1 and claim transitional credit. - HELD THAT: - Although these petitioners did not produce screenshots or other contemporaneous digital evidence, the Court relied on earlier decisions of this Court that have granted relief to similarly placed taxpayers. The Court observed that many taxpayers might not have preserved technical evidence and that the notifications extending filing dates and the recognition of systemic portal failures support granting relief. The Court therefore found no reason to deny relief to petitioners without screenshots where the factual matrix indicates bona fide inability to upload due to system failures or genuine clerical errors in the transition period. [Paras 16, 17, 19, 20, 28]Allow petitioners without digital proof to file TRAN-1 and claim transitional credit; direct respondents to accept and process such claims.Rectification/revision of TRAN-1 - Form GST TRAN-1 - transition of CENVAT credit - right to carry forward input tax credit as vested property under Article 300A - Petitioners who filed TRAN-1 within time but seek revision/rectification for inadvertent or bona fide errors are entitled to an opportunity to rectify their TRAN-1 so as not to forfeit accrued transitional credit. - HELD THAT: - The Court noted that these petitioners had filed TRAN-1 within the prescribed period but, due to inadvertent omissions or mistakes, were precluded from obtaining the full transitional credit. Given the absence of an effective statutory mechanism to revise TRAN-1 and the protection of the credit as a vested right under Article 300A, the Court held that genuine mistakes should not result in loss of accumulated credit. Reliance was placed on prior decisions where corrigenda or reopening was permitted for bona fide errors. Accordingly, the Court permitted revision/rectification. [Paras 22, 23, 25, 26, 28]Permit petitioners who filed TRAN-1 within time to revise/rectify their TRAN-1 so as to enable entitlement to transitional credit.Final Conclusion: All petitions in the three batches are allowed. Respondents are directed to re-open the online portal or accept manual submission of Form GST TRAN-1 and to process the petitioners' claims in accordance with law; submissions to be accepted on or before 30th June, 2021. Issues Involved:1. Transition of CENVAT credit from the erstwhile indirect tax regime to the GST system.2. Technical glitches and shortcomings in the online system preventing timely filing of TRAN-1 Form.3. Legal validity of the time period prescribed under Rule 117 of CGST Rules for filing TRAN-1 Form.4. Petitioners’ rights to claim transitional credit and challenges faced in the procedural aspects.5. Absence of a mechanism for revision/rectification of TRAN-1 Form.Detailed Analysis:I. Transition of CENVAT credit from the erstwhile indirect tax regime to the GST system:The judgment addresses the transition of unutilized CENVAT credit from the previous tax regime to the GST system as per Chapter XX of the CGST Act, 2017. The Act mandates filing the TRAN-1 Form by 27th December 2017, to claim such credit. However, numerous taxpayers faced difficulties in filing the form due to technical issues, leading to blocked filings post the deadline.II. Technical glitches and shortcomings in the online system preventing timely filing of TRAN-1 Form:Taxpayers encountered various technological hindrances, including poor internet bandwidth and system failures, which prevented them from filing the TRAN-1 Form by the deadline. The Government acknowledged these issues and set up the IT Grievance Redressal Committee (ITGRC) to address such problems. Rules 117(1A) and 120A were incorporated to extend the filing deadline for affected taxpayers.III. Legal validity of the time period prescribed under Rule 117 of CGST Rules for filing TRAN-1 Form:The court examined whether the time period under Rule 117 was directory or mandatory and concluded it to be directory. The irrationality of Rule 117(1A), which applied only to a specific class of persons facing technical difficulties, was also discussed. The court emphasized that the unutilized input tax credit is a vested right under Article 300A of the Constitution of India, which cannot be taken away due to technical grounds.IV. Petitioners’ rights to claim transitional credit and challenges faced in the procedural aspects:The petitions were categorized into three batches based on common issues:First Batch:Petitioners with evidence of attempts to file TRAN-1 Form before the deadline.- The court recognized the genuine attempts made by these taxpayers and the technical issues faced. It directed the respondents to either reopen the online portal or accept manual filing of the TRAN-1 Form.Second Batch:Petitioners without proof of attempts to file TRAN-1 Form.- Despite the lack of evidence, the court granted relief based on previous decisions where similarly placed taxpayers were allowed to file TRAN-1 Form. The court emphasized that many taxpayers might not have preserved evidence of their attempts due to lack of technical know-how.Third Batch:Petitioners who filed TRAN-1 Form within the prescribed time but sought revision/rectification.- The court acknowledged the inadvertent errors made by these taxpayers and the absence of a mechanism for rectification. It held that genuine mistakes should not result in the loss of accumulated credit protected under Article 300A of the Constitution.V. Absence of a mechanism for revision/rectification of TRAN-1 Form:The court noted that the lack of an effective mechanism for revising TRAN-1 Form left taxpayers remediless. It directed the respondents to provide a facility for rectification of bona fide errors, ensuring that taxpayers do not lose their accumulated credit.Conclusion and Directions:The petitions in all three batches were allowed. The court directed the respondents to either reopen the online portal for filing TRAN-1 Form or accept manual submissions by 30th June 2021. The respondents were instructed to process the claims in accordance with the law once the forms were filed.