2021 (8) TMI 1122 - HC - GST

Court orders VAT credit transition to petitioner's ledger, criticizes authorities for system issues.

The court allowed the writ petition, directing the respondents to transition the VAT credit of Rs. 21,07,574/- into the petitioner's electronic credit ... Transition of VAT Credit - the credit of the amount in Form GSTR-3B not allowed - petitioner contends that, it is into the business of non-banking financial company engaged in financing automobiles in the form of loans and financial leases to its customer and has operations in 14 States across India, including in the State of Telangana - HELD THAT:- Though the respondents filed a lengthy counter-affidavit, it neither denied or disputed the ARN number generated from their systems and the email received by the petitioner of successful filing of GST TRAN-1 Form. In the absence of any denial to the ARN number or email sent to the petitioner, it is not open for the respondents now to turn around and allege the petitioner to be a non-filer. Further, no explanation is offered by the respondents as to which transaction the ARN number referred to by the petitioner is relatable to, if under the said ARN number, the petitioner has not filed Form GST TRAN-1 on 27.12.2017. In an identical situation, in petitioner’s own case, the Bombay High Court in BMW INDIA FINANCIAL SERVICES PVT. LTD., VERSUS UNION OF INDIA, STATE OF MAHARASHTRA, GOODS AND SERVICE TAX COUNCIL, GOODS AND SERVICES TAX NETWORK (GSTN) NEW DELHI [2020 (10) TMI 1217 - BOMBAY HIGH COURT] considering a similar issue of transitional credit of ₹ 17,07,673/- claimed through TRAN-1 filed on 27.12.2017 not being transitioned into the petitioner’s electronic credit ledger despite successful filing, while observing that the action of the respondents is unfair and unjust - the Bombay High Court allowed the writ petition and directed the respondents to take such action as may be necessary for transitioning the credit of such amount into petitioner’s credit ledger/electronic credit ledger within four weeks from the date of the order. In the facts of the present case, there are no reason to take a different view from the one as expressed by the Bombay High Court, merely because the respondents chose to file a counter in the present writ petition alleging negligence on the part of the petitioner, which in our concerned view, as detailed herein above is without any basis, unsubstantiated apart from being reprehensible. The respondents are directed to transition the credit of amount of ₹ 21,07,574/- claimed by the petitioner, into petitioner’s electronic credit ledger in Form GST PMT-2 maintained on the portal, within a period of four weeks from the date of the order - petition allowed. Issues Involved:1. Non-transitioning of VAT credit into the petitioner's electronic credit ledger.2. Technical glitches encountered on the GSTN portal.3. Non-reflection of the transitional credit in the petitioner's electronic credit ledger.4. Allegations of negligence and dereliction of duty by the petitioner.5. Judicial precedents and similar cases in other states.Detailed Analysis:1. Non-transitioning of VAT credit into the petitioner's electronic credit ledger:The petitioner challenged the respondents' action of not transitioning the VAT credit into their electronic credit ledger in Form GST PMT-2 based on the declaration in Form GST TRAN-1 filed on 27.12.2017. The petitioner, engaged in financing automobiles, claimed entitlement to transitional VAT credit of Rs. 21,07,574/- for lease/rental contracts continuing post-GST introduction. Despite filing the required Form GST TRAN-1 electronically and receiving acknowledgment, the credit was not reflected in their ledger, causing financial hardship.2. Technical glitches encountered on the GSTN portal:The petitioner contended that technical difficulties on the GSTN portal hindered the reflection of their transitional credit. They raised queries and communicated with GST authorities, but their grievances were not resolved. The respondents' counter-affidavit claimed no technical issues were noticed, which the court found self-contradictory and lacking substance, given the widespread acknowledgment of GSTN network failures during the transition period.3. Non-reflection of the transitional credit in the petitioner's electronic credit ledger:The court noted that the petitioner's successful filing of Form GST TRAN-1 was undisputed, as evidenced by the ARN number and email confirmation. The non-reflection of the credit in the ledger was attributed to the respondents' system issues, not the petitioner's fault. The court emphasized that the respondents should ensure their systems capture the information correctly and not penalize taxpayers for technical glitches.4. Allegations of negligence and dereliction of duty by the petitioner:The respondents alleged negligence on the petitioner's part, claiming that allowing such credit would jeopardize government revenue. The court dismissed these allegations, stating that the petitioner's timely and successful filing disproved any negligence. The respondents' failure to address the technical issues and their high-handed approach were criticized.5. Judicial precedents and similar cases in other states:The court referred to a similar case in the Bombay High Court, where the petitioner's transitional credit was not reflected despite successful filing. The Bombay High Court directed the respondents to transition the credit, emphasizing that the objective of digitalization is to convenience taxpayers, not harass them. The Telangana High Court concurred with this view, finding no reason to differ in the present case.Conclusion:The court allowed the writ petition, directing the respondents to transition the credit of Rs. 21,07,574/- into the petitioner's electronic credit ledger within four weeks. The court clarified that it did not examine the merits of the petitioner's claim regarding eligibility for the VAT credit. Pending miscellaneous petitions were closed without costs.