GST Portal glitches justify allowing late electronic filing of TRAN-1 and TRAN-2 forms for transitional credit claims

The Allahabad HC allowed petitions seeking to submit/revise electronically GST TRAN-1 and TRAN-2 forms for transitional credit of CENVAT and VAT Input Tax Credit. The court held that while ITC is not a vested right requiring procedural compliance under GST laws, the government's recognition of IT-related portal glitches and technical difficulties during GST implementation created circumstances warranting relief. Since the GST Portal malfunctioned over extended periods, preventing taxpayers from meeting electronic filing requirements despite legislative intent to grant transitional benefits, the court ruled that reasonable opportunity should be provided to complete the mandatory electronic submissions for carrying forward pre-GST credits.

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Issues Involved:
1. Whether Input Tax Credit (ITC) is a vested right under the GST regime.
2. The impact of technical glitches on the GST Portal on the submission/revision of Form GST TRAN-1/TRAN-2.
3. The legality of the procedural requirements and timelines for submitting/revising Form GST TRAN-1/TRAN-2.
4. The appropriate relief for petitioners who faced technical difficulties in submitting/revising Form GST TRAN-1/TRAN-2.

Detailed Analysis:

1. Whether ITC is a Vested Right under the GST Regime:

The court examined Section 140 of the CGST Act and the UPGST Act, which are transition provisions allowing the carry forward of CENVAT and VAT ITC from the pre-existing tax regime to the GST regime. It was determined that while ITC is a statutory entitlement, it is subject to the fulfillment of conditions specified in the new GST laws, including the submission of Form GST TRAN-1/TRAN-2 electronically within the prescribed time. The court disagreed with the contention that ITC became a vested right merely upon filing returns under the pre-existing laws, emphasizing that further compliance under the new GST laws was necessary.

2. Impact of Technical Glitches on the GST Portal:

The court acknowledged the widespread technical difficulties and glitches faced by taxpayers in submitting/revising Form GST TRAN-1/TRAN-2 on the GST Portal. This was supported by the CBIC's Circular dated 3 April 2018, which recognized these issues and proposed a grievance redressal mechanism. The court noted that the existence of such technical difficulties was not a local phenomenon but a common issue faced by taxpayers across the country, leading to multiple High Court decisions granting relief to affected taxpayers.

3. Legality of Procedural Requirements and Timelines:

The court analyzed Rule 117 of the CGST Rules, which prescribed the procedure and timeline for submitting/revising Form GST TRAN-1/TRAN-2. It was observed that the timeline for submission had been extended multiple times, ultimately up to 31 August 2020, through various orders and notifications. The court found that the strict enforcement of these timelines, despite acknowledged technical difficulties, was arbitrary and violative of Article 14 of the Constitution of India.

4. Appropriate Relief for Petitioners:

Given the generic and widespread nature of the technical difficulties, the court held that all petitioners should be granted a reasonable opportunity to submit/revise/re-revise their Form GST TRAN-1/TRAN-2. The court directed that petitioners file physical forms with their jurisdictional authorities, who would then verify compliance and forward the forms to the GST Network for electronic submission. This process was to be a one-time affair, with no further revisions allowed. The court also extended this relief to all other "registered persons" in the State of U.P. who faced similar difficulties.

Conclusion:

The court allowed all writ petitions, providing a structured process for petitioners to submit/revise their Form GST TRAN-1/TRAN-2, thereby ensuring that they could avail the transition ITC they were entitled to under the GST regime. The court emphasized the need for a fair and reasonable approach, considering the technical challenges faced by taxpayers.

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