2022 (2) TMI 995 - HC - GST

Tax Authorities Wrongfully Blocked Transition of VAT Credit to GST Due to Petitioner's Missed TRAN-1 Filing Deadline

M/s. Pragal Associates, M/s. Pure Plastics Versus The Additional Deputy Commercial Tax Officer GD-1, The Chairman, GSTN World Mark 1, The Director General (Systems)

The HC quashed communications dated 18.12.2017 and 20.12.2017 that blocked taxpayer's transition of VAT credit to GST. Court found that while petitioner ... Transition of credit - as petitioners failed to file the TRAN – I by the due date on 27.12.2017, the credit of the petitioners were blocked by the respondent by the impugned communication - HELD THAT:- The provisions of the Pondicherry GST Act did not prohibit the petitioner from transitioning the input tax credit available in the returns under Pondicherry Value Added Tax Act. However, in view of the impugned communications issued by the respondent, the petitioners failed to file TRAN-1 by the due date on 27.12.2017. Even it, the petitioner had filed TRAN-1 on time, the respondents were not without any power under the provisions of the respective GST enactments to ask the petitioner to reverse the order if it had been wrongly transitioned or utilized under Section 75 and 74 of the respective GST Act. Since the petitioner cannot transition the credit under the provisions of the Act at this distant point of time, the ends of justice will be made if the respondents decides the issue as to whether the petitioners were indeed entitled to the input tax credit during which could not be transitioned under the provisions of the respective GST enactments by 27.12.2017 in view of the impugned communications - the respondents are directed to issue appropriate notice to the respective petitioners within a period of forty five days from the date of receipt of a copy of this order. The writ petition is disposed off. Issues:Challenging impugned communications dated 18.12.2017 and 20.12.2017 regarding excess tax credit under VAT and GST, failure to produce documents for transition of credit, petitioners unable to transition credit, blocking of credit by respondents, interpretation of Pondicherry GST Act provisions, power of respondents to reverse wrongly transitioned credit, justice in deciding entitlement to input tax credit.Analysis:The petitioner challenged impugned communications dated 18.12.2017 and 20.12.2017 from the respondents regarding excess tax credit under VAT and GST. The communications directed the petitioners to produce all books of accounts and records for verification before availing the excess credit under GST. The petitioners claimed they were unable to transition the credit due to the lack of response from the respondents regarding document submission.In response, the respondents argued that the petitioners were advised not to file TRAN-I without approval and failing to provide documents on time led to no order being passed. The respondents contended that the petitioners could have filed TRAN-I by 27.12.2017, but their failure to do so resulted in the blocking of credit by the respondents through the impugned communication.The Court considered the arguments of both parties and examined the provisions of the Pondicherry GST Act. It was noted that the Act did not prohibit the petitioners from transitioning the input tax credit available under the Pondicherry Value Added Tax Act. However, due to the impugned communications, the petitioners failed to file TRAN-1 by the deadline. The Court highlighted that even if the petitioners had filed on time, the respondents had the power under the GST enactments to request reversal of wrongly transitioned credit.Given the circumstances, the Court emphasized that justice would be served by allowing the respondents to determine whether the petitioners were entitled to the input tax credit that could not be transitioned by the deadline. The Court directed the respondents to issue appropriate notices to the petitioners within forty-five days. If it is found that the petitioners were entitled to transition the credit blocked by the impugned communication, the respondents were instructed to release the amount in cash or through the electronic ledger.In conclusion, the Court disposed of the writ petitions based on the above observations, without imposing any costs on either party.