Manufacturer Granted Transitional Credit Under CGST Rules After Missing Deadline Due to Factory Fire Accident

The HC allowed a writ petition from a manufacturer seeking transitional credit under CGST Rules. The petitioner missed the TRAN-1 filing deadline due to factory closure following a fire accident in 2016. Despite respondents' argument that Rule 117(1A) relief applies only to timely filers with technical issues, the court ruled in favor of the petitioner, citing precedents including M/s.Brand Equity Treaties. The court directed respondents to verify the petitioner's unutilized credit as of the accident date and either enter it in the electronic cash register or provide a cash refund if the credit remained unutilized.

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Issues:
Challenge to impugned communication dated 19.11.2020 regarding TRAN-1 credit eligibility under CGST Rules, 2017.

Analysis:
The petitioner, engaged in manufacturing explosives, faced a fire accident in 2016 leading to factory closure until 2018 when Central Excise Act was replaced by CGST Act, 2017. Required to file TRAN-1 under Rule 117 of CGST Rules, 2017, petitioner missed the deadline due to factory closure. Despite amendments allowing relief for technical issues post-data entry, petitioner's request was rejected by respondents.

The petitioner cited precedents like P.Preetha case and others, supporting their claim for transitional credit. Respondents contended that relief under Rule 117(1A) is for timely filers only, not for late filers like the petitioner. They argued against enabling provisions for transitional credit in 2020, seeking dismissal of the Writ Petition.

Referring to the Delhi HC decision in M/s.Brand Equity Treaties case, respondents argued against extending the limitation period for claiming input tax credit in TRAN-1. Despite the Delhi HC ruling, the Department's appeal to the Supreme Court was mentioned as a barrier to allowing petitioner's credit claim.

The judge, considering arguments and precedents, noted that previous cases granted benefits to assesses and allowed writ petitions. Emphasizing that input tax credit is crucial for tax liability discharge, the judge ruled in favor of the petitioner. Directing respondents to verify petitioner's unutilized credit on the accident date, the judge ordered credit entry in the electronic cash register or cash refund if credit remained unutilized.

Conclusively, the Writ Petition was disposed of with the direction to verify and grant unutilized credit to the petitioner. No costs were awarded, and the connected Miscellaneous Petition was closed.

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