2022 (7) TMI 182 - HC - GST

Belated TRAN-1 filing allowed; Rule 117 held directory, three-year limit as maximum for transitional input tax credit claims

HC allowed belated filing of Form TRAN-1 for transitional input tax credit, holding Rule 117 of CGST Rules is directory and its time limit does not ... Benefits of transitional credit - delay in filing Form TRAN-1 - HELD THAT:- In the case of the High Court of Delhi in Brand Equity Treaties Ltd. & Ors. vs. Union of India [2020 (5) TMI 171 - DELHI HIGH COURT] ultimately held that Rule 117 of the CGST Rules is directory in nature in so far as it prescribes the time limit for transitioning of credit is concerned and at the same time the Court has held that the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. Ultimately, the Court after considering the terms of residuary provisions of the Limitation Act held that the period of three years should be the guiding principle and thus, a period of three years from the appointed date would be the maximum period for availing of such credit. Even this Court had an occasion to deal with similar issue in the case of M/s Siddharth Enterprises through partner Mahesh Liladhar Tibdewal vs. The Nodal Officer, [2019 (9) TMI 319 - GUJARAT HIGH COURT]. This Court vide order dated 06.09.2019 has allowed the aforesaid batch of writ applications with a direction to the respondent authorities to permit the writ applicants filing of declaration Form GST TRAN-1 and GST TRAN – 2 to enable them to claim transitional credit of the eligible duties in respect of the inputs held in the stock as on the appointed date in terms of Section 140(3) of the Act. At the same time, this Court further held that the due date as contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit are held to be procedural in nature and should not be construed mandatory. Indisputably, the writ applicant company at relevant stage though, belatedly had applied for filing of Form TRAN – 1 to avail the Input Tax Credit of the accumulated CENVAT credit as of 30.06.2017 as reflected in their letter dated 05.04.2018. The reason explained by the writ applicant for the delayed uploading of the Form appears to be genuine as the bank account of the writ applicant company was declared Non Performing Account - It is not in dispute that substantial amount to the tune of Rs.2,41,33,827/- were lying in the account of erstwhile regime and pursuant to the Notification dated 10.09.2018, the writ applicant had immediately approached to the respondent authority namely the Commissioner of GST vide letter dated 12.09.2018 to give him an opportunity to upload Form TRAN-1 by reopening the portal. There are no hesitation in reiterating that Rule 117 of the CGST Rule being directory in nature, the prescribed time limit for transitioning of credit would in no manner result in forfeiture of the rights of the writ applicants even though, when the credit is not availed within the period prescribed - application allowed. Issues Involved:1. Transitional Credit Claim under GST: Timely filing of Form GST TRAN-1 for availing transitional credit.2. Validity of Rule 117 of CGST Rules: Whether the time limit prescribed under Rule 117 is mandatory or directory.3. Technical Difficulties and Extension: Consideration of technical difficulties faced by taxpayers in filing Form GST TRAN-1.4. Vested Right and Property: Whether the accumulated CENVAT credit constitutes a vested right and property under Article 300A of the Constitution.5. Judicial Precedents: Reference to previous judgments and their applicability.Detailed Analysis:1. Transitional Credit Claim under GSTThe writ applicant, a private limited company engaged in manufacturing, sought the benefit of transitional credit amounting to Rs.2,41,33,827/- by filing Form GST TRAN-1. The company faced financial constraints and its bank account was declared as NPA, which led to a delay in filing the form before the notified date of 27.12.2017. Despite subsequent notifications extending the deadline, the respondent authorities did not allow the filing, leading the applicant to approach the court.2. Validity of Rule 117 of CGST RulesThe court examined whether the time limit prescribed under Rule 117 of the CGST Rules is mandatory or directory. It referred to the Delhi High Court's decision in the case of Brand Equity Treaties Ltd. vs. Union of India, which held that Rule 117 is directory in nature concerning the time limit for transitioning credit. The court emphasized that the credit standing in favor of an assessee is 'property' and cannot be deprived without authority of law under Article 300A of the Constitution.3. Technical Difficulties and ExtensionThe court acknowledged that several taxpayers faced technical difficulties in filing Form GST TRAN-1 due to inadequacies in the GST Network. It noted that the government had extended the filing deadline multiple times and introduced Sub-rule (1A) to Rule 117, allowing further extensions for those facing technical difficulties. The court held that 'technical difficulties' should not be narrowly interpreted and should include any challenges faced by taxpayers, not just those logged in the GST system.4. Vested Right and PropertyThe court reiterated that the accumulated CENVAT credit is a vested right and property under Article 300A of the Constitution. It cannot be taken away merely by procedural rules without an overarching provision in the GST Act. The court emphasized that the substantive right to carry forward CENVAT credit should not be forfeited due to procedural delays, especially given the technical glitches and the transition to a new tax regime.5. Judicial PrecedentsThe court referred to several precedents, including the Delhi High Court's decision and its own previous judgments, which supported the view that the time limit for filing Form GST TRAN-1 is directory. It highlighted that the Supreme Court dismissed the appeal against the Delhi High Court's decision, reinforcing the principle that procedural rules should not override substantive rights.ConclusionThe court allowed the writ application, directing the respondent authorities to permit the writ applicant to file Form GST TRAN-1 either by reopening the online portal or accepting it manually. The authorities were instructed to verify and process the form within two weeks, ensuring the applicant's right to avail the transitional credit. The judgment underscores the principle that procedural delays should not result in the forfeiture of vested rights, especially in the context of transitioning to a new tax regime.