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 operate to forfeit credit rights. The court followed the principle that a three-year period from the appointed date is the maximum for availing such credit and accepted bona fide reasons for delay (bank account declared non-performing). Direction issued to permit filing of TRAN-1/TRAN-2 and claim accumulated credit as on the appointed date; application therefore allowed.

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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 GST
The 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 Rules
The 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 Extension
The 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 Property
The 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 Precedents
The 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.

Conclusion
The 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.

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