Tax Credit Battle: GST Input Claim Suspended After SC Directive, Authorities Must Carefully Review Transitional Form

HC ruled on a GST input tax credit dispute, keeping a show cause notice in abeyance after the petitioner filed TRAN-1 form following SC's directive. The court allowed tax authorities to proceed with the notice only after evaluating the transitional credit claim, ensuring procedural fairness while preventing unnecessary legal proceedings.

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Issues:
Challenge to show cause notice proposing interest and penalty on Input Tax Credit erroneously availed without filing form TRAN-1.

Analysis:
The Writ Petition was filed to challenge an impugned show cause notice dated 09.11.2020, proposing the levy of interest and penalty on Input Tax Credit that was erroneously availed without filing form TRAN-1 based on GSTR 3B. The Petitioner argued that subsequent to the notice, the Supreme Court passed an order allowing the filing of fresh/revised form TRAN-1/TRAN-2 between 01.09.2022 to 31.10.2022, later extended to 30.11.2022. The order directed GSTN to open a portal for filing forms for availing Transitional Credit, with officers given 90 days to verify claims and reflect allowed credit in the Electronic Credit Ledger.

The Petitioner had filed form TRAN-1 on 11.10.2022, pending consideration by the Respondents. Despite this, the 2nd Respondent issued a communication and requested the Petitioner to appear for adjudicating the show cause notice. The Court noted that the show cause notice was issued based on the invalidity of credit transition as it was not made through form TRAN-1. However, since form TRAN-1 was filed based on the Supreme Court's direction, the Court decided to keep the show cause notice in abeyance until a decision is made on the transition credit claimed in form TRAN-1.

The Court disposed of the Writ Petition with the observation that the 2nd Respondent could proceed with the show cause notice after deciding on the transition credit claimed in form TRAN-1, if circumstances warranted, following the prescribed procedures. The Court clarified that it intervened in this case to avoid multiplicity of proceedings, passing the orders against the show cause notice without imposing costs. The connected Miscellaneous Petitions were closed as a result of this judgment.

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