Tax Credit Dispute Resolved: Technical Portal Glitches During GST Implementation Block Legitimate Credit Claims Under Rule 117

HC ruled in favor of petitioner challenging GST tax credit penalties. The court found technical portal issues during GST implementation prevented proper credit transition and should not result in punitive measures. The impugned order imposing interest and penalty was quashed, recognizing the petitioner's legitimate claim for Input Tax Credit sanctioned through Tran-1 Credit order.

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Issues:
The case involves difficulties faced by the petitioner in transitioning Input Tax Credit on capital goods during the implementation of GST. The dispute arose when the petitioner filed a revised return to claim Input Tax Credit, which was earlier sanctioned to the petitioner.

Summary:
The petitioner encountered challenges in transferring Input Tax Credit on capital goods during the introduction of GST on 01.07.2017. Despite efforts to communicate with the Department and officials, the petitioner faced issues in transitioning the credit properly. Subsequently, the petitioner decided to avail Input Tax Credit that could not be transitioned under Section 140 of the Central Goods and Services Tax Act, 2017, as confirmed by a Sanction Order (Tran-1 Credit) dated 20.02.2023. Following this, proceedings were initiated against the petitioner, leading to the impugned order.

The impugned order dated 28.03.2023 imposed penalty and interest on the petitioner under Section 50 and Section 73(9) read with Section 122(2)(a) of the CGST Act. The dispute centered around the petitioner filing a revised return based on decisions of the Bombay High Court and the Supreme Court to claim Input Tax Credit previously sanctioned by the Tran-1 Credit order.

The main issue for consideration was whether the petitioner could be penalized with interest and penalty despite the credit being sanctioned and the petitioner filing returns to transition the same credit. The court noted that the petitioner was entitled to transitional credit as confirmed by the Sanction Order dated 20.02.2023, amounting to Rs. 11,06,396.

The court held that technical glitches in the web portal during the GST implementation caused the petitioner's difficulties and should not result in penalties, especially since the credit was allowed post-GST implementation. Consequently, the impugned order imposing interest and penalty was deemed unsustainable and quashed, allowing the writ petition with no costs.

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