TRAN-1 correction for transitional input tax credit from June 2017 VAT return u/s140 allowed; rejection quashed, re-verification ordered

Rectification of FORM TRAN-1 for transitional input tax credit under s.140 CGST Act was sought after credit was wrongly claimed due to the taxpayer's mistake. The HC held that although the error was attributable to the taxpayer, the credit reflected as unutilized in the last pre-GST VAT return (June 2017) and was not disputed when the first GST return was filed; applying SC law that validly availed credit cannot be denied, the impugned rejection was unsustainable. The order was quashed and the matter remitted to the department to re-verify the taxpayer's records from the June 2017 VAT return and pass fresh orders.

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Issues Involved:
Challenge to disallowance of transitional credit under CGST Act, 2017.

The petitioner, previously an assessee under TNVAT Act, 2006, filed FORM TRAN-1 under Section 140 of the CGST Act, 2017 to transmit unutilized Input Tax Credit as of 30.06.2017. The petitioner declared the carried forward Input Tax Credit as Rs. 89,88,498/- in the returns for June 2017.

In the revised FORM GST TRAN-1 filed on 24.08.2017, the petitioner transited the Input Tax Credit in table 5(c) for State/Union Territory tax credit carried forward. This credit was utilized by the petitioner to discharge tax liability under the TNGST Act, 2017.

After a Supreme Court decision, the petitioner filed a revised return on 28.11.2022 to rectify errors due to technical glitches in the web portal. However, a mistake was made in filing the revised TRAN-1, placing the credit amount in the wrong table.

The respondents disallowed the transitional credit claimed by the petitioner, stating that the credit was wrongly transited and utilized. A Show Cause Notice was issued to recover Rs. 89,88,499/- if not paid voluntarily.

The petitioner argued that although mistakes were made in filing the returns, the unutilized credit as of June 2017 should not be denied. The Supreme Court precedent supports the view that validly availed credit cannot be denied.

The Court held that the unutilized credit from the last VAT return under TNVAT Act, 2006 should be re-examined by the respondents. If the credit was available, even with filing discrepancies, it should be condoned and regularized. If no credit was available, it should be recovered in accordance with the law within four weeks.

The Writ Petition was allowed with the above observations, with no costs imposed.

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