2024 (4) TMI 992 - HC - GST

Petitioner entitled to transitional input tax credit for unutilized advance VAT payments under Section 140 TNGST Act 2017

The Madras HC allowed a writ petition challenging denial of transitional input tax credit for unutilized advance VAT payments. The court held that Section ... Transitional arrangements for input tax credit under Section 140 of the TNGST Act, 2017 - transitioning of un utilised VAT/Entry Tax balances - advance tax vis a vis input tax credit - rectification/manual filing of TRAN 1 and credit entry in electronic ledger - availability of writ jurisdiction despite alternate appellate remedyTransitional arrangements for input tax credit under Section 140 of the TNGST Act, 2017 - transitioning of un utilised VAT/Entry Tax balances - Entitlement to transition the amount of VAT/Entry Tax remaining unutilised in returns prior to the appointed day into electronic credit ledger under Section 140 of the TNGST Act, 2017. - HELD THAT: - The Court held that Section 140(1) permits a registered person to take in his electronic credit ledger amounts of Value Added Tax and Entry Tax remaining unutilised in returns furnished under the existing law prior to the appointed day, subject only to the statutory exceptions. The petitioner produced VAT Return (filed 08.08.2017) showing a balance lying unutilised as on 30.06.2017, and the official record corroborated the unutilised balance. Reliance was placed on the Division Bench and Single Judge decisions which emphasise that validly accrued credits subsisting at the switch over to GST cannot be defeated by procedural or portal limitations and that substantial compliance should not be frustrated by technicalities. Applying that reasoning, the Court found no merit in denying transition of the legitimately earned unutilised tax balance and quashed the impugned order.Amount of VAT/Entry Tax unutilised as on 30.06.2017 is entitled to be transitioned under Section 140 and the impugned denial is quashed.Rectification/manual filing of TRAN 1 and credit entry in electronic ledger - availability of writ jurisdiction despite alternate appellate remedy - Relief and remedy to be afforded to the petitioner for carrying forward the unutilised balance and maintainability of writ despite existence of alternate remedy. - HELD THAT: - Noting that the petitioner had an alternate appellate remedy, the Court nevertheless exercised writ jurisdiction because officers under the GST provisions are subject to limitation and procedural impediments (such as portal constraints) should not defeat substantive rights. The Court directed the respondents to permit rectification of TRAN 1 or accept manual TRAN 1 filing or alternatively make a suitable credit entry in the petitioner's electronic cash/credit ledger after verifying that the amount was unutilised as on 30.06.2017. The respondents were ordered to complete this exercise within ninety days from receipt of the order.Respondents directed to permit TRAN 1 rectification or manual filing or make suitable electronic credit entry after verification within 90 days; writ allowed notwithstanding alternate appellate remedy.Final Conclusion: Writ petition allowed; impugned order dated 23.12.2019 quashed and respondents directed to enable transition/rectification or manual TRAN 1 or to make a suitable electronic credit entry of the verified unutilised tax balance as on 30.06.2017 within ninety days. Issues:The issues involved in the judgment are the denial of transitional tax remaining unutilized in VAT returns and the interpretation of Section 140 of the TNGST Act, 2017.Denial of Transitional Tax:The petitioner challenged the order denying the transitional tax remaining unutilized in VAT returns filed for July 2017. The petitioner, engaged in the sale of ceramic tiles, imported tiles from various states and paid advance tax at Tuticorin port. The petitioner sought to transition the unutilized advance tax under Section 140 of the TNGST Act, 2017. The petitioner argued that the impugned order should be quashed as there was no scope for denying the transition of unutilized advance tax.Interpretation of Section 140 of TNGST Act, 2017:The Additional Government Pleader contended that only input tax credit unutilized as of June 30, 2017, could be transitioned under Section 140. He argued that the petitioner could seek a refund for the unutilized advance tax but could not transition it. The Government Pleader emphasized that advance tax was not equivalent to input tax credit. He suggested that the petitioner could pursue remedies before the Appellate Authority under Section 107 of the TNGST Act, 2017.Judicial Interpretation and Decision:The Court considered arguments from both sides and reviewed the VAT returns filed by the petitioner, confirming the unutilized balance. Referring to Section 140 of the TNGST Act, 2017, the Court highlighted that any unutilized VAT or entry tax amount must be allowed to be transitioned. Citing precedents, the Court emphasized that validly availed input tax credit could not be denied and should be carried forward for adjustment under the GST regime.Final Decision:The Court allowed the writ petition, directing the respondents to enable the petitioner to rectify or manually file the necessary forms for transitioning the unutilized tax amount. The Court emphasized that officers under the GST Act must adhere to limitations and granted 90 days for the completion of the transition process. The impugned order was quashed, and the writ petition was allowed without costs.