GST transitional credit transfer allowed for same PAN across states under Section 140

The Telangana HC allowed a petition challenging the denial of transitional credit transfer under GST law. The petitioner, having the same PAN nationwide, filed returns in Telangana's GST portal despite initial registration in Maharashtra. The court held that Section 140 of the GST Act permits credit transfer to any registered person with the same PAN, regardless of the state portal used. The show cause notice was deemed legally flawed as it incorrectly assumed returns could only be filed in the original state's portal. The petition was maintainable as a pure question of law per Supreme Court precedent in Godrej Sara Lee Ltd.

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Issues Involved:
1. Whether the petitioner bank could file its GST return in the Telangana portal due to a technical glitch in the Maharashtra portal.
2. Whether the petitioner bank can be saddled with demand, penalty, and interest under Section 140 of the GST Act, 2017.

Detailed Analysis:

Issue 1: Filing GST Return in Telangana Portal Due to Technical Glitch in Maharashtra Portal
The petitioner bank, headquartered in Maharashtra, faced a technical glitch while filing its GST return in the Maharashtra portal. Consequently, the bank filed its return in the Telangana portal, where it has a branch, and transferred the credit to the Maharashtra portal on the same day.

The petitioner argued that there is no prohibition under the GST Act for filing returns electronically in another state where the branch exists, especially when no undue benefit was derived, and the revenue did not suffer any loss. The petitioner supported this argument by referring to Section 140 (1) and (8) of the GST Act, 2017, which allows the transfer of credit to any registered person having the same Permanent Account Number.

The Revenue contended that the petitioner should have filed the return in the Maharashtra portal and approached higher authorities for redressal of the technical glitch. They argued that Section 140 mandates filing returns in the state where the registration exists.

The court found that the pivotal question was whether Section 140 of the GST Act barred filing returns in the Telangana portal. Since this was a pure question of law, the court decided to entertain the petition without relegating the petitioner to the statutory alternative remedy.

Issue 2: Demand, Penalty, and Interest Under Section 140 of the GST Act, 2017
The show-cause notice issued to the petitioner alleged that the credit availed through the TRAN-1 return filed in Telangana was ineligible and required reversal with applicable interest and penalty. The petitioner argued that the credit was transferred to the Maharashtra portal on the same day, and no undue benefit was derived.

The court examined Section 140 of the GST Act, particularly sub-sections (1) and (8). It found that the petitioner had centralised registration and the same Permanent Account Number nationwide. Thus, sub-section (1) did not restrict the petitioner to file returns only in Maharashtra. Sub-section (8) allowed the transfer of credit to any registered person having the same Permanent Account Number.

The court noted that the Revenue failed to establish any prohibition against filing returns in the Telangana portal where the petitioner's branch existed. It also found that the technical glitch in the Maharashtra portal was not disputed by the Revenue. The court emphasized that the Department cannot take advantage of its own wrong and held that the petitioner should not be penalized for filing returns in the Telangana portal due to a technical glitch in the Maharashtra portal.

Conclusion:
The court concluded that the foundation of the show-cause notice was flawed, as it assumed that returns could not be filed in the Telangana portal. Consequently, the court set aside the show-cause notice dated 03.09.2021 and the Order-in-Original dated 31.10.2023, allowing the writ petition without costs.

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