2025 (1) TMI 1418 - HC - GST

Taxpayer allowed to file revised GSTR-3B returns despite delays due to system glitches and transitional difficulties under Section 140

The Madras HC allowed a petition seeking permission to file revised GSTR-3B returns for July-November 2017. The court held that despite TRAN-01 facility ... Seeking direction to respondent No.7 to dispose of the petitioner's letter filed by the petitioner seeking permission to file a revised GSTR-3B for the months from July 2017 to November 2017 - HELD THAT:- Chapter XX deals with transitional provisions to transition unutilized ITC. As per Section 140(1) of the CGST Act, 2017, a registered person, other than a person opting to pay tax under Section 10 shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit ( of eligible duties) carried forward in the return relating to the period ending with the day immediately preceding the appointed day i.e., 01.07.2017, furnished by him under the existing law ( within such time and ) in such manner as may be prescribed. As per sub-section 2 to Section 140 of the Central Goods and Services Tax Act, 2017, a registered person, other than a person opting to pay tax under Section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for a period ending with the day immediately preceding the appointed day within such time and in such manner as may be prescribed. Admittedly, the TRAN-01 facility was enabled on the GST portal only on 25.08.2017 which is almost 56 days after the implementation of GST w.e.f 01.07.2017. The petitioner had time upto 29.09.2017 to file TRAN-01 returns as per Rule 117 of the CGST Rules, 2017. Such time was extended upto to 31.10.2017 vide Order No.03/2017 – GST dated 21.09.2017. Thereafter, the said time was further extended upto 30.11.2017 vide Order No.07/2017-GST dated 28.10.2017. Once again, the time for filing TRAN-01 returns was further extended upto 27.12.2017 vide Order No.09/2017 – GST dated 15.11.2017. There was a delay in availing the ITC and therefore, during the interregnum, part of the liability was discharged by cash by debiting the amounts to the electronic cash ledger. It is under these circumstances, the Honourable Supreme Court observed that non-performance or no-operability of Form GSTR-2A or for that matter, other forms, will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessment in Form GSTR-3B manually on electronic platform. This is not the case here. The petitioner cannot be burdened with accumulation of ITC as the petitioner is unable to liquidate the same as it is under inverted duty structure. Conclusion - The technical glitches in the GST system should not penalize taxpayers who are otherwise compliant and entitled to utilize their ITC. Petition allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issue in this case was whether the petitioner could amend the GSTR-3B returns for the period from July 2017 to November 2017 to utilize transitional Input Tax Credit (ITC) that was not transitioned due to technical issues with the GST portal, and consequently, whether the petitioner was entitled to a refund of the tax paid in cash during that period.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework primarily involved the provisions of the Central Goods and Services Tax (CGST) Act, 2017, especially Section 140 dealing with transitional provisions, and Section 39 regarding the furnishing of returns. The case also referenced the Supreme Court decision in Union of India v. Bharti Airtel Ltd., which dealt with the rectification of GSTR-3B returns and the use of ITC.Court's Interpretation and ReasoningThe Court distinguished the present case from Bharti Airtel, noting that the latter involved a delay in availing ITC due to non-operationalization of Form GSTR-2A, whereas the present case involved a delay in transitioning ITC due to the late operationalization of Form GST TRAN-01. The Court emphasized that the petitioner's inability to transition ITC was due to technical glitches and not due to any fault on the part of the petitioner.Key Evidence and FindingsThe petitioner had a transitional ITC of Rs. 82,91,19,712/- but could only transition Rs. 74,61,65,427/- due to the delayed operationalization of the GST portal. During the period from July 2017 to November 2017, the petitioner discharged a tax liability of Rs. 3,06,54,81,564/-, partly using ITC availed during that period and partly in cash, amounting to Rs. 86,96,78,402/-.Application of Law to FactsThe Court applied the principles of equity and fairness, acknowledging the technical difficulties faced by the petitioner in transitioning ITC. It noted that the petitioner could not be penalized for systemic failures and was therefore entitled to amend the returns to reflect the correct utilization of ITC.Treatment of Competing ArgumentsThe respondents relied on the Bharti Airtel decision to argue against the petitioner's request for rectification and refund. However, the Court found this case distinguishable, as the Bharti Airtel decision did not involve transitional ITC but rather the non-operability of Form GSTR-2A. The Court emphasized that the petitioner was not seeking to alter any output tax liability but merely to correct the mode of payment, which was revenue-neutral.ConclusionsThe Court concluded that the petitioner should be allowed to amend the GSTR-3B returns for the relevant period and receive a refund of the cash paid, subject to a corresponding debit from the electronic credit ledger.SIGNIFICANT HOLDINGSCore Principles EstablishedThe Court established that technical glitches in the GST system should not penalize taxpayers who are otherwise compliant and entitled to utilize their ITC. It reinforced the principle that systemic failures should not deprive taxpayers of their legitimate entitlements.Final Determinations on Each IssueThe Court set aside the impugned order and directed the respondents to allow the petitioner to amend the GSTR-3B returns. It also ordered a refund of Rs. 74,61,65,427/- to the petitioner, contingent upon a debit of an equivalent amount from the petitioner's electronic credit ledger.