2025 (11) TMI 1798 - HC - VAT / Sales Tax

Refund of ITC on capital goods denied for failure to claim transitional credit via TRAN-1 after GST rollout

M/s Madhukesh G Associates Versus The Commissioner Commercial Tax

HC dismissed the revision filed by the assessee challenging denial of refund of ITC on capital goods under the UP VAT regime post-GST implementation. HC ... Denial of refund of ITC on capital goods as per Rule 24(a) of the UP VAT Rules ignoring that erstwhile UP VAT Act 2008, stood subsumed in GST (Goods & Service Tax) Regime, coming into force on and from 01.07.2017 - sustainability of the Tribunal's order in view of the decision of Easwaran Brothers India Private Limited Vs. The Assistant Commissioner (ST) (FAC) [2022 (12) TMI 1037 - MADRAS HIGH COURT] - HELD THAT:- It is not in dispute that the petitioner is claiming ITC on purchase of goods. The benefit of ITC can only be allowed as per the provision prevailing on that date of its claim. It is also not in dispute that GST Law was in force from 01.07.2017. It is further not in dispute that ITC claim on capital goods was in the first year. Rule contemplates for availing the ITC in next three equal installments. After implementation of GST, the transition provisions were made for claiming ITC in the shape of finding TRAN-1. Nothing have been brought on record to show that the appellant have filed TRAN-1 for claiming the ITC. Under the Vat Act, there is no provision prescribed for refund of ITC earned on capital goods. Thus, no case is made out for interfering in the impugned order. Hence, the revision is dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether denial of refund of input tax credit on capital goods under Rule 24(a) of the U.P. VAT Rules, for the assessment year 2017-18, was justified in view of the subsuming of the U.P. VAT Act, 2008 into the GST regime with effect from 01.07.2017. 1.2 Whether, in the absence of filing TRAN-1 under the GST transitional provisions and in the absence of any statutory provision under the U.P. VAT Act, a claim for refund of accumulated input tax credit on capital goods could be sustained. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Refund of ITC on capital goods under U.P. VAT regime post-GST implementation (a) Legal framework (as discussed) 2.1.1 The Court noted that under Rule 24(a) of the U.P. VAT Rules, input tax credit on capital goods purchased in a particular assessment year could be availed in three equal installments in subsequent years on the purchase of such capital goods. 2.1.2 The Court recorded that the GST law came into force on 01.07.2017 and that transitional provisions under the GST regime contemplated claiming of unutilized input tax credit through filing of TRAN-1. 2.1.3 The Court observed that under the U.P. VAT Act there is no provision prescribing refund of input tax credit earned on capital goods. (b) Interpretation and reasoning 2.1.4 The Court accepted that the assessee's claim related to input tax credit on purchase of capital goods and that such credit, as per the then prevailing Rule 24, was to be availed in three equal installments in subsequent years, not by way of refund. 2.1.5 The Court held that the benefit of input tax credit can only be allowed strictly in accordance with the statutory provisions prevailing on the date of its claim, and that those provisions envisaged availment of credit in installments, not refund. 2.1.6 The Court found that, after implementation of GST, transitional provisions required filing of TRAN-1 for migration/availment of unutilized input tax credit; however, no material was placed on record to show that the assessee had filed TRAN-1. 2.1.7 The Court accepted the revenue's contention that the assessee was not seeking to avail input tax credit in the manner prescribed (i.e., through installments and/or in accordance with GST transitional procedure), but was instead claiming direct refund of such credit, which was neither contemplated under the U.P. VAT Act nor availed under the GST regime. 2.1.8 The reliance placed by the assessee on external case law was not accepted as a basis to override the clear statutory scheme and the specific factual position regarding non-filing of TRAN-1 and absence of a refund provision for capital goods ITC under the U.P. VAT Act. (c) Conclusions 2.1.9 The Court concluded that, in the absence of any statutory provision under the U.P. VAT Act permitting refund of input tax credit on capital goods, and in the absence of filing TRAN-1 under the GST transitional provisions, the assessee was not entitled to refund of accumulated input tax credit on capital goods. 2.1.10 The Court held that no ground was made out to interfere with the Tribunal's order denying such refund. 2.1.11 The questions of law were answered in favour of the revenue and against the assessee, and the revision was dismissed.