Credit availed through TRAN-1 was denied due to non filing of last 2 months return under VAT law

[LAKSHMINARAYANAN TR]

Dear Experts

I would like to pick your minds for this case where one of our clients transitioned the ITC via TRAN-1 form under table 5C( ITC balance carried forward from VAT return). Department denied the same on account of not filing immediate 3 months returns as per sec 140(1) under VAT law. The provision is specific that last 6 months returns is to be file to transition the credit from previous regime. My question is although its specific provision based on which its denied, I'm aware of judgments in the previous regime where mere procedural lapse can't deny a significant ITC. May I hear your views on what is the chance before first appellate authority?

thank you

CA Durairaj

AI Summary

Client Denied Credit for Not Filing Last Two VAT Returns, Challenging Section 140(1) Requirement for ITC Eligibility A client was denied credit transitioned via the TRAN-1 form due to not filing the last two months of VAT returns, as required by Section 140(1) of the VAT law. The provision mandates filing the last six months' returns to transition credit from the previous regime. Despite this specific provision, there are precedents where procedural lapses did not negate significant input tax credit (ITC). Experts suggest challenging the legal validity of the requirement, arguing that procedural lapses should not affect ITC eligibility, and recommend contesting the issue before the appellate authority.