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

[KASTURI SETHI]

You must challenge the legal validity of the condition of filing last six months' return. You can be successful and it will pave the way for others. All those who have been denied ITC on this ground should unite and challenge the legal validity.

[Ganeshan Kalyani]

I too agree that mere procedural lapse cannot take away the eligibility of input tax credit. Must contest the issue.

AI Summary

Eligibility for input tax credit questioned where post hoc return filing condition denies transitional ITC; challenge recommended. TRAN 1 credit claims under Table 5C were denied for non filing of recent VAT returns, raising a legal issue whether the post hoc return filing condition can validly extinguish the substantive entitlement to carry forward input tax credit; advisers recommend challenging the legal validity of that condition before the first appellate authority, arguing procedural lapse should not bar accrued ITC.