Transitional credit taken directly in the GSTR 3B

[Hariharan Sundaram]

Dear experts, one taxpayer has taken the transitional credit directly in the GSTR 3B. He has filed erstwhile ER1 and ST3 returns for the month of June 2017 and the period ending on 30.06.2017 as NIL . In other words, without reflecting the Cenvat credit in the last filed returns filed during the erstwhile GST regime he has taken the credit straight away in the GSTR 3B. Now the department issued GST DRC 1A to recover the same . Kindly guide to come out of this issue

[RAJA SWAMINATHAN]

A taxpayer, on receipt of intimation in Form DRC-01A, can use the second part of the said form i.e. Part B, to communicate to the officer the liability is not acceptable by him due to the wrong filing of form. Appeal has to be filed in line with the appeal procedure under GST act. In case of no remedy up to appellate level then appeal can be filed in High court.

Since the time limit for revision of ER1 and ST3 returns has already expired the only remedy available is to approach the High Court for acceptance of the CENVAT Credit amount which is eligible. The Honorable High Courts have up held in may revenue related cases that substantial benefit cannot be denied due to procedural irregularities.

[KASTURI SETHI]

It is a case of clear-cut and intentional violation of Section 140 of CGST Act. No hope. You will have to challenge validity of Section 140 of CGST It is not a cake walk. We are required to follow the GST laws in letter and spirit. Law is so much clear that I visualize no hope in this case. It is just like hoping against hope.

[JAGDISH SHARMA]

Technically it seems to be very much impossible due to two below mentioned reasons.

Number 1. CBIC had extended the due date of the GST TRAN 1 form till 31st March 2020 on the consideration of technical issues faced by the registered person. The latest order has superseded the Order no. 01/2019 and now applies to the concerned taxpayers and filers.

This was for those taxpayers who could not file or wrongly filed Tran-1.So According to this time is over for you.Nothing is for you according to this notification except knocking at High Court. Though favoring the taxpayer many High courts allowed Tran-1 filing after due dates but to counter High Courts Revenue brought below mentioned notification that restricts filing Tran-1 after due dates.But one positive thing in your case you have already availed in Tran-1 credit in 3B instead of Tran-1 form.So you can fight for eligibility of your claim not for that you have not filed Tran-1.Many taxpayers faced such problems,Hon'ble Panjab & Haryana Court in case of Adfert Technologies Pvt. Ltd. Versus Union of India others CWP No.30949 of 2018(O&M) Date of Decision 04/11/2019 = 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT allowed taxpayers to avail Tran-1 but only challenge Number 2 to some extent.

Number 2. Notification No. 43/2020 – Central Tax dated 16/05/2020

CBIC has appointed May 18, 2020, from which retrospective amendment in Section 140 of the CGST Act, 2017 prescribing the time limits for taking transitional credits as per Section 128 of the Finance Act 2020 shall come into force. The amendment is made effective retrospectively from July 1, 2017. In many cases, High Courts had allowed transitory credit even when required returns were not filed before the due date. The amendment was done to get over these judgments and provided that transitory credit taken after the due date will be disallowed if return filed beyond the due date. This amendment is with retrospective effect to nullify judgments of various High Courts Section 140 of the CGST Act, 2017 amended with retrospective effect.
But this notifcation talks about Return filed beyond date but you have already filed so have to take plea for eligibility of your claim only in High Court.

I hope you got your answer.

May i be wrong somewhere,So requested to all Subject experts to correct as i am new in GST practice want to learn more from my all seniors.

Thanks

CMA JAGDISH SHARMA

[JAGDISH SHARMA]

Secondly You have to fight for 2 things i.e.

One for your NIL filed ST3 returns to establish for your Available Input to carry forwards as Tran-1 in GSt.

Second ,In GST to prove eligibility as Tran-1

If Credit amount is not significant as compare to GST reversal with interest then better to close up the chapter with DRC 1A.

[KASTURI SETHI]

Dear Jagdish Sharma Ji,

I agree with your views. You have laboured hard on this issue. Really appreciable. Pl. continue contributing to this forum. We learn from each other. We reinforce by way of sharing our knowledge. TMI is the best forum to enhance your knowledge and recognition also.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. TMI is the best platform to share and gain knowledge.

AI Summary

Taxpayer Challenges GST Credit Recovery via GSTR 3B; Experts Debate Section 140 Violation and Legal Options A taxpayer took transitional credit directly in GSTR 3B without reflecting it in the last filed returns under the previous GST regime. The tax department issued a GST DRC 1A to recover the credit. Experts suggest that the taxpayer can communicate disagreement with the liability using Form DRC-01A and may need to appeal up to the High Court due to expired deadlines for revising returns. Some experts believe the case is a clear violation of Section 140 of the CGST Act, making legal success unlikely. Others suggest fighting for eligibility of the claim in court, despite procedural issues.