TRAN-1 - CREDIT CARRY FORWARD

[Vaishnavi Bubesh]

Dear Experts,

One vendor invoice related to Frieght CAF handling services for the month of June 2017 was raised with service tax on 03.07.2017. This input service is not shown in service tax return for Apr 17 to June 2017.

We have carry-forwarded this particular invoice in Table 7B of TRAN-1 return.

Now department has objected this referring - 'section 140(5) of CGST Act 2017 allows only credit on the input/input services in transit. It is inferred from the reply that the services were already availed before appointed date and not in transit.'

Please advise on way forward?

[KASTURI SETHI]

SH.SAIRAM LBS Ji,

Only way-out to fight the on the basis of case laws.

There are so many case laws wherein High Courts have held that ITC cannot be denied on the basis of technical lapse or procedural lapse, it being substantive right. On such-like you can place reliance upon the ratio of the following judgement of Hon'ble Supreme Court :-

Transitional Input Tax Credit cannot be disallowed for non-filing or incorrect filing of Form GST TRAN-1

The Supreme Court Bench comprising Hon’ble Mr. Justice Dr. D.Y. Chandrachud and Hon’ble Mr. Justice Sanjiv Khanna on 28-2-2020 dismissed the Petition for Special Leave to Appeal (C) No. 4408 of 2020 filed by 2020 (3) TMI 188 - SC ORDER UNION OF INDIA & ORS. VERSUS ADFERT TECHNOLOGIES PVT. LTD. Union of India against the Judgment and Order dated 4-11-2019 of Punjab & Haryana High Court in C.W.P. Nos. 30949 of 2018 as reported in 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT (Adfert Technologies Pvt. Ltd. v. Union of India). While dismissing the petition, the Supreme Court passed the following order :

“In the facts and circumstances of the present case, we are not inclined to exercise our jurisdiction under Article 136 of the Constitution. We accordingly dismiss the Special Leave Petition.

Pending application(s), if any, stand disposed of.”

The Punjab & Haryana High Court in its impugned order had held that the unutilized credit of Tax paid in pre-GST regime cannot be disallowed to carry forward in GST regime on procedural or technical ground, i.e., non-filing/incorrect filing of Form GST TRAN-1 by the last date, i.e., 27-12-2017. The High Court had permitted the assessee to file Form GST TRAN-1 or to file revised Form if filed incorrectly, either electronically or manually on or before 30-11-2019.

[Union of India v. Adfert Technologies Pvt. Ltd. - 2020 (3) TMI 188 - SC ORDER]

[Shilpi Jain]

How could the vendor have issued invocie dated jul 17 with ST? That itself is not right.

[Shilpi Jain]

From 1st jul 17 onwards Finance Act 1994 is repealed

[KASTURI SETHI]

I agree with the views of Madam Shilpi Jain. In addition to this, I add that with repeal of Finance Act, 1994, Service Tax registration became defunct. Only account in ACES Home remained open just for deposit of Govt. dues. Hence no question of issue of invoice under Service Tax law after 30.6.17.

Further, it is pertinent to mention that after 30.6.17 one of my clients surrendered Service Tax Registration Certificate in the jurisdictional Range Office and he was told by the officer that there was no need to surrender ST physically in the office inasmuch as the Finance Act, 1994 stands repealed.

[Vaishnavi Bubesh]

Dear Sir/Madam,

Thank you for your views. Yes you are right, vendor should not have raised with service tax. But we have paid service tax amount to vendor and vendor has also deposited to the government for which we have submitted proofs to the department.

But unfortunately, we are now denied to carry forward this particular credit in TRAN-1.

Since no option left, We suppose that we need to reverse the TRAN-1 credit along with interest.

Thank You,

Sairam

[KASTURI SETHI]

SH.SAIRAM LBS Ji,

In this situation, the supplier has paid Service Tax instead of GST. It is undisputed fact. In case amount of credit involved is very small, leave it. If a huge amount is involved, knock at the door of High Court but after exhausting departmental channels.

[Amit Agrawal]

I hold following views for given facts:

A. Vendor was correct charging service tax (& not GST) on his invoices, even if date of invoice was 03.07.2017 as it was against services provided in / for the month of June, 2017.

B. You are correct in transferring this Cenvat Credit through Trans-1 as same being allowed u/s 140 (5). This is presuming that such invoice was recorded in the books of account of yours within a period of thirty days from the appointed day.

C. Section 140 (5) nowhere states that it deals with 'input / input services in transit' cases. This seems to be Dept. officer's interpretation.

By the way, I am curious to know what could be 'input services in transit' - as claimed by the Dept. Officer - which fits into the scenarios covered by said section 140 (5).

P.S. If quantum involved is small, it is better to reverse credit with interest as a practical measure. If quantum involved is significant and you are willing to defend the credit using judicial means, I feel that you have a strong case on merit/s.

These are my personal views and not a professional advice / suggestion.

AI Summary

Transitional input tax credit: protect carry forward entitlement despite procedural TRAN 1 lapses, or reverse with interest as pragmatic option. Dispute concerns entitlement to carry forward transitional input tax credit in Form GST TRAN-1 for a vendor invoice charged with service tax after the appointed day; the department invoked section 140(5) as limited to inputs or input services 'in transit.' Contributors rely on precedent (Adfert Technologies line) that procedural lapses in TRAN-1 filing do not extinguish substantive right to transitional credit and advise litigation for significant amounts or reversal with interest for small sums.