AI Drafter 
TaxTMI 
TaxTMI 
2021 (3) TMI 953
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s P.S. Bhat Brother, M/s. Sai Radha Developers, M/s Sai Radha Motors, M/s Escon Gensets Private Limited, M/s Vertive Energy Private Limited, M/s Juwi India Renewable Energies Pvt. Ltd. M/s. Origami Cellulo Private Limited, M/s. Orchestrate Systems Private Limited, M/s Kongovi Private Limited, M/s. Compass, M/s Lifestyle International Private Limited, M/s Hosamane Precision Parts, M/s Plasto Inc., M/s Weiwo Communications Private Limited, M/s Whizdm Innovations Private Limited, M/s Pragathi Automation Pvt. Ltd., Sri.Jeevan J. Neeralgi, Sri. Vikram Aditya Huilgol and Sri.K.M. Shivayogiswamy, learned counsel on behalf of appellant- Union of India, GST Council, GST Network and GST Commissioner and Sri. K. Hema Kumar, learned Addl. Government Advocate appearing for respondent-State of Karnataka and learned Senior Counsel Sri. G. Shivadass representing Sri. Prashanth Shivadass, Sri. M.S. Hariprasad, Sri. V. Raghuraman, Sri. Atul K. Alur, Sri. Y.C. Shivakumar and Sri. K. Mallaha Rao for the respondents/Writ petitioners. J U D G M E N T NAGARATHNA J., Since all these appeals raise common question of law and facts and arise from the common order passed by the learned Single....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct from 10.09.2018 vide Notification No.48/2018-Central Tax, the Commissioner may, on the recommendations of the GST Council, extend the date for submitting the declaration in TRAN-1 by a further period on account of technical difficulties on the common portal. Therefore, reliance could not be placed on the said Rule to permit the petitioners to file or revise the TRAN-1/TRAN-2 beyond the statutory period prescribed or otherwise which would be contrary to the language employed in the said Rule. (c) Learned Single Judge considered the submissions and observed that it was not in dispute that Rule 117(1A) permitted the registered persons who could not submit the declaration within the due date on account of technical glitches on the common portal, by a further period not beyond 31.03.2019. That, under Rule 117 of the Rules, a period of 90 days from the appointed day being 01.07.2017 was prescribed, but the same was extended from time to time upto 31.12.2019 by virtue of insertion of Sub-rule 1A to Rule 117, vide Notification No.49/2019/Central Tax dated 09.10.2019. The problem of technical glitches in the common portal was addressed by the Department by permit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hivadass, Sri. M.S. Hariprasad, Sri. V. Raghuraman, Sri. Atul K. Alur, Sri. Y.C. Shivakumar and Sri. K. Mallaha Rao for the respondents/Writ petitioners. We have perused the material on record including the written submissions. 5. Learned counsel appearing for the Union of India contended that the Goods and Services Tax(GST) having been introduced in the Country with effect from 01.07.2017, Section 140 of the said Act enables the registered person to be entitled to take in his electronic credit ledger the amount of CENVAT credit carried forward in the return relating to the period immediately preceding the introduction of GST. But, Section 140 States that the said credit shall be taken "within such time and in such manner as may be prescribed". That the time limit and the manner in which the transitional credit is to be availed is prescribed under Rule 117 of the Rules. As far as these cases are concerned, the last date for filing of TRAN-1 was extended from time to time as noted below:- a. Order No. 03/2017- GST 21.09.2017 - Last date of filing of TRAN-1 extended till 31.10.2017; b. Order No. 07/2017-GST 28.10.2017 - Last date of filing of TRAN-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nunciated in Section 140 read with Rule 140 of the Rules, sought to bypass the said provisions by seeking relief in the writ petitions. That the benefit of input credit is under a statutory scheme and there can be no concession made for availing of the said benefit and all procedural restriction or limitations would have to be complied if an assessee has to avail the said benefit. 8. According to the appellants, the assessees in the instant cases failed to file revised declarations in form TRAN-1 within the time prescribed under Section 140 read with Rule 117 and without adhering to the procedural requirements sought waiver of the same in the writ petitions. That the learned Single Judge could not have granted relief to the assessees-respondents herein so as to avail the benefit of transitional credit beyond the time period or belated stage. Therefore, the learned Single Judge erred in directing the appellant authorities to accept the declaration forms beyond the statutorily prescribed time limit. It was contended that the right to seek said relief was extensive since the assessees did not file/revise TRAN-1 within the prescribed time. In this regard, it was contended that by ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed TRAN-1 in time or on account of technical glitches at the assessees end or for any other reasons, the benefit had not been availed by the assessees in time. Therefore, such assessees could not have availed of the extended period of time to file their declaration forms. In other words, it was contended that in order to claim the benefit of extended period of time under Rule 117(1A) of the Rules, it was necessary that the dealer ought to have availed of the Income Tax Grievance Redressal mechanism under the Circular dated 03.04.2018, wherein, after due examination of the matter, the GST Council would have made recommendations for extension of time on the ground that the dealer in question could not upload his forms due to technical glitches on the GST common platform. 12. Elucidating on the expression 'technical difficulties', learned counsel for the appellant - Union of India submitted that the same has been considered and interpreted by the Division Bench of the Bombay High Court in the case of Nelco Ltd. v. Union of India and Ors, [(2020) 81 GST 518 (Bombay)], (Nelco Ltd.) and the Bombay High Court rejected the contention of the assessees therein that the said phrase could b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e said direction is contrary to the object and purpose of Section 140 read with relevant Rules. It was contended by learned counsel for the appellants that the order passed by learned Single Judge may be set-aside and the writ petitions may be dismissed. 15. Per contra, learned senior counsel Sri. G. Shivadass representing Sri. Prashanth Shivadass, learned counsel Sri.V.Raghuraman, Sri.Atul K. Alur, Sri.Mallaha Rao and other counsel appearing for the respondent-assessee contended that the judgment of the learned single Judge would not call for any interference in these appeals. That the learned single Judge has taken note of Section 140 of the Act read with Rule 117 of the rules and the fact that sub-rule (1A) was inserted to Rule 117 by an amendment for the purpose of extending the time limit to file or revise the Tran-1 when it was found that such filing or revision was not possible because of technical glitches in the common portal. That the learned single Judge has been conscious of the fact that it would be a case of discrimination if only extension of time was granted on the ground of technical glitches on the common portal and not on any other ground. Learned single judge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the amendment. Any narrow or a myopic reading of the same would not in any way enhance the object and purpose of the amendment. Therefore, learned senior counsel and other counsel contended that the impugned order has rightly appreciated the fact that the assessees, who have the benefit of the input credit, which is a substantial benefit that they have under the statute, must ultimately be tangible and reach the assessees and the same cannot be withheld by the revenue on a narrow or literal interpretation of the expression 'technical defects'. 18. Learned senior counsel and other counsel appearing for the respondents submitted that there is no merit in these appeals and the same may be dismissed. 19. Learned Additional Government Advocate appearing for the State adopted the submissions of learned counsel for the appellant-Union of India and submitted that these appeals would have to be allowed by dismissing the writ petitions. 20. Learned Additional Government Advocate appearing for the appellant in W.A.No.556 of 2020 also submitted that this appeal assails order dated 17.12.2019 passed by the learned single Judge in Writ Petition No.52363 of 2019. The said writ p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch exemption notifications as are notified by the Government." 23. In the instant cases, the assessees have complied with all these conditions. They also contended that under the GST regime, there is no provision relatable to lapsing of the credit as such. In other words, whatever benefit of credit input that could have taken under the earlier law could be availed of in a continuous process under the new regime. However, the bone of contention between the parties in these cases is with regard to the respondents-assessees herein not filing their TRAN-1 or revised TRAN-1 within the period prescribed under Rule 117 of the Rules. Whether, on account of the said fact they would be denied the benefit of credit input? 24. Rule 117 of the Rules speaks about tax or duty credit followed under existing law. Same reads as under: "117. Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day.-(1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying therein, se....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services; and (v) the date on which the receipt of goods or services is entered in the books of account of the recipient. (3) The amount of credit specified in the application in FORM GST TRAN-1 shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT- 2 on the common portal. (4) (a) (i) A registered person who was not registered under the existing law shall, in accordance with the proviso to sub-section (3) of section 140, be allowed to avail of input tax credit on goods (on which the duty of central excise or, as the case may be, additional duties of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975, is leviable) held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty. (ii) The input tax credit referred to in sub-clause (i) shall be allowed at the rate of sixty per cent. on such goods which attract central tax at the rate of nine per cent. or more and forty per cent for other goods of the central tax applicable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN-1 by a further period not beyond "31st March, 2020" in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension." Rule 120 deals with details of goods sent on approval basis and Rule 120A deals with revision of declaration in form GST TRAN-1 and the same read as under: "120. Details of goods sent on approval basis.- Every person having sent goods on approval under the existing law and to whom sub-section (12) of section 142 applies shall, within (the period specified in rule 117 or such further period as extended by the commissioner), submit details of such goods sent on approval in FORM GST TRAN-1. 120A. REVISION OF DECLARATION IN FORM GST TRAN-1 - Every registered person who has submitted a declaration electronically in FORM GST TRAN-1 within the time period specified in rule 117, rule 118, rule 119 and rule 120 may revise such declaration once and submit the rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was no purpose in granting any extension of time by way of a concession. In the said case, the petitioner therein had stated that he had technical difficulties in filing the TRAN-1 FORM and therefore, the delay ought to have been over-looked and the benefit of availment of the credit of input ought to have been given. But, the Division Bench found that there was no cogent proof of the existence of technical difficulties as seen from the system logs at the common portal and went on to uphold the vires of Rule 117 of the Rules. It was observed that the time-limit stipulated in Rule 117 of the Rules was in consonance with the transitional nature of the enactment, and it was neither arbitrary nor unreasonable. 29. It was further observed in the said case that the availment of input tax credit under Section 140(1) was a concession attached with conditions of its exercise within the time-limit and only exception was on account of technical difficulties on the common portal. That those registered persons who could not submit the declaration by the due date because of technical difficulties on the common portal which could be evidenced from the system logs, could be given an extension....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., (P.R.Mani), which is a judgment of the Division Bench of the Madras High Court which considered Section 140 of the Act as well as Rule 117 of the Rules. After noting that the validity of Section 140 and Rule 117 under the Act had been upheld by several High Courts, it was observed that input tax credit being a concession and not a vested right has to be availed within the time-limit if benefit is to accrue. That the time-limit prescribed for filing of TRAN-1 or revised TRAN-1 FORM was to be construed as a mandatory requirement and not being directory. That if it was construed to be directory, it would adversely impact the Government revenue interest. Hence, it was held that the time-line prescribed under Rule 117 in filing the return in FORM GST TRAN-1 could not be extended as such and on that basis, the writ petition was dismissed. 32. Per contra, learned senior counsel and learned counsel for the respondents-assessees relied upon the following two judgments in support of their contentions, viz., Adfert Technologies and SKH Sheet Metals Components. In the first of the above cases, the question considered was, whether, in exercise of jurisdiction under Article 226 of the Const....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent in the case of Krish Automotors Pvt. Ltd. Vs UOI and others, 2019- TIOL-2153-HC-DEL-GST= 2019 (29) G.S.T.L. 584 (Del.)],, Delhi High Court has noted its various previous orders and directed as under: "11. Accordingly, a direction is issued to the Respondents to permit the Petitioner to either submit the TRAN-1 form electronically by opening the electronic portal for that purpose or allow the Petitioner to tender said form manually on or before 15th October, 2019 and thereafter, process the Petitioner's claim for ITC in accordance with law. The petition is disposed of in the above terms." 12. We fully agree with findings of Hon'ble Gujarat and Delhi High Court noticed hereinabove and find no reason to take any contrary view. We are not in agreement with the cited judgment by the Revenue of Hon'ble Gujarat High Court in Willowood Chemicals case (Supra) as the Gujarat High Court itself in subsequent judgments and Delhi High Court in a number of judgments (as noticed hereinabove) have permitted petitioners (therein) to file TRAN-I Forms even after 27.12.2017. We also find that the Sub Rule (1A) added/inserted to Rule 117 w.e.f. 10.09.2018 has not been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication, introduced by way of sub Rule (1A), restricting the benefit only to taxpayers whose cases are covered by "technical difficulties on common portal" subject to recommendations of the GST Council, is arbitrary, vague and unreasonable. What does the phrase "technical difficulty on the common portal" imply? There is no definition to this concept and the respondent seems to contend that it should be restricted only to "technical glitches on the common portal". We, however, do not concur with this understanding. "Technical difficulty" is too broad a term and cannot have a narrow interpretation, or application. Further, technical difficulties cannot be restricted only to a difficulty faced by or on the part of the respondent. It would include within its purview any such technical difficulties faced by the taxpayers as well, which could also be a result of the respondents follies. After all, a completely new system of accounting; reporting of turnover; claiming credit of prepaid taxes; and, payment of taxes was introduced with the implementation of the GST regime. A basket of Central and State taxes were merged into a single tax. New forms were introduced and, as aforesaid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial construction of technical difficulties, limiting it to those existing on the common portal. It is unfair to create this distinction and restrict it to technical snags alone. In our view, there could be various different types of technical difficulties occurring on the common portal which may not be solely on account of the failure to upload the form. The access to the GST portal could be hindered for myriad reasons, sometimes not resulting in the creation of a GST log-in record. Further, the difficulties may also be offline, as a result of several other restrictive factors. It would be an erroneous approach to attach undue importance to the concept of "technical glitch" only to that which occurs on the GST Common portal, as a pre-condition, for an assesee/tax payer to be granted the benefit of Sub-Rule (1A) of Rule 117. The purpose for which Sub-Rule (1A) to Rule 117 has been introduced has to be understood in the right perspective by focusing on the purpose which it is intended to serve. The purpose was to save and protect the rights of taxpayers to avail of the CENVAT credit lying in their account. That objective should also serve other taxpayers, such as the petitioners. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....swift streamlining of the ITC. The timeline introduced by Rule 117 is purely procedural and as discussed above the same was not treated as sacrosanct. The Central Government has continuously extended the same, by carving out an exception under Rule 117 (1A). Moreover, under none of the provisions of the Act, we can infer the intention of the legislature to create this distinction by way of subordinate legislation. We also cannot decipher any intent to deny extension of time to deserving cases where delay in filing was on account of human error. This interpretation would run counter to the object sought to be achieved under Section 140 of the Act, which is the governing provision and exhibits the true legislative intent. The situation before us is not where the statute fixes any timelines for transitioning of credit. After the retrospective amendment of Section 140, we can interpret that the power to fix the timeline and its extension has been prescribed to the Central Government which was done vide Rule 117. This Rule provides for a time period of 90 days and also stipulates that the same can be extended for a further period not exceeding 90 days. However, under Rule 117 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n mind the fact that the entire country was in a transitional mode insofar as the new regime of GST being implemented with effect from 01.07.2017. It would be relevant to note that in each State earlier, there were independent and separate Sales Tax Regime in the form of VAT (Value Added Tax) Act. Although, there were different enactments in various States of the country, there was an over-all pattern, which emerged inasmuch as there were several similarities that could be found under various VAT enactments of the respective States. But, the Parliament thought it fit that the entire country must be covered under a single tax regime and by amendment made to the Constitution by insertion of Article 246-A and by exercising power under Article 249, brought under one umbrella in the form of the Goods and Service Tax Act, not only the indirect taxation regime under the various State VAT Acts but also the Central Sales Tax, Central Excise and Service Tax in the form of a single Code. 37. The grievance of the respondent-assessees must be viewed in the above historical perspective, wherein, the assessees had to transit from the earlier tax regime under State/Central enactments to the new....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssees under the respective enactments cannot be categorized or clubbed as one class of assessees, as that is far from reality. There are various categories such as, small-scale businesses, large-scale businesses and medium-scale industries, each one of whom may have their own challenges to meet, not only in their day-to-day carrying on of their businesses, but also while complying with the requirements under the Act and the Rules in question, especially when transitional requirements have to be complied with so as to enable a smooth continuity as well as a change from the old taxation regime into the new one. Therefore, the Rule making authority has intentionally and consciously not defined what is "technical difficulty in the common portal". It is in the above context that the case of the assessees must be considered. 40. Learned counsel for appellants relied upon certain decisions to contend that the benefit of CENVAT credit is by way of a concession and hence, could be availed only after fulfilling certain conditions. That in Willowood Chemicals, it has been held that there is no vested right which could have been taken away by Section 140 of the Act. That when the tax struct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said expression "technical difficulty on common portal" in order to ultimately grant relief to them which they are not seeking by way of a concession or a departure to be made by the Revenue, but on the other hand, what would have been their right had they continued in the earlier tax regime. Such a difficulty would not have been envisaged at all if the erstwhile tax regime had been continued. The difficulty of the assessees must be appreciated in the background of the fact that they would have to adjust, of course, as early as possible, under the umbrella of the new tax regime. But, while doing so, the glitches which have to occur either on account of the electrical devices which have to be used or on account of the man-made lapses, would have to be both taken into consideration. 47. It has been urged on behalf of the respondents-assessees that in these cases, the respondents-assessees admitted to have uploaded the FORM TRAN-1 or revised TRAN- 1, but on account of technical glitches, the said exercise did not get fulfilled. On the other hand, it is also not the case of the Revenue that these assessees slept over the matter and never made any attempt to upload TRAN-1 or revised ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to 27.12.2017, amendments were made to the said Rule by extending the time for the purpose of submitting the declaration electronically in Form GST TRAN-1. Ultimately, insertion of sub-rule (1A) to Rule 117 with effect from 10.09.2018 was effected. Even thereafter, the sub-rule was amended not once, but thrice so as to extend the time from 31.03.2019 to 31.03.2020 and ultimately, it was extended to 31.08.2020. The last extension upto 31.08.2020 was in exercise of the powers conferred under Section 168A of the Act by insertion of Section 117(1A) of the Act by way of an amendment. This was on the recommendation of the GST Council whereby, earlier Notification No.35/2020-CT dated 03.04.2020 was amended. This was done by extending the time period granted upto 30.06.2020 by the Notification dated 03.04.2020 issued in the interregnum. In this context, it would be useful to refer to Section 172 of the Act, which reads as under: "Removal of difficulties. 172. (1) If any difficulty arises in giving effect to any provisions of this Act, the Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such pro....