TaxTMI 
TaxTMI 
2025 (12) TMI 865
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....tor (hereinafter, 'ISD'). The Petitioner has multiple business premises across the country where services are provided and CENVAT credit in the form of ITC becomes available to each of the sub-offices of the Petitioner. 4. For the period between March, 2017 to June, 2017, after the GST regime had been introduced, the Petitioner could file a form TRAN-1 to avail the transitional credit under Section 140 of the Central Goods and Services Tax Act, 2017 (hereinafter, 'CGST Act'). The Petitioner had ITC to the tune of Rs.99,18,972/- as closing balance which ought to have been allowed to be carried forward under the GST regime. 5. However, the same could not be availed of in terms of Rule 39(1)(a) of the Central Goods and Services Tax Rules, 2017 (hereinafter, 'the Rules') due the fact that at the relevant point in time, the transition was not permitted on the GST portal. After the transition took place, the credit was not reflected on the portal of the Petitioner leading to repeated representations being made by the Petitioner for reflection of the credit on the portal. However, the same was not allowed by the Department which has led to the filing of the present petition. The pra....
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...., it is mandatory that any ITC available with an ISD for distribution in a particular month ought to be distributed in the same month which clearly implies that no provision for carrying forward or transfer to electronic credit ledger in case of an ISD was even contemplated in the entire GST regime. The same was done keeping in mind the limited role of an ISD which was to distribute the ITC to the respective units. As already stated earlier, and at the cost of repetition, an ISD registered under the GST regime does not enjoy the same status of an assessee obtaining registration under GST for carrying out its business. The purpose of the ISD is facility based wherein the business, having a large share of common expenditure and billing or payment is done from centralized locations. The mechanism is aimed at simplifying the credit taking process for entities. 7. In view of this clear position of law which emanates from the GST regime, the only option which was available was for the Petitioner-ISD to distribute the ISD credit to its different units/offices before 1.07.2017 and thereafter the transferee unit/offices ought to have filed TRAN-1 to transition the said credit distr....
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....ing invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 [of this Act or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017)], for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20" 10. The provisions relating to ISD are captured in Sections 20 to 25 of the CGST Act. The procedure for registration of an ISD is prescribed under Sections 22 to 25 of the Act and the manner in which credit can be distributed is stipulated under Section 20 the CGST Act, as under: "20. Manner of distribution of credit by Input Service Distributor: (1) The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed. (2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:- ....
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....or tax levied under entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule." 11. This provision has been subsequently amended w.e.f. 1st April, 2025. However, insofar as the present case is concerned what would be relevant would be the unamended provision. 12. Section 140(7) of the CGST Act would also be relevant and is extracted below: "140...(7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as [credit under this Act, within such time and in such manner as may be prescribed, [whether the invoices relating to such services are received prior to, on or after, the appointed day" 13. A perusal of Section 140(7) of the CGST Act would show that the ITC which was available on account of any services received prior to the appointed date by the ISD shall be eligible for distribution as credit within the time and manner as may be prescribed. It is not in dispute that after the GST regime came into effect, no specific timeline has been p....
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.... such benefit, being part of the transitional arrangement created under Section 140 of the CGST Act. Thus, in our prima facie opinion, the Revenue is required to take a holistic view of such impasse, as also, considering the provisions of the CGST Act it needs to take a stand which would not defeat the substantive provisions of the Act, which permits the benefit of the credit to be taken by the assessee under Section 140(7) read with other provisions of the Act. 5. It is on such prima facie opinion, before we hear the parties further, we would request the learned ASG, who is representing the revenue in the present batch of petitions, to consider whether in reality any serious dispute would arise on the modalities of giving effect to sub-section (7) of Section 140. It may also be observed that this would not mean, that a credit would be permissible in cases when the same is not recognized by law or is not permissible in any individual case. The cases of assessee's on that count can certainly be considered, which would be by a scrutiny on a case-to-case basis, and accordingly whether in a given case, the benefit of credit is available or not would certainly be decided, as th....
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.... assist the Court in taking an appropriate view of the matter." 18. In the order dated 29th February, 2024 passed by the High Court of Bombay, the matter has been referred to the GST Council. However, no decision by the GST Council in this regard has been shown. Both the counter affidavits are also silent in this regard. 19. Similar cases involving non-grant of credit have also been considered by various Courts. One of the early cases was a decision of the Co-ordinate Bench of this Court in Vision Distribution Pvt. Ltd. v. Commissioner, State Goods & Services Tax & Ors, 2019: DHC:6949-DB. In the said case, an exporter was unable to avail of ITC as the amount was not reflected in the ITC ledger. The Co-ordinate Bench of this Court held as under: "7. Having heard learned counsels, we are inclined to direct partial refund of the amount claimed by the Petitioner. We are of the view that the Petitioner cannot be made to suffer on account of failure on the part of the Respondents in devising smooth transition to GST regime w.e.f. 01.07.2017, from the erstwhile indirect taxation structure. The Petitioner, being an exporter under the GST regime is entitled to undertake zero ....
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....ll International Services India Private Limited v. Union of India & Ors., 2025: MHC:251, the Madras High Court observed that since the GST system was not fully operational, parties cannot be put to a disadvantage. The observations of the Madras High Court are as under: "52. The GST was implemented w.e.f. 01.07.2017. However, the system to implement the GST fully was not operational on 01.07.2017. Thus, the petitioner was unable to transition ITC of Rs. 74,61,65,427/- out of Rs. 82,91,19,712/- which was available to the petitioner under the previous regime. 53. Under Section 54(3)(ii) of the CGST Act, 2017, though the petitioner is entitled to refund of credit accumulated on account of rate of tax on input supplies higher than the rate of tax on output supplies, the petitioner would have been unable to liquidate its credit of ITC in its electronic credit ledger. 54. There will also be no scope for claiming refund of ITC under Section 54(3)(ii) of the CGST Act, 2017 on the aforesaid sum of Rs. 74,61,65,427/- out of Rs. 82,91,19,712/- which was debited by the petitioner from its electronic credit ledger as the aforesaid amount of Rs. 74,61,65,427/- out of Rs....