2024 (6) TMI 1097 - HC - GST

Interpretation of statute - Section 140 (5) of the CGST Act - Transition of credit as per Section 140 (5) of the Central Goods and Services Tax Act, 2017 - rejection of application filed by petitioner seeking extension under the proviso to Section 140 (5) of the CGST Act - application not filed within time limitation - HELD THAT - Section 140 (5) of the CGST Act provides that a registered person can take credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day on which duty or tax has been paid under the erstwhile regime, provided that the invoice is recorded in the books of accounts within a period of thirty days from the appointed day. First proviso to the said section provides that on sufficient cause being shown, the Commissioner may extend the period by a further period not exceeding thirty days - proviso to Section 140 (5) of the CGST Act permits the Commissioner to extend the time of recording the invoices in the books of account by a further period of thirty days, i.e., by 28th August 2017 provided the registered person shows a sufficient cause. Sub Section 5 of Section 140 of the CGST Act only requires the supplier of service to have paid before the appointed day and the invoice or the duty or tax paying document being recorded in the books of account of registered person within a period of thirty days from the appointed day, i.e., 1st July 2017, which period could be extended by a further period of thirty days on sufficient cause being shown - rejection of the application by the impugned order dated 1st November 2023 on the ground that it was filed only on 27th December 2017 is incorrect. The impugend order is set aside - appeal disposed off.

Summary

Issues:
1. Application for extension under Section 140 (5) of the CGST Act rejected by the Assistant Commissioner.
2. Confirmation of tax demand by the Additional Commissioner due to rejection of extension application.
3. Interpretation of transitional provisions under the GST Regime.
4. Compliance with Section 140 (5) of the CGST Act regarding credit of eligible duties and taxes.
5. Consideration of time limit for filing an application for extension under Section 140 (5) of the CGST Act.

Detailed Analysis:
1. The petitioner sought extension under the proviso to Section 140 (5) of the CGST Act, which was rejected by the Assistant Commissioner. The rejection was based on the application being filed beyond the prescribed time limit. The rejection led to a tax demand being confirmed by the Additional Commissioner, citing non-compliance with the provisions of the CGST Act regarding transitional credit.

2. The implementation of the GST Regime involved the subsumption of previous taxation regimes, necessitating specific transitional provisions. Section 140 of the CGST Act allows for the carry forward of old credits into the GST Regime, ensuring taxpayers can take credit in their electronic GST Ledger for unutilized credits from the previous regime.

3. Section 140 (5) of the CGST Act outlines the conditions for taking credit of eligible duties and taxes, requiring invoices to be recorded in the books of accounts within a specified period. The proviso allows for an extension of this period on showing sufficient cause. The petitioner faced challenges in recording invoices due to a cyber attack, impacting their ability to comply within the initial timeframe.

4. The key issue revolved around whether Section 140 (5) of the CGST Act imposes a specific time limit for filing an application seeking an extension to record invoices in the books of account. The court clarified that while the provision allows for an extension of the recording period, it does not prescribe a deadline for submitting the extension request.

5. The court, exercising jurisdiction under Article 226 of the Constitution of India, ruled in favor of the petitioner. The rejection of the extension application based on the filing date was deemed incorrect, leading to the quashing of the orders dated November 1, 2023, and December 1, 2023. The matter was remanded to the concerned authority to reevaluate the petitioner's claim for Input Tax Credit (ITC) in accordance with the granted extension under Section 140 (5) of the CGST Act. The authority was directed to provide a detailed and reasoned order by September 30, 2024, after giving the petitioner a personal hearing.