2019 (12) TMI 837 - HC - GST

Transfer of accrued credit - transition/migration to GST regime - Sections 139 to 143 of the Act and Rule 117 of the SGST Rules - HELD THAT - Since it is not in dispute that the petitioners herein did attempt to upload the necessary details in the system maintained by the respondents, and it cannot be disputed, based on a perusal of the system log, that the petitioners did attempt to log into the system, the mere fact that the petitioners cannot establish that the inability to upload the required details was on account of a system error that was occasioned by the respondents, cannot be a reason for denying them the substantive benefit of carrying forward the credit earned by them under the erstwhile regime. Writ petitions were allowed and a direction was issued to the respondents to permit the petitioners therein to file the TRAN -1 Form, either electronically or manually on or before 31.12.2019 without prejudice to the right of the respondent statutory authorities to verify the genuineness of the claim of the petitioners - petition allowed.

Summary

Issues Involved:
1. Transfer of credit under the GST regime from the VAT regime.
2. Technical glitch preventing petitioners from uploading necessary details on GSTN web portal.
3. Denial of transfer of accrued credit due to procedural requirements not met by cut-off date.
4. Dispute over inability to upload details being due to system error.
5. Substantive benefit of carrying forward credit earned under the erstwhile regime.
6. Precedents from Delhi High Court and Himachal Pradesh High Court regarding accrued tax credits.
7. Relief sought by petitioners to file TRAN-1 Forms electronically or manually.

Issue 1: Transfer of credit under the GST regime from the VAT regime
The petitioners, who were assesses under the Kerala Value Added Tax Act, migrated to the GST regime. They were entitled to carry forward the tax paid on goods during the VAT regime to the GST regime. The transition provisions governing this transfer are Sections 139 to 143 of the Act and Rule 117 of the SGST Rules.

Issue 2: Technical glitch preventing petitioners from uploading necessary details
The petitioners faced a technical glitch preventing them from uploading necessary details on the GSTN web portal in Form GST TRAN-1 before the cut-off date of 27.12.2017. This issue led to their inability to successfully migrate the credit to the GST regime.

Issue 3: Denial of transfer of accrued credit due to procedural requirements not met by cut-off date
The respondents denied the petitioners the facility to transfer accrued credit from the VAT regime to the GST regime due to the petitioners' failure to comply with procedural requirements before the prescribed cut-off date. This denial was based on the contention that the petitioners did not meet the necessary criteria within the specified timeline.

Issue 4: Dispute over inability to upload details being due to system error
The petitioners contended that their inability to upload the necessary details was due to a technical glitch encountered in the system, which was not their fault. They argued that they should not be deprived of their substantive rights under the GST Act solely due to a technical lapse on the part of the respondents.

Issue 5: Substantive benefit of carrying forward credit earned under the erstwhile regime
The court acknowledged that the petitioners did attempt to upload the required details in the system and had logged in before the cut-off date. The court held that the inability to upload the details due to a system error should not be a reason to deny the petitioners the substantive benefit of carrying forward the credit earned under the erstwhile regime.

Issue 6: Precedents from Delhi High Court and Himachal Pradesh High Court regarding accrued tax credits
The court referred to judgments from the Delhi High Court and the Himachal Pradesh High Court, which emphasized that accrued tax credits should not be denied based on procedural defects cited by the respondents. These judgments highlighted the challenges faced by dealers in the GST system's implementation phase.

Issue 7: Relief sought by petitioners to file TRAN-1 Forms electronically or manually
In line with the precedents and finding no dispute regarding the petitioners' attempts to log into the system, the court allowed the writ petitions. It quashed the impugned communications and directed the respondents to permit the petitioners to file their TRAN-1 Forms electronically or manually by 31.12.2019, with verification of the genuineness of the claims. The court emphasized facilitating electronic filing but allowed manual filing where necessary, ensuring that claims are not denied solely for missing the initial deadline.