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2020 (6) TMI 385 - HC - GSTTransition of available Input Tax Credit - revision of Form GST TRAN-1 - electronic credit ledger under the GST laws does not reflect the entire credit - HELD THAT - The exactness required in compliance of tax provisions should not be construed so rigidly that permissible flexibility is completely disregarded. In effect, the ITC has been expropriated without any lawful sanction. The ITC that was shown in the returns under the existing laws were taxes that stood paid to the respective Governments for goods or services and were available for adjustment or utilization in accordance with law. Now, on account of a clerical mistake the said taxes paid are being appropriated, without cause, putting the Petitioner in serious jeopardy by subjecting it to further taxation under GST without the benefit of ITC. The case before us demonstrates how the tax department has miserably fallen short of the expectation. It is regrettable that Respondents have failed to address the basic and fundamental problem faced by the Petitioner that occurred while filing a Form, seemingly on account of a bona fide or inadvertent mistake. Instead of offering a restitutive solution they have stonewalled all the attempts made by the Petitioner The injustice and prejudice caused to the Petitioner is profound and it s disillusionment and despair is evident. It cannot be upheld the stand of the respondent which is founded on some illogical understanding of the Rules. We have time and again made adverse remarks on the procedural working of the GST system in several decisions. We may just add that we do not derive any pleasure when we make such observations, as comments of the Court affect the reputation of the administration in the country. Such remarks are made only when we are constrained to do so. The case before us is one where there is a complete lack of understanding and fairness on the part of the Tax Department. The fact that Respondents have done nothing to solve the problem faced by the Petitioner, fueled with the adamant stand before us, contributes to skepticism of GST technical infrastructure, which we feel should and can be easily avoided. Only if Respondents were to engage with the taxpayers with a genuine intention to solve the problems, confidence in the system can be built up and such matters would not reach courts. Petitioner is permitted to revise TRAN-1 Form on or before 30.06.2020 and transition the entire ITC, subject to verification by the Respondents - petition allowed.
Issues Involved:
1. Short transitioning of Input Tax Credit (ITC). 2. Technical and human errors in filing GST TRAN-1 form. 3. Retrospective amendment to Section 140 of the CGST Act, 2017. 4. Arbitrary distinction of timelines under Rules 117 & 117(1A). 5. Procedural timelines for filing TRAN-1. 6. Non-disclosure of reasons for rejecting the claim. Issue-wise Detailed Analysis: 1. Short transitioning of Input Tax Credit (ITC): The petitioner sought a writ of mandamus under Article 226 of the Constitution of India, directing the respondents to allow the short transitioning of ITC amounting to ?5,51,33,699/- either by updating the electronic credit ledger at their back end or by allowing them to revise the Form GST TRAN-1. The petitioner had filed the GST TRAN-1 form on 27th August 2017, but only ?1,01,24,382/- was reflected on the common GST portal, leaving a shortfall of ?5,51,33,699/-. 2. Technical and human errors in filing GST TRAN-1 form: The petitioner claimed that the short transitioning was due to a bona fide error while filling the GST TRAN-1 form. Despite several representations and complaints, the issue was not resolved. The court noted that the error occurred because the petitioner failed to fill in the correct details in the right column, which led to the short transitioning of the credit. 3. Retrospective amendment to Section 140 of the CGST Act, 2017: The respondents argued that the petitioner could not avail the benefit of the judgment in Brand Equity Treaties Ltd. due to the retrospective amendment to Section 140 of the CGST Act, 2017, introduced by the Finance (Amendment) Act, 2020. This amendment inserted the words "within such time" in Section 140(1), giving the Central Government the power to prescribe a time limit for filing TRAN-1. However, the court held that the decision in Brand Equity Treaties Ltd. was not entirely based on the absence of a prescribed time limit and that the amendment did not negate other grounds and reasons enumerated in the said decision. 4. Arbitrary distinction of timelines under Rules 117 & 117(1A): The court found the distinction between timelines under Rules 117 and 117(1A) to be arbitrary and unreasonable. Rule 117(1A) allows the Commissioner to extend the date for submitting the declaration electronically in FORM GST TRAN-1 for those who faced technical difficulties on the common portal. The court observed that the term "technical difficulties" should not be interpreted narrowly and should include various challenges faced by taxpayers, including human errors. 5. Procedural timelines for filing TRAN-1: The court held that the timelines prescribed under Rule 117 are procedural and not sacrosanct. The Central Government had extended the time period for filing TRAN-1 multiple times for those covered by Rule 117(1A). The court emphasized that the timelines should be interpreted as directory and not mandatory, to avoid prejudice to taxpayers. 6. Non-disclosure of reasons for rejecting the claim: The court criticized the respondents for not providing specific reasons for rejecting the petitioner's claim. Despite numerous representations and an RTI application, the reasons for rejection were not disclosed. The court found this approach to be grossly unjust and arbitrary, violating Article 14 of the Constitution. Conclusion: The court allowed the petition, permitting the petitioner to revise the TRAN-1 form on or before 30.06.2020 and transition the entire ITC, subject to verification by the respondents. A writ mandamus was issued to the respondents to either open the online portal for filing the revised TRAN-1 form electronically or to accept it manually and process the claims in accordance with the law.
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