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2021 (9) TMI 1042 - HC - GSTTransitional Credit - Seeking to command the respondent authorities to allow the petitioners to submit/revise/re-revise electronically, their respective declarations on Form GST TRAN-1 and GST TRAN-2 - carry forward/transition of CENVAT and VAT Input Tax Credit - whether the ITC is a vested right under the GST regime? - HELD THAT - The right to avail ITC did not get vested on the petitioners upon their filing returns under the pre-existing laws. The petitioners were obligated to perform further act under the new laws i.e., CGST Act and the UPGST Act - to submit electronically, Form GST TRAN-1 and/or TRAN-2, before they could carry that credit to their Electronic Credit Ledger - the exact nature of the CENVAT/ITC, would always depend upon the language of the provisions and scheme of the enactment whereunder that question may arise. Therefore, though the decisions relied upon by learned Additional Advocate General do appear to lay down, by way of a principle, that ITC is not a vested right but merely a concession, at the same time, we cannot overlook the fact that those decisions arose under different laws. It may not be empirically correct to contend that CENVAT or ITC is a pure concession as concessions do not necessarily spring from a conceptual base to tax value addition. However, that principle may be relevant only to determine the ITC arising against transactions performed after enforcement of the GST regime i.e., post 01.07.2017. It may not be true of past/earlier transactions arising under the pre-existing/repealed laws, in the context of pure transition provision. Section 164 of the CGST Act and the UPGST Act empowers the Union and the State Governments to make Rules on matters required to be or that may be prescribed or in respect of which provisions are to be or may be made. Therefore, Rule 117 of the CGST Rules clearly appears to be a rule made to give effect to the transition provisions of the Act. It provides for filing/revision electronically, of Form GST TRAN-1 and/or TRAN-2, to obtain credit of ITC - a detailed procedure has been prescribed to submit/revise/re-revise electronically, Form GST TRAN-1/TRAN-2 with respect to CENVAT/ITC carried forward for the period ending 30.06.2017. It is only upon such Form being submitted electronically, in the manner prescribed that the right to carry forward such credit to the Electronic Credit Ledger would arise. Unless this vital procedural step is taken, the petitioner can never claim a accrual of a vested right to transition ITC. The time limit under Section 140(1) of the CGST Act read with Rule 117 of the CGST Rules 2017 and parallel provisions under the State law (to submit Form TRAN-1/TRAN-2 electronically, within 90 days from the appointed date), was the time limit specified in or prescribed by those enactments. Therefore, even if reference to Section 140 has not been specifically made in any of the orders and notifications issued under Rule 117(1), Rule 117(1)A or Section 140A or Section 168A still, undeniably, the time limit to submit electronically Form GST TRAN-1/TRAN-2 stood extended in accordance with law, up to 31.08.2020. No contrary provision of law, either statutory or delegated, has been shown to exist as may warrant a different construction to be made to the exercise of powers made by the Commissioner CGST or of the CBIC or the Central Government, acting either on their own or on the recommendation of the CBIC or the GST Council. In Circular dated 3 April 2018, the CBIC further recognized, there were IT related glitches on the GST Portal resulting in compliances remaining from being made by a vast section of registered persons . Once that difficulty was recognized to have existed on a pan- India basis, over a long duration of time, the CBIC, in its own wisdom, created a mechanism to resolve the same. Chiefly, it provided for creation of Nodal agencies to examine all such grievances of IT related glitches and to allow for extension of time (to submit GST Form TRAN- 1/TRAN-2, electronically), only in those cases where a complaint had been received by the Nodal authority and where electronic trail etc. of such failed attempt was available - the CBIC itself recognized the existence of technical difficulties in working the GST Portal over a long period of time, that too, immediately upon introduction of the GST regime. A long and burdensome transition was attempted all over the country, by all indirect taxpayers. Looked from another perspective, the clear intent of the legislature is to grant benefit of CENVAT and ITC under the pre-existing laws, as may have been carried forward on the appointed date 01.07.2017. In such circumstances, if the GST Portal had worked seamlessly, all petitioners would have submitted/revised/re-revised electronically, their Forms GST TRAN-1 and/or TRAN-2 within the time granted - Taxing statute and equity considerations are not natural allies. At the same time, in the context of a purely procedural requirement and transition provision, we cannot act unmindful of that consequence - if the respondents had offered a functional system, the State could not have deprived the petitioners of transition credit of CENVAT and ITC (under the repealed laws) - thus, there is no hesitation in observing that a reasonable opportunity ought to have been granted to all registered persons /taxpayers to submit/revise/re-revise electronically their Form GST TRAN-1/TRAN-2. Petition allowed.
Issues Involved:
1. Whether Input Tax Credit (ITC) is a vested right under the GST regime. 2. The impact of technical glitches on the GST Portal on the submission/revision of Form GST TRAN-1/TRAN-2. 3. The legality of the procedural requirements and timelines for submitting/revising Form GST TRAN-1/TRAN-2. 4. The appropriate relief for petitioners who faced technical difficulties in submitting/revising Form GST TRAN-1/TRAN-2. Detailed Analysis: 1. Whether ITC is a Vested Right under the GST Regime: The court examined Section 140 of the CGST Act and the UPGST Act, which are transition provisions allowing the carry forward of CENVAT and VAT ITC from the pre-existing tax regime to the GST regime. It was determined that while ITC is a statutory entitlement, it is subject to the fulfillment of conditions specified in the new GST laws, including the submission of Form GST TRAN-1/TRAN-2 electronically within the prescribed time. The court disagreed with the contention that ITC became a vested right merely upon filing returns under the pre-existing laws, emphasizing that further compliance under the new GST laws was necessary. 2. Impact of Technical Glitches on the GST Portal: The court acknowledged the widespread technical difficulties and glitches faced by taxpayers in submitting/revising Form GST TRAN-1/TRAN-2 on the GST Portal. This was supported by the CBIC's Circular dated 3 April 2018, which recognized these issues and proposed a grievance redressal mechanism. The court noted that the existence of such technical difficulties was not a local phenomenon but a common issue faced by taxpayers across the country, leading to multiple High Court decisions granting relief to affected taxpayers. 3. Legality of Procedural Requirements and Timelines: The court analyzed Rule 117 of the CGST Rules, which prescribed the procedure and timeline for submitting/revising Form GST TRAN-1/TRAN-2. It was observed that the timeline for submission had been extended multiple times, ultimately up to 31 August 2020, through various orders and notifications. The court found that the strict enforcement of these timelines, despite acknowledged technical difficulties, was arbitrary and violative of Article 14 of the Constitution of India. 4. Appropriate Relief for Petitioners: Given the generic and widespread nature of the technical difficulties, the court held that all petitioners should be granted a reasonable opportunity to submit/revise/re-revise their Form GST TRAN-1/TRAN-2. The court directed that petitioners file physical forms with their jurisdictional authorities, who would then verify compliance and forward the forms to the GST Network for electronic submission. This process was to be a one-time affair, with no further revisions allowed. The court also extended this relief to all other "registered persons" in the State of U.P. who faced similar difficulties. Conclusion: The court allowed all writ petitions, providing a structured process for petitioners to submit/revise their Form GST TRAN-1/TRAN-2, thereby ensuring that they could avail the transition ITC they were entitled to under the GST regime. The court emphasized the need for a fair and reasonable approach, considering the technical challenges faced by taxpayers.
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