2024 (10) TMI 1161 - HC - GST

Constitutional validity of Rule 117 (4) (b) (iii) of the CGST Rules - ultra-vires of Section 140 (3) of the CGST Act - violation of Article 14 of the Constitution of India - seeking declarartion that Rule 117 (4) (b) (iii) of the CGST Rules to be directory in nature - HELD THAT - It appears that this Court has already concluded this issue in the aforesaid decision of Siddharth Enterprise 2019 (9) TMI 319 - GUJARAT HIGH COURT with regard to the right of the petitioner to avail the transitional credit which is even otherwise legally available and due to the technical glitch or inadvertent mistake on the part of the petitioner, the respondent authorities were supposed to permit the petitioner to rectify TRAN-1/TRAN-2 by making necessary changes in the software if the software is designed not permitting the petitioner to upload the correct TRAN-1 to rectify the mistake in the first TRAN-1 which was uploaded on 12.12.2017. The respondent authorities are therefore directed to permit the petitioner to file the rectified TRAN-1 with correct details in correct columns so as to avail the transitional credit by the petitioner along with TRAN-2 within a period of eight weeks from today. The impugned show-cause-notice is hereby quashed and set aside - Petition allowed.

Issues Involved:

1. Validity of Rule 117 (4) (b) (iii) of the CGST Rules.
2. Petitioner's entitlement to transitional tax credit under Section 140 (3) of the CGST Act.
3. Technical glitches in the GST portal affecting the submission of GST TRAN-1 and TRAN-2 forms.
4. The impact of procedural lapses on the right to transitional credit.
5. The role of judicial directions in rectifying procedural errors in GST filings.

Issue-wise Detailed Analysis:

1. Validity of Rule 117 (4) (b) (iii) of the CGST Rules:
The petitioner challenged Rule 117 (4) (b) (iii) of the CGST Rules, arguing it was ultra-vires Section 140 (3) of the CGST Act and violated Article 14 of the Constitution of India. The petitioner claimed that the rule was contrary to the object, purpose, and scheme of the CGST Act. The court, however, did not explicitly rule on the constitutional validity of the rule but focused on the procedural aspects and the petitioner's entitlement to transitional credit.

2. Petitioner's Entitlement to Transitional Tax Credit:
The petitioner, an authorized distributor, was entitled to claim transitional tax credit for the excise duty component on goods in stock as of 30.06.2017 under Section 140 (3) of the CGST Act. The petitioner filed Form TRAN-1 but inadvertently omitted details in the column for stock with duty-paid invoices. Despite this, the transitional credit was reflected in the electronic credit ledger. The court recognized the petitioner's entitlement to transitional credit and directed the authorities to permit the petitioner to rectify the TRAN-1 form.

3. Technical Glitches in the GST Portal:
The petitioner faced technical issues when attempting to file Form GST TRAN-2, which was necessary for claiming transitional credit. The court acknowledged the technical glitches and referred to the Supreme Court's order directing the reopening of the GST portal to address such issues. The petitioner was unable to file TRAN-2 due to system errors, which the court attributed to technical glitches beyond the petitioner's control.

4. Impact of Procedural Lapses on the Right to Transitional Credit:
The court emphasized that procedural lapses, such as the failure to file forms within stipulated timelines, should not deprive a taxpayer of their substantive right to transitional credit. Citing the decision in Siddharth Enterprise, the court held that the due date for filing transitional credit claims is procedural and should not be construed as mandatory. The court directed the respondent authorities to allow the petitioner to rectify the errors in the TRAN-1 form to claim the credit.

5. Role of Judicial Directions in Rectifying Procedural Errors:
The court's judgment highlighted the judiciary's role in ensuring fairness and non-arbitrariness in state actions, particularly in tax matters. By directing the authorities to allow rectification of the TRAN-1 form, the court reinforced the principle that technical and procedural errors should not impede the exercise of legal rights. The court quashed the impugned show-cause notice and instructed the authorities to facilitate the petitioner's filing of corrected forms within eight weeks.

In conclusion, the judgment underscored the importance of balancing procedural requirements with substantive rights, ensuring that taxpayers are not unfairly penalized due to technical or inadvertent errors in compliance with GST transition provisions.

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