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TMI Blog2020 (6) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Pune, Maharashtra for manufacture of final products and sale to OEMs. The indirect tax structure prevailing in India, prior to 1st July, 2017, comprised of multifarious duties and taxes imposed by the Centre as well as States. Excise duty was levied under Central Excise Act, 1994 ('Excise Act') on manufacture of excisable goods; service tax was imposed under Finance Act, 1994 ('Finance Act') on provision of services in the taxable territory. Similarly, sale of goods was exigible to Value Added Tax ('VAT') imposed under respective State VAT enactments and Central Sales Tax ('CST') under Central Sales Tax Act, 1956 ('CST Act'), depending on whether the goods were sold intra-state or inter-state. [hereinafter the legislations referred hereinabove are being collectively referred to as 'Existing Laws']. In this regard, Petitioner obtained registration with the jurisdictional authorities under various legislations listed hereinabove. It also availed CENVAT credit of specified duties and taxes paid on inputs, capital goods and input services in terms of Cenvat Credit Rules, 2004 ('Credit Rules') and input tax credit of VAT paid on purchases in terms of Maharashtra VAT Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit, since the Cenvat under Central Excise and Service Tax had not been replicated in the Electronic Credit Register. Respondents suggested that since the common portal itself enables the taxpayers to make necessary amendments, Petitioner could avail the said option to rectify the error. Around this time, Respondents issued Order number 9/2017 - GST, extending the date of filing for GST TRAN-1 till 27 December 2017. Petitioner claims that it filed a revised declaration in the nature of Form GST TRAN-I on 27th December, 2017 and reflected the correct figures under column 5(a) of the Form, however, the amount was still not transferred to the electronic credit register and was shown as "blocked credit". Petitioner then registered a complaint dated 5th February, 2018, with the GST helpdesk. GST helpdesk duly acknowledged the complaint, generated 'request ID' and informed the Petitioner that they were working on the issue and the status thereof shall be updated and intimated. 6. Thereafter, the Petitioner vide letter dated 6th February, 2018, made further representations to the Assistant Commissioner of CGST as also to Principal Commissioner of CGST, Pune Commissionerate. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner who upon examination and satisfaction of the grievance of the Petitioner, shall forward the case to Respondent No. 2 for undertaking appropriate action. The note produced by the Respondents inter alia reads as under: "Petitioners can make a representation to the jurisdictional Commissioner about the issue. The same will be examined and the jurisdictional Commissioner if prima facie satisfied, will forward the same to the Secretariat GST Council with a copy to ITGRC. A decision will be taken at that level and communicated to the Petitioners." 8. After considering the contents of the note and the minutes of 32nd GST Council meeting, Bombay High Court vide order dated 27.02.2019 disposed of the petition with direction to the Petitioner to file a representation before concerned Authorities in terms of the 32nd GST Council meeting. The said is extracted hereunder: "1. In the light of the note placed on record by Shri Mishra annexing therewith the Office Memorandum dated 19th February, 2019 issued by the Government of India, Goods and Service Tax Council seeking to address certain non technical issues, namely, human errors and putting in place a mechanism to take corrective meas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t '...RTI Act is not the proper law for redressal of grievances and that there are other appropriate fora for resolving such matters... ' Hence, no further action is required in the matter." 11. In the above factual background, Petitioner has filed the present writ petition, invoking the extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India. SUBMISSIONS OF THE PARTIES 12. Learned counsel for the Petitioner narrated the factual background and argued that the Respondents have acted in a most unreasonable manner by denying the Petitioner benefit of transitional provision without any cogent reason. Petitioner is seeking transition of ITC that had accrued and vested in its favour under the erstwhile regime. Petitioner had acted promptly and filed the statutory GST TRAN-I form within the specified time. However, since there was a bona fide error in filling the same, the Petitioner filed a revised return correcting the same and yet, the entire credit is still not exhibited in the electronic credit ledger. The short transitioning is due to some problem at Respondent's end. The issue was flagged, but was not rectified on account of frivolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal and allowed filing of the TRAN-1 Form beyond the stipulated date. Learned Counsel also relied upon the detailed decision rendered by this Court recently in a batch of cases titled as Brand Equity Treaties Ltd. And Ors. v. Union of India, [2020] 116 taxmann.com 415 (Delhi). He argued that Petitioner's case is identical to one of the cases decided in the said batch i.e. Micromax Informatics Ltd. v Union of India [WP(C) No. 196/2019], where the Court had taken note of facts similar to this case and allowed belated filing of TRAN-1. In the said case, the Court also held that Rule 117 of the GST Rules is directory in nature in so far as it prescribes the time limit for transitioning of credit and it cannot result in forfeiture of rights of taxpayers, if the same is not availed within the period prescribed therein. Accordingly, this Court allowed taxpayers to avail the input tax credit by permitting them to file TRAN-1 form on or before 30th June, 2020. Learned counsel for the Petitioner further submitted that irrespective of the said decision, since admittedly the TRAN-1 form in the case of the Petitioner was filed well before the specified date, notwithstanding the benefit granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue raised by the Petitioner is not new, but a recurrent one. Petitioner before us made an attempt to transition the available credit under the existing laws by filing Form TRAN-1, but the electronic credit ledger under the GST laws does not reflect the entire credit. The ITC seems to have vanished in the rigmarole of the statutory GST Forms. The credit actually available for transition and what was actually transferred, can be explained by the following tabulation: Form TRAN-I filed on 27.8.2017 under Section 140(1) of CGST Act for transitioning closing balance of credits in erstwhile returns Credit actually transitioned in Electronic Credit Ledger of the Petitioner Credit not transitioned to the Electronic Credit Ledger of the Petitioner Erstwhile Return Amount (Rs.) Amount (Rs.) Amount (Rs.) ER-1 (Excise) 3,86,54,605/- 1,01,24,382/- 5,51,33,699/- ST-3 (Service Tax) 1,64,79,094/- Form 231 (Maharashtra VAT) 1,01,24,382/- TOTAL 6,52,58,081/- 1,01,24,382/- 5,51,33,699/- 15. The aforesaid error occurred while filing the requisite TRAN-1 , as apparently Petitioner failed to fill in the correct details in the right column, which is evident from the screenshot o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST filing procedures. Particularly, with the entire system being online, the interface between the taxpayers and authorities is entirely electronic. This requires some basic fundamental knowledge for using the technology. Since GST law is a major tax reform in indirect taxation, the difficulties faced in filing of the statutory forms is understandable. In this process, human errors cannot be ruled out and if they occur, the solution is not to criticize the taxpayer for the fault, but instead, the Government should endeavour to find a resolution. The government should support its citizens by making the burden of compliance and payment as simple as possible. The intent and efforts of the Government should be to extend proper assistance, information and education to taxpayers so that they fulfil their obligations. This should be the critical area of focus in the area of tax administration which would ensure compliance with tax laws and also build confidence amongst taxpayers. Indeed, by explaining the significance of payment of taxes, and the role that a taxpayer plays in building the nation, the Government endeavors to encourage and motivate the citizens to be tax compliant. If we st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not entirely resting on the fact that statute [CGST Act] did not prescribe for any time limit for availing the transition of the input tax credit. There are several other grounds and reasons enumerated in the said decision and discussed hereinafter, that continue to apply with full rigour even today, regardless of amendment to Section 140 of the CGST Act. Arbitrary distinction of timelines under Rules 117 & 117 (IA) 21. Petitioner's case has been rejected on the ground of being "nontechnical" human error and the benefit of Rule 117(1A) has not been given. Let us elaborate on this aspect and note some of the relevant provisions. Here, we are concerned only with sub-section (1) of section 140 and Rule 117 and 117(1A). The same are extracted below: "Amended Section 140 of the CGST Act 140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed: " Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Rules, the Government opened a narrow window for registered persons who faced technical difficulties on the common portal while filing Form TRAN-1. The Central Government has been consistently extending the time period for filing the Form TRAN-1 even beyond 31.12.2019 for those taxpayers who are covered by Rule 117 (1A). Recently in view of the order No. 01/2020-GST dated 7th February, 2020 issued by Government of India, Ministry of Finance, the period was extended upto 31st March 2020. Thus, when we contrast the time limit stipulated under Rule 117 (1) and Rule 117(1A), we find that the time limit of 90 days is not sacrosanct. In Brand Equity (supra), that court has observed that the government has not ascribed any meaning to the words "technical difficulties on the common portal" and it cannot be interpreted in a restrictive manner. The relevant portion is extracted hereinbelow: "18. In above noted circumstances, the arbitrary classification, introduced by way of sub Rule (1A), restricting the benefit only to taxpayers whose cases are covered by "technical difficulties on common portal" subject to recommendations of the GST Council, is arbitrary, vague and unreasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch to the conclusion that there is no technical glitch as per their GST system laws, as there is no information stored/logged that would indicate that the taxpayers attempted to save/submit the filing of Form GST TRAN-1. Thus, the phrase "technical difficulty" is being given a restrictive meaning which is supplied by the GST system logs. Conscious of the circumstances that are prevailing, we feel that taxpayers cannot be robbed of their valuable rights on an unreasonable and unfounded basis of them not having filed TRAN-1 Form within 90 days, when civil rights can be enforced within a period of three years from the date of commencement of limitation under the Limitation Act, 1963. 19. The introduction of Sub rule (1A) in Rule 117 is a patchwork solution that does not recognise the entirety of the situation. It sneaks in an exception, without addressing situations taken note of by us. This exception, as worded, is an artificial construction of technical difficulties, limiting it to those existing on the common portal. It is unfair to create this distinction and restrict it to technical snags alone. In our view, there could be various different types of technical difficulties occur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of delegated legislation by framing rules, without there being any overarching provision in the GST Act. We have, in our judgment in A.B. Pal Electricals (supra) emphasized that the credit standing in favour of the assessee is a vested property right under Article 300A of the Constitution and cannot be taken away by prescribing a time-limit for availing the same. ". 23. The aforesaid reasoning still holds good. Additionally, we would like to observe that the rule suffers from the vice of vagueness and concept of "technical difficulty on common portal" and its applicability has not been adequately defined anywhere. Because of absence of any defining words, there is no predictability about the application of this Rule for the class of cases to which it would apply, as is demonstrated in the case in hand. In absence of a criteria, the application of the provision would suffer from arbitrariness. It would be apposite to note that the GST Council in its 32nd meeting expanded the mandate of ITGRC to include those cases where the taxpayers who had been victims of the system failure, whether technical or otherwise. This becomes evident from the office memorandum of GST Council, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged by the Central or the State Governments would be part of the same tax regime, credit of tax paid at every stage would be available as set-off for payment of tax at every subsequent stage.'( Ref: GST Flyer; CBIC Website) Significantly, for the cases covered under Section 140 (1) of the CGST act, ITC under the existing laws is a vested right. This credit stood vested in favour of the taxpayer and would have been utilized for payment of outgoing taxes under the respective legislations, but for the repeal of the existing laws. In order to claim this credit, declaration in form GST TRAN-1 is required to be furnished on the common portal within ninety days from the appointed day i.e. 1st July, 2017 or within such extended time. Thus, the closing balance of the CENVAT credit /VAT in the last returns filed under the existing law can be taken as credit in electronic credit ledger. Such credit would be available only when returns for the previous last six months have been filed under the existing laws. Thus, on analysis of the provisions of Central Goods and Service Tax Act and the Rules framed thereunder, the mind of the legislature on input tax credit becomes clear. The transitiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers who faced "technical difficulties on common portal". Yet, deserving 'nontechnical' cases like the present one have been ignored and this exclusion is arbitrary and irrational. Moreover, if we were to look for a provision in the statute that would stipulate a consequence for failure to adhere to the timelines, we would find none. Rule 117 of the CGST rules also does not indicate any consequence for non-compliance of the condition. Both the Act and Rules do not provide any specific consequence on failure to adhere to the timelines. Since the consequences for non-consequence are not indicated, the provision has to be seen as directory. Pertinently, nonobservance of the timelines would prejudice only one party- the registered person/taxpayer. If we interpret the timelines to be mandatory, the failure to fulfil the obligation of filing TRAN-1 within the stipulated period, would seriously prejudice the taxpayers, for whose benefit section 140 has been provided by the legislature. In view of the above discussion, interpreting the procedural timelines to be mandatory would run counter to the intention of the legislature and defeat the purpose for which the transitionary provisions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... barred and treated to be a fresh return. The revised data can be easily verified and correlated with the tax returns filed in the erstwhile regime. In fact, Rule 120A of CGST Rules is an enabling provision that can be resorted to, by the taxpayers to revise the Form GST TRAN-1 on the common portal within the time specified in the rules or such further period as may be extended by the Commissioner. In the present case, the mistake was clerical in nature. It is the Respondents who have, for specious reasons, denied this opportunity to the Petitioner. Therefore, the revision cannot be treated as a fresh filing , especially, keeping in view the spirit of the spirit of 32nd meeting of GST Council, referred above Non-disclosure of reasons for denying claim of the Petitioner and arbitrariness in rejection. 27. There is yet another reason that entitles the Petitioner to the relief sought in the present petition. Petitioner's case was considered and rejected by the IT Grievance Redressal Committee, despite the recommendation of the Jurisdictional Commissionerate. It is also pertinent to note that the Respondents had given an undertaking before the Bombay High Court in Writ Petition No. 71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be countenanced. Viewed from another angle, one can construe Petitioner's difficulty as technical in nature, as the short credit is reflected as blocked credit on the portal, with no provision to rectify the same electronically. In absence of any clause defining "technical difficulty on common portal", as discussed above, Petitioner's case would even be covered by Rule 117 (1A) of the CGST Rules. GST laws required taxpayers to embrace transformative new ways. The use of technology can be daunting for many taxpayers who hitherto before, were largely dependent on conventional manual filings of returns. In order to overcome the resistance to change and encourage transformation and remodeling of the entire accounting structure at taxpayers' end, the electronic mode should be user friendly. Sadly, the Respondents have not helped the situation, despite all the good intentions they may have. They have further compounded the problems for the taxpayers by being adamant about their stand and exhibited no flexibility in approach. The exactness required in compliance of tax provisions should not be construed so rigidly that permissible flexibility is completely disregarded. In effect, the ..... 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