2019 (9) TMI 319 - GUJARAT HIGH COURT

Filing of Form GST Tran-1 and GST Tran-2 - transitional credit - credit in respect of inputs held in stock on the appointed day in terms of Section 140(3) of the Central Goods and Services Tax Act, 2017- It is the case of the writ-applicants that the declaration in the form GST TRAN-1 could not be filed on account of the technical glitches in terms of poor net connectivity and other technical difficulties on the common portal - HELD THAT:- The right to carry forward credit is a right or privilege, acquired and accrued under the repealed Central Excise Act, 1944 (1 of 1944) and it has been saved under Section 174(2)(c) of the CGST Act, 2017 and, therefore, it cannot be allowed to lapse under Rule 117 of the CGST, 2017, for failure to file declaration form GST Tran-1 within the due date, i. e. 27. 12. 2017 - The right to carry forward CENVAT credit for not being able to file the form GST Tran-1 within the due date offends the policy of the Government to remove the cascading effect of tax by allowing the input tax credit as mentioned in the Objects and Reasons of the Constitution 122nd Amendment Bill, 2014. The Objects and Reasons of the Constitution 122nd Amendment Bill, 2014 clearly set out that it is intended to remove the cascading effect of taxes and to bring out a nationwide taxation system.

The cascading of taxes, in simple language, is ‘tax on tax'. The denial of carry forward of tax paid on stock on the appointed day may lead to cascading effect of tax because the GST will again have to be paid on the Central Excise duty already suffered on the stock. It is an established principle of law that it is necessary to look into the mischief against which the statute is directed, other statutes in pari materia and the state of the law at the time.

It was held by the Supreme Court in the case of District Mining Officer and Ors. v. Tata Iron and Steel Co. and Ors. , [2001 (7) TMI 1277 - SUPREME COURT] that, “the process of construction combines both literal and purposive approaches. In other words, the legislative intention, i. e. the true or legal meaning of an enactment, is derived by considering the meaning of the words used in the enactment in light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed.

It was held by the Supreme Court, in the case of U. P. Bhoodan Yagna Samiti, U. P. v. Braj Kishore and Ors. , [1988 (9) TMI 343 - SUPREME COURT], that it is clear that when one has to look to the intention of the Legislature, one has to look to the circumstances under which the law was enacted, the Preamble of the law, the mischief which was intended to be remedied by the enactment of the statute.

Thus, it is arbitrary, irrational and unreasonable to discriminate in terms of the time-limit to allow the availment of the input tax credit with respect to the purchase of goods and services made in the pre-GST regime and post-GST regime and, therefore, it is violative of Article 14 of the Constitution. - It is legitimate for a going concern to expect that it will be allowed to carry forward and utilise the CENVAT credit after satisfying all the conditions as mentioned in the Central Excise Law and, therefore, disallowing such vested right is offensive against Article 14 of the Constitution as it goes against the essence of doctrine of legitimate expectation.

By not allowing the right to carry forward the CENVAT credit for not being able to file the form GST Tran-1 within the due date may severely dent the writ-applicants working capital and may diminish their ability to continue with the business. Such action violates the mandate of Article 19(1)(g) of the Constitution of India - The liability to pay GST on sale of stock carried forward from the previous tax regime without corresponding input tax credit would lead to double taxation on the same subject matter and, therefore, it is arbitrary and irrational.

The respondents are directed to permit the writapplicants to allow filing of declaration in form GST TRAN-1 and GST TRAN-2 so as to enable them to claim transitional credit of the eligible duties in respect of the inputs held in stock on the appointed day in terms of Section 140(3) of the Act - It is further declared that the due date contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit is procedural in nature and thus should not be construed as a mandatory provision - Application allowed.