Credit cannot be denied even if assessee made mistake filed in TRAN-1 twice

[CA Bimal Jain]

The Hon’ble Madras High Court in M/S. SRI RENGA TIMBERS, REPRESENTED BY ITS SOLE PROPRIETOR S. RENGANATHAN VERSUS THE ASSISTANT COMMISSIONER (ST) (FAC) , THE SUPERINTENDENT OF GST & CENTRAL EXCISE, TIRUVARUR - 2023 (9) TMI 130 - MADRAS HIGH COURT quashed the order passed by the Adjudicating Authority and held that the credit that was validly availed cannot be denied, even if there were mistakes in the TRAN-1 returns filed twice.

Facts:

M/s. Sri Renga Timbers (“the Petitioner”) was earlier registered under Tamil Nadu Value Added Tax Act, 2006 (“the TNVAT Act”), with the implementation of GST the Petitioner filed FORM TRAN-1 under Section 140 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) to transmit the Input Tax Credit (“ITC”) lying unutilized with the Petitioner as on June 30, 2017 to GST regime.

The Petitioner transferred the ITC on the stock of inventory of locally purchased taxable goods valued at INR 6,19,89,648/- and declared the ITC carried forward at the end of the month INR  89,88,498/- in the returns filed for the month of June 2017.

The Petitioner transited the aforesaid ITC in table 5(c) in the third column State/Union Territory tax as credit claimed on account of State/Union Territory tax credit carried forwarded in FORM TRAN-1 filed on August 24, 2017.

Further, the said ITC was also utilized by the Petitioner during the course of time for discharging the tax liability for the supplies effected under the Tamil Nadu Goods and Services Tax Act, 2017 (“the TNGST Act”).

In the year 2022, after the decision of the Hon'ble Supreme Court in UNION OF INDIA & ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. & ANR. - 2022 (7) TMI 1232 - SC ORDER dated July 22, 2022 and UNION OF INDIA VERSUS FILCO TRADE CENTRE PVT. LTD. - 2022 (9) TMI 514 - SC ORDER September 02, 2022] the Petitioner filed a revised return in TRAN-1 on November 28, 2022, although the decision was rendered to ameliorate the situation arising out of difficulties faced by the assessee to properly file Form GST TRAN-1 due to technical glitches in the web portal.

However, this time the Petitioner instead of showing the amount of credit in column 2 for State/Union Territory Tax against Table 7.c i.e., amount of VAT and Entry Tax paid on inputs supported by invoices under the caption "Inputs Held in Stock", the petitioner made an entry in Table 7.a.A i.e., for Input Held in Stock, where duty paid invoices were available.

But the Petitioner pointed out this mistake to the Superintendent of GST & Central Excise, Tiruvarur Range.

Thereafter, the Revenue Department (“the Respondent") in the light of the clarification issued by the Principal Secretary/Commissioner of State Tax vide Circular No.19/2022 – TNGST (PP6/GST/145/2022) dated December 14, 2022, the first respondent Assistant Commissioner (ST) (FAC), Mayiladuthurai concluded that the Petitioner wrongly claimed and utilized the excess SGST credit of Rs. 89,88,499/- as per the revised Form GST TRAN-1 as per with the earlier Form GST TRAN-1 claiming the aforesaid credit.

Accordingly, issued a show cause notice and denied the ITC to the tune of sum of INR 89,88,498/-.

Thereafter, the Adjudicating Authority vide an order dated February 27, 2023 (“the Impugned Order”) the Petitioner had wrongly claimed and utilized the excess SGST credit of INR 89,88,499/- as per the revised Form GST TRAN-1 and with earlier Form GST TRAN-1 claiming the aforesaid credit.

Aggrieved by the Impugned Order the Petitioner filed a writ before the Hon’ble Madras High Court.

 The Petitioner contended that the was mistake committed not once but twice and the credit was availed on the stock lying as on June 30, 2017 was transited in FORM TRAN-1 on August 24, 2017 was carried forward by mistake, the amount of VAT/Entry tax on inputs supported by invoices in Table 7.c under the caption "Inputs Held in Stock" and this was sought to be rectified by the Petitioner by filing a revised return on November 28, 2022. However, by mistake a revised TRAN-1 was filed by showing the amounts against the inputs held in stock where duty paid invoices are available in Table7.a.A.

The Respondent contended that as on date only revised TRAN-1 is available, since even as per the Petitioner's own admission and credit was wrongly transited and there was no credit available against Table 7.c in TRAN-1, therefore, the amount that was utilized by the Petitioner in past has to be denied. The Petitioner was required to pay INR 89,88,499/- together with interest.

Issue:

Whether credit can be denied when the mistake was committed by the assessee in filling TRAN-1?

Held:

The Hon’ble Madras High Court in M/S. SRI RENGA TIMBERS, REPRESENTED BY ITS SOLE PROPRIETOR S. RENGANATHAN VERSUS THE ASSISTANT COMMISSIONER (ST) (FAC) , THE SUPERINTENDENT OF GST & CENTRAL EXCISE, TIRUVARUR - 2023 (9) TMI 130 - MADRAS HIGH COURT held as under:

• Observed that, validly availed credit is indefeasible in law and the Petitioner's errors in filing FORM TRAN-1 on August 24, 2017 and the revised return on November 28, 2022, it was established that the amount of INR 89,88,498 was unutilized credit from the Petitioner's last return filed for the month of June 2017.
• Opined that, such credit could not be denied, even if there were mistakes in the TRAN-1 returns filed twice.
• Relied Upon the Judgement of UNICHEM LABORATORIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY - 2002 (9) TMI 110 - SUPREME COURT, wherein the Hon’ble Supreme Court held that it is not on the part of the duty of the revenue to deny the benefit that was otherwise legitimately available to an assessee.
• Quashed the Impugned order and remanded back the matter to the Adjudicating Authority to re-examine the records of the petitioner afresh from the last VAT return for the month of June 2017 under the TNVAT Act.
• Opined that, if such credit was available, even if there was any discrepancy while filing Form TRAN-1, the mistakes committed by the petitioner may be overlooked and the credit that availed and utilized can be condoned and regularized.
• Further opined that, in case no credit was available in the last VAT return and was wrongly transited, such credit shall be recovered from the petitioner in accordance with law.

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