TMI Blog2020 (5) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, respondent No.1 framed the CGST Rules - Rule 117 of the said rules imposed a time limit of 90 days for availing benefit of the accumulated CENVAT credit as provided under Section 140 (1) in its input tax credit register under the CGST Act. The transition from the erstwhile regime to GST for the availment of the CENVAT credit was to be by way of a declaration to be submitted electronically in Form GST TRAN-1. The date prescribed for filing of the said Form was extended several times by way of orders issued from time to time, finally till 27th December, 2019. Several taxpayers however could not meet the deadline. This was on account of several factors - predominantly being inadequacies in the network of the respondents, which failed to meet the expectations and serve the needs of taxpayers. Thousands of taxpayers complained that there was low bandwidth and despite several attempts being made on the GST Network, they were unsuccessful in filing the statutory GST TRAN-1 Form online - The recommendations of the Grievance Redressal Committee were also brought to the notice of the GST Council and the matter was deliberated upon. Several cases got settled at the government level, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and accepted respondents contention that the case of the petitioner could not be strictly considered as one covered by the situation of technical glitches - The above decision would also cover the case of the Petitioners, and there can be no two views about this proposition and we would like to extend similar benefit to them. Whether the Government could curtail the accrued and vested right, and restrict it to 90 days by a subordinate legislation? - HELD THAT:- There is nothing sacrosanct about the time limit so provided. It is not as if the Act completely restricts the transition of CENVAT credit in the GST regime by a particular date, and there is no rationale for curtailing the said period, except under the law of limitations. The period of 90 days has no rationale and as noted above, extensions have been granted by the Government from time to time, largely on account of its inefficient network. In order to avail the benefit, no restriction has been put under any provisions of the Act in terms of the time period for transition. The time limit prescribed for availing the input tax credit with respect to the purchase of goods and services made in the pre-GST regime, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, in the present cases, the purport of the transitory provisions is to allow a smooth migration from the erstwhile service tax regime to the new GST regime and the interpretation must be in consonance with the said purpose. Thus there are no hesitation in reading down the said provision [ Rule 117] as being directory in nature, insofar as it prescribes the time-limit for transitioning of credit and therefore, the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. This however, does not mean that the availing of CENVAT credit can be in perpetuity. Transitory provisions, as the word indicates, have to be given its due meaning. Transition from pre-GST Regime to GST Regime has not been smooth and therefore, what was reasonable in ideal circumstances is not in the current situation. In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit - since all the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt were to give directions to the respondents to permit them to file the statutory Form TRAN-1 to avail the input tax credit, they would be satisfied and not press for the relief of challenging the vires of the provisions of the Act. 2. This Court has allowed numerous petitions, relating to availment of input tax credit on account of delayed filing of Form TRAN-1. The controversy in the present petitions is no different, but nonetheless respondents have strongly objected to the directions sought in the present petitions, contending that the factual situation in each one of the present cases is quite different, and does not merit the relief granted to other taxpayers. It is argued that the Court has allowed the petitions only in those cases, where the delay had been occasioned on account of technical glitches in the Goods and Services Tax Network (GSTN). The facts of the instant cases are substantially distinguishable, and do not indicate or allege any such error or glitch on the network of the respondents relating to the filing of the TRAN-1 forms. It is further contended that the pleadings disclose that the delay in their cases did not occur on account of any technical glitch o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit amounting to ₹ 60,15,498/-. Petitioner contends that on 2nd January, 2018, based on the advice of its consultant, it was under the belief that it was eligible for refund under Section 142(3) of the CGST Act, and the consultant filed an online refund application. However due to technical glitch, an error appeared on the screen. Thereafter, on 13th February, 2018, when petitioners consultant again tried to upload the refund application for CENVAT credit, yet again an error occurred and the message proxy error was displayed on the screen. Petitioner s consultant visited the office of the Assistant Commissioner of GST to enquire about the error and was informed that Petitioner was not eligible for the refund under Section 142 (3) of the Act. On being apprised of this legal position, physical copy of Form TRAN-1 was filed on 24th August, 2018 along with supporting invoices before Deputy/Assistant Commissioner of Central Excise, GST East Division. Petitioner was informed that the application would be verified and it would be intimated about the outcome. Thereafter, vide letter dated 30th August, 2018, additional documents as required by the respondents were also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by Central Board of Indirect Taxes and Customs wherein a mechanism was introduced to assist the taxpayers who had faced difficulties owing to technical glitches. Despite repeated follow ups, no reply was received from the respondents and finally, vide letter dated 9th May, 2018, respondents informed the petitioner that the credit of ₹ 6,04,47,033/- was not populated in TRAN-1 and, thus, the credit thereof cannot be extended to the petitioner. W.P.(C) 13203/2019 9. In this case as well, petitioner contends that it had been trying to upload its claim for carrying forward the credit in form GST TRAN-1 but could not do so due to error in the system of the respondents. Petitioner enquired from other professionals and learnt that apart from it, large number of assessees were facing similar problems and could not upload the claim of input credit on account of system error/failure. Petitioner submits that on account of utter confusion and chaos that resulted in failure to upload Form GSTR TRAN-1, it could not upload the claim on the common portal within time. Petitioner also engaged in correspondence with the respondents, however there has been no effective resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expiry of the last date for filing TRAN-1, as admitted in the pleadings. The petitioners were negligent, and do not deserve any leniency. Mr. Bansal defended Rule 117 of the CGST rules by arguing that under Sub-section (1) of Section 164 of the CGST Act, Government is authorised to make rules for carrying out the provisions of the Act on recommendation of the Council. He submitted that the CGST Rules laid down by the Central Government, including the Rules impugned in the present petition, flow from the Act and are in consonance with the intention of the legislature. Mr. Bansal emphasized on the words in such manner as may be prescribed which are appearing in Sub-Section (1) of Section 140 as follows: 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 in such manner as may be prescribed (emphasis supplied) He submits that this provision empowers the Government to fix the time frame for availing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Rules, 2017 ( CGST Rules ). Rule 117 of the said rules imposed a time limit of 90 days for availing benefit of the accumulated CENVAT credit as provided under Section 140 (1) in its input tax credit register under the CGST Act. The said Rule reads as under: 117. Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day.- (1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section: Provided that the Commissioner may, on the recommendations of the Council, extend the period of ninety days by a further period not exceeding ninety days. Provided further that where the inputs have been received from an Export Oriented Unit or a unit located in Electronic Hardware Technology Park, the credit shall be allowed to the extent as provided in sub-rule (7) of rule 3 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factors - predominantly being inadequacies in the network of the respondents, which failed to meet the expectations and serve the needs of taxpayers. Thousands of taxpayers complained that there was low bandwidth and despite several attempts being made on the GST Network, they were unsuccessful in filing the statutory GST TRAN-1 Form online. Scores of complaints were made on the portal and it was also brought to the notice of the government. The technical difficulties faced by the taxpayer were acknowledged and an IT Grievance Redressal Committee was constituted and assigned the task of redressing the grievance of the taxpayers. The recommendations of the Grievance Redressal Committee were also brought to the notice of the GST Council and the matter was deliberated upon. Several cases got settled at the government level, however some cases were contested on the ground that taxpayers did not put forward any evidence to suggest that they faced any technical glitch on the portal that prevented them to submit the GST TRAN-1 Form within the prescribed time limit. Many such matters travelled to courts. Majority of them were allowed in favour of the taxpayers, and directions were issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not considered either by the legislature, or the executive as sacrosanct or mandatory. 15. In the above factual background, in some of the cases that came up before this Court, the petitioners cited difficulties in filing the TRAN-1 Form which were of a different nature. In some cases, there were bonafide errors on the part of the taxpayer and in others, the difficulty arose on account of lack of understanding of the complete overhaul of the indirect tax system; or complicated filing procedure and the statutory forms resulting in erroneous information being stated therein. Even in such cases, to note a few, this Court has declined to make a differentiation and given the benefit of the doubt to the taxpayers, realizing that Respondent s network and system, and the change, had posed multifarious problems that require a reasonable approach. One such petition has been preferred by the Sales Tax Bar Association [W.P (c) No. 9575/2017] narrating scores of technical problems being faced on the portal. We adopted a proactive approach in the said matter and have endeavoured to identify root cause for failure of the network to work seamlessly. In the said proceedings, we had also hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he followed up with the authorities by submitting a representation seeking benefit of the CBIC s orders issued from time to time-extending the last date for submission of the TRAN-1 Form. The case was considered by the GST Council, but it failed to redress his grievance and the matter reached before us. We considered the situation and accepted respondents contention that the case of the petitioner could not be strictly considered as one covered by the situation of technical glitches . Yet, we extended the benefit of the Circular to the said petitioner in the following terms: 4. Petitioner relies upon several decisions of this Court including M/s Blue Bird Pure Pvt. Ltd vs Union of India and Ors, 2019 SCC OnLine 9250 and Sare Realty Projects Private Limited vs Union Of India,W.P. (C) NO. 1300/2018, decided on 01.08.2018to urge that the Court has granted reliefs to several other parties who were in similar situation. 5. We have considered the submissions of the parties. The nature of reliefs sought in the present petition and the facts disclosed herein is fully covered by the decision of this Court in M/s Blue Bird Pure Pvt. Ltd (supra) decided on 22.07.2019, wherein, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to enable the petitioner to file the TRAN1 electronically for claiming the transitional credit or accept the manually filed TRAN1 and to allow the input credit claimed after processing the same, if it is otherwise eligible in law . 11. In the present case also the Court is satisfied that the Petitioner's difficulty in filling up a correct credit amount in the TRAN-1 form is a genuine one which should not preclude him from having its claim examined by the authorities in accordance with law. A direction is accordingly issued to the Respondents to either open the portal so as to enable the Petitioner to again file TRAN-1 electronically or to accept a manually filed TRAN-1 on or before 31st May, 2019. The Petitioner's claims will thereafter be processed in accordance with law. 12. With a view to ensure that in future such glitches can be overcome, the Court directs the Respondents to consider providing in the software itself a facility of the trader/dealer being able to save onto his/her system the filled up form and also a facility for reviewing the form that has been filled up before its submission. It should also permit the dealer to print out the filled up fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T TRAN-1 due to the glitches in the system. It is not fair to expect that each person who may not have been able to upload the Form GST TRAN-1 should have preserved some evidence of it such as, by taking a screen shot. Many of the registered dealers/traders come from rural/semiliterate background. They may not have had the presence of mind to create any record of their having tried, and failed, to upload the Form GST TRAN-1. They cannot be made to suffer in this background, particularly, when the systems of the Repsondents were not efficient. From the documents placed on record, it emanates that the Respondents have no cogent ground to deny the benefit of the Notification No. 49/2019 dated 09.10.2019 issued specifically to grant relief to taxpayers who faced difficulty in filing Form GST TRAN-1 due to technical glitches. 8. We may further add that the credit standing in favour of an assessee is property and the assessee could not be deprived of the said property save by authority of law in terms of Article 300 (A) of the Constitution of India. There is no law brought to our notice which extinguishes the said right to property of the assessee in the credit standing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Rules, the relevant provision prescribing the manner in which the CENVAT credit has to be transitioned. Initially, the time limit prescribed under Rule 117 for transitioning was 90 days, as explained above, was extended from time to time. Evidently, there is no other provision in the Act prescribing time limit for the transition of the CENVAT credit, and the same has been introduced only by way of Rule 117. This provision also contains a proviso, which vests power with the Commissioner to extend the period on the recommendations of the Council. Indeed, the Commissioner has exercised such power and time period which was initially to expire after 90 days, has been, as a matter of fact, extended till 29th December, 2017. In fact, as noticed above, under Sub-Rule (1A) of Rule 117, for a specific class of persons, the time limit has gone way beyond the period originally envisaged, and has still not expired. Thus, there is nothing sacrosanct about the time limit so provided. It is not as if the Act completely restricts the transition of CENVAT credit in the GST regime by a particular date, and there is no rationale for curtailing the said period, except under the law of limitations. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarted logging in closer to the deadline. They encountered trouble filing the returns. Petitioners who are large and mega corporations - despite the aid of experts in the field, could not collate the humongous data required for submission of the statutory forms. Courts cannot be oblivious to the fact that a large population of this country does not have access to the Internet and the filing of TRAN-1 was entirely shifted to electronic means. The Nodal Officers often reach 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 ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit with respect to the purchase of goods and services made in the pre-GST regime, cannot be discriminatory and unreasonable. There has to be a rationale forthcoming and, in absence thereof, it would be violative of Article 14 of the Constitution. Further, we are also of the view that the CENVAT credit which stood accrued and vested is the property of the assessee, and is a constitutional right under Article 300A of the Constitution. The same cannot be taken away merely by 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. 20. Now, let us also examine the case law relied upon by the Respondents. We find that the judgments cited by Mr. Amit Bansal are distinguishable on facts. In the case of ALD Automotive Pvt. Ltd. vs. Commercial Tax Officer (supra)reference was made to the judgment of the Supreme Court in Godrej Boyce Mfg. Co. (P) Ltd. v. CST, (1992) 3 SCC 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with reference to the proportion in which raw material was purchased within and outside the State. In the said case, the appellant-company was a registered dealer under the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu VAT Act)who was engaged in the business of leasing management of the motor vehicles and resale of used motor vehicles. It claimed entitlement to input tax credit of the amount paid on the purchases made from the registered dealer of motor vehicle as per Section 19(2) of the Tamil Nadu VAT Act.As per Section 19(11), if a dealer had not claimed input tax credit for a particular month, the dealer could claim the input tax credit before the end of the financial year or before 90 days from the date purchase, whichever was later. When the petitioner filed its return for the assessment year 2007-08 - for want of tax invoices, the said input tax credit could not be claimed. Thereafter, he filed revised returns claiming input tax credit. This was disallowed by the commercial tax officer, which was then assailed in the writ petition before the High Court. The High Court set aside the order confirming the proposal to disallow. The matter reached before the Apex cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested CENVAT credit. The procedure could not run contrary to the substantive right vested under sub Section (1) of Section 140. While interpreting Order VIII Rule 1 CPC, the Supreme Court has observed that the time limit for filing written statement is directory in nature and not mandatory, and that procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice [Ref: Salem Advocates Bar Association v. Union of India AIR 2003 SC 189]. Reference may also be made to Commissioner of Central Excise, Madras v Home Ashok Leyland (2007) 4 SCC 41, wherein it was observed that the Rule 57E of the Central Excise Rules, 1944 was a procedural provision, which provides procedure for adjustment of MODVAT credit available to the taxpayer and, hence, the right available under the substantive provision cannot be deprived for non-compliance with the procedural provision. There is no consequence provided in Rule 117 of GST Rules on account of failure to file GST TRAN-1. The argument of the respondents is that the consequence is provided in Sub-Section (1) of Section 140 by way of a pre-condition for being entitled to transit the CENVAT credit in his electronic credit re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces is not in the current situation. In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit. 23. Accordingly, since all the Petitioners have filed or attempted to file Form TRAN-1 within the aforesaid period of three years they shall be entitled to avail the Input Tax Credit accruing to them. They are thus, permitted to file relevant TRAN-1 Form on or before 30.06.2020. Respondents are directed to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually. Respondents shall thereafterprocess the claims in accordance with law. We are also of the opinion that other taxpayers who are similarly situated should also be entitled to avail the benefit of this judgment. Therefore, Respondents are directed to publicise this judgment widely including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 til ..... X X X X Extracts X X X X X X X X Extracts X X X X
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