Brand Equity Treaties Ltd. and others vs. Union of India (Supra) Archives

Assessee can claim Trans Credit in GSTR3B of July 2020 : HC

Introduction

According to Rule 117, every registered person is entitled to take ITC under section 140 shall, by submitting a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying amount of input tax credit (ITC) of eligible duties and taxes.

Provisions of Law

Extract of Rule 117 is as under (as amended upto 9^th October, 2019):-

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.

Extract of Rule 117A is as under (as amended upto 9^th October, 2019):-

Notwithstanding anything contained in sub-rule (1), the Commissioner may, on the recommendations of the Council, extend the date for submitting the declaration electronically in FORM GST TRAN-1 by a further period not beyond 31st December, 2019, in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension.

While the rule 117 under the GST Act mandated a deadline for claiming the credit, taxpayers have argued in court that input tax credit was a right and not a taxpayer concession, which made a deadline ultra vires.

Although the original deadline expired in September,2017, the government granted several extensions till December 27, 2017. Further, taxpayers who couldn’t file the claim due to technical glitch in the system were allowed to do so till March 31, 2020.

Section 140 of CGST Act deals with the transitional arrangements of input tax credit, which allows a registered person to carry forward his unavailed input credit from the previous tax regime to the current GST Regime.

Let us refer to the case of Amba Industrial Corporation vs Union of India where the benefit of Section 140 was extended till 30^th June, 2020 by the High Court.

Facts of the Case

The Petitioner is challenging provisions of Rule 117(1A) of CGST Act, 2017 and seeking direction to Respondent to permit Petitioner to electronically upload form TRAN-I or avail input tax credit (ITC) in monthly return GSTR-3B.
The Petitioner-a partnership firm, engaged in the business of trading of S.S. Flats.
The Petitioner prior to 01.07.2017 i.e. date of introduction of GST was registered under Central Excise Act, 1944 as a dealer/trader and had purchased S.S. Flats and Scrap on payment of Excise Duty.
The Petitioner to carry forward unutilized CENVAT Credit, in terms of Section 140 of CGST Act read with Rule 117 (1) was required to upload TRAN-I on the official portal of Respondent.
However Petitioner failed to upload TRAN-I by last date i.e. 27.12.2017.
The lower courts did not permit the carry forward of ITC due to late filing of TRAN-I. Aggrieved the taxpayer filed an appeal to the High Court.

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Proceedings of High Court

Reference to previous judgements

Reference was given to the case of Adfert Technologies Pvt. Ltd. Vs Union of India. In Adfert Technologies case the Respondents have been directed to open portal so that assessee may upload TRAN-I and in case Respondent fails to open portal, Petitioners have been permitted to take ITC in monthly return GSTR-3B.
Division Bench of Delhi High Court in the case of SKH Sheet Metals Components vs. Union of India WP(C), vide order dated 16.06.2020 has permitted Petitioner to revise TRAN-I on or before 30.06.2020. Delhi High Court while passing aforesaid order has relied upon its recent decision in Brand Equity Treaties Ltd. and others vs. Union of India (Supra) wherein Court had held that Government cannot adopt different yardsticks while evaluating conduct of the tax payers and its own conduct, acts and omissions.

Relevant points of judgment of Delhi High Court in Brand Equity Treaties Ltd Case were mentioned:

A. Pertaining to Technical Difficulty

The 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.
“Technical difficulty” is a broad term and cannot have a narrow interpretation, or application. Further, technical difficulties cannot be restricted only to a difficulty faced by or on the part of the respondent. It would include any such technical difficulties faced by the taxpayers as well.
A completely new system of accounting, reporting of turnover, claiming credit of prepaid taxes, and payment of taxes was introduced with the implementation of the GST regime. New forms were introduced and, as aforesaid, all of them were not even operationalized. Just like the respondents, even the taxpayers required time to adapt to the new systems, which was introduced as a completely online system.
Assessees also faced the challenges posed by low bandwidth, lack of computer knowledge and skill to operate the system. It is very unfair on the part of the respondents, in these circumstances, to expect that the taxpayers should have been fully geared to deal with the new system on day-one, when they themselves were completely ill-prepared, which led to creation of a complete mess.
Taxpayers 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 could not 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.
Conscious of the circumstances that are prevailing, Delhi HC was of the opinion 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 3 years from the date of commencement of limitation under the Limitation Act, 1963.

B. Provisions of Rule 117(1A)

The introduction of Sub rule (1A) in Rule 117 is a patchwork solution that does not recognize the entirety of the situation.
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.
There could be various different types of technical difficulties occurring on the common portal which may not be solely on account of the failure to upload the form.
It would be an erroneous approach to attach undue importance to the concept of “technical glitch” only to that which occurs on the GST Common portal, as a pre-condition, for an assesee/tax payer to be granted the benefit of Sub- Rule (1A) of Rule 117.
The purpose for which Sub Rule (1A) to Rule 117 has been introduced has to be understood in the right perspective by focusing on the purpose which it is intended to serve. The purpose was to save and protect the rights of taxpayers to avail of the CENVAT credit lying in their account.
That objective should also serve other taxpayers, such as the petitioners. The approach of the Government should be fair and reasonable. It cannot be arbitrary or discriminatory, if it has to pass the muster of Article 14 of the Constitution.
The government cannot turn a blind eye, as if there were no errors on the GSTN portal.
The extremely narrow interpretation that the respondents seek to advance, of the concept of “technical difficulties”, in order to avail the benefit of Sub Rule (1A), is contrary to the statutory mechanism built in the transitory provisions of the CGST Act.
The legislature has recognized such existing rights and has protected the same by allowing migration thereof in the new regime under the aforesaid provision. 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, 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.
High Court was 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.

In view of decision of the Court in the case of Adfert Technologies Pvt. Ltd. (Supra) and in the case of Brand Equity Treaties Ltd. (Supra) thepresent petition was allowed. The Respondents were directed to permit Petitioner to upload TRAN-I on or before 30.06.2020 and in case Respondent fails to do so, the Petitioner would be at liberty to avail ITC in question in GSTR-3B of July 2020. However, the respondents would be at liberty to verify genuineness of claim(s) made by Petitioner.

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