Big GST relief for Delhi taxpayers - Trans credit - Ruling in Reliance by Delhi High Court

Court: HIGH  COURT  OF  DELHI  AT  NEW  DELHI

Date

# Reserved: 2-3-2020
# Pronounced: 5-5-2020
Petitioners
a. BRAND EQUITY TREATIES LIMITED
b. MICROMAX INFORMATICS LTD
c. DEVELOPER GROUP INDIA PRIVATE LIMITED
d. RELIANCE ELEKTRIK WORKS
Judges
a. HON’BLE MR.JUSTICE VIPIN SANGHI
b. HON’BLE JUSTICE SANJEEV NARULA

Writ of Mandamus

Relief asked for:
Directing the respondents to permit the petitioners to avail input tax credit of the accumulated CENVAT credit as of 30th June, 2017 by filing declaration  Form  TRAN-1 beyond  the  period  provided  under  the  Central  Goods  and  Services  Tax  Rules,  2017  (hereinafter,  the  “CGST  Rules”)

Judgement relied upon:

Petitioners: Time limit of filing of Trans form should be prescribed in the Act and not in rules.
a. A.B.  Pal  Electricals  v  Union  of  India  (W.P.(C)  6537/2019(decided  on  17.12.2019)
b. SCG  Contracts  India  Pvt.  Ltd.  vs.  KS  Chamankar Infrastructure Pvt. Ltd. 2019 SCC OnLine SC 226.

Respondents: Act has given power to rules to prescribe the time limit of filing of form.

c.  Willowood  Chemicals  Pvt.  Ltd.   vs.   Union   of   India   2018   (19   G.S.T.L   228   Gujarat)
d. ALD Automotive Pvt. Ltd. vs. Commercial Tax Officer 2018 (364) ELT 3 (SC)

ANALYSIS AND CONCLUSION by High Court Delhi

Judgement relied upon

a. M/s  Blue  Bird  Pure  Pvt.  Limited  vs.  Union  of  India  2019  SCC  OnLine  9250;

b. SARE  Realty  Projects  Pvt.  Limited  vs.  Union of India [W.P.(C) 1300/2018decided on 1st August, 2018]
c. Bhargava Motors  vs.  Union  of  India  [W.P.(C)  1280/2019  decision  dated  13th  May, 2019]
d. Kusum  Enterprises  Pvt.  Limited  vs.  Union  of  India  [W.P.(C) 7423/2019 decided on 12th July, 2019].
e.  Sales Tax Bar  Association  [W.P  (c)  No.  9575/2017]

Facts quoted.

a. In earlier period of filing there were indeed technical difficulties in filing of Trans 1 form.
b. There  were  bonafide  errors  on  the  part  of  the  taxpayer  and  in  others, 
c. the  difficulty  arose  on  account of lack of understanding of the complete overhaul of the indirect tax system; or
d. complicated filing procedure and the statutory forms resulting in erroneous  information  being  stated  therein.
e. AB Pal Electricals Pvt. Ltd. vs. Union of India in  W.P.(C)  6537/2019 decided  vide  judgmentdated  17th  December, 2019

Important para

The benchmark, in our view, is that the online system brought into  force  by  the  GSTN  Ltd.  should  be  able  to  perform  all  functions  and  should  have  all  flexibilities/options,  which  were  available  in  the  pre-GST regime.The problems on the GSTN cannot be wished away, and have to be resolved  in  the  right  earnest.  This  requires  sensitivity  on  the  part  of  the  Government  which  has,  unfortunately,  not  been  exhibited  in  adequate  measure.

What were the other reasons where assessee could not file TRANS 1

a. Not been  vigilant  of  the  timelines,  or 
b. Have  been  victims  of  the  chaos  and  confusion  that  was  prevailing  at  the  time  when  the  GST  regime.
c. Could not file the form within prescribed time  for  the  reason  that  the  Managing  Director  of  the  company  was  not  keeping well, and as a result was unable to attend to the business affairs of the  company  for  a  long  time.  The  personnel  responsible  for  dealing  with  compliances  required  to  be  made  by  the  company,  constantly  reported  that  the GST portal was not working properly and, therefore, they were unable to access the portal and file the requisite details. When the Managing Director recovered from his illness, 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 above situation is not covered  by  the  situation  of  “technical  glitches".

Reasoning

21 “whether  particular  provision  is  mandatory  or  directory  has  to be determined on the basis of object of particular provision and design of the  statute” and “such interpretation should not be put which may promote the  public  mischief  and  cause  public  inconvenience  and  defeat  the  main  object  of  the  statute”. Therefore,  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.

Ruling

22.  We,  therefore,  have  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.

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 till date are permitted to do so on or before 30-6-2020.