P&H HC allows filing or revising  TRAN-01, not filed/ wrongly filed, manually or electronically by 30th November, 2019

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Synopsis: The Hon’ble Punjab & Haryana High Court in the matter of Adfert Technologies Pvt. Ltd. v. Union of India & Ors. [CWP No. 30949 of 2018(O&M)] has provided relief to 102 petitioners who have not filed or wrongly filed their TRAN-01 form by directing the revenue to allow such petitioners to file their TRAN-01 forms by November 30th, 2019 holding that accumulated unutilized credits of pre-GST regime are a vested right of the taxpayers.

Facts:

Civil writ petitions in 102 different cases were filed by various taxpayers on account of them not being able to carry forward their unutilized CENVAT credit of duty paid under Central Excise Act, 1944(“CEA, 1944”) and Input Tax Credit of VAT paid under Punjab VAT Act, 2005(“PVAT Act”) or Haryana VAT Act, 2003(“HVAT Act”). The reason for the same being that these taxpayers could not file TRAN-01 (“the form”) and/ or the incorrectly filed the form by the “stipulated last date” i.e. December 27, 2017.

All the petitioners are duly registered under the Central Goods and Services Tax Act, 2017 (“CGST Act, 2017”) and were also registered under the erstwhile PVAT Act/ HVAT Act and/or CEA, 1944. The petitioners had accrued unutilized credits under the erstwhile laws which were eligible to be carried forward under the new GST regime through filing of form TRAN-01 as per Section 140 of the CGST Act, 2017. However, no time limit for the same was prescribed under the relevant section of the said act but Rule 117 of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”) provided for a period of 90 days from the appointed day i.e. July 1st, 2017 which was extended from time to time & the last date was December 27th, 2017.

There were cases where the petitioners didn’t file the form or filed the form wrongly because of varied reasons such as press release showing last date December 31st, 2017, lack of proper knowledge of computer system, complexity in filling different columns of TRAN-I, system glitches, etc.

The petitioners further contended that unutilized credits are a vested right of the taxpayers which cannot be washed away and any contrary interpretation would amount to violation of Article 14 and 300A of the Constitution of India. The Petitioners also contended that no Section or Rule of CGST Act/ CGST Rules  provides that unutilized ITC would lapse, if TRAN-I is not filed by due date, thus, refund in cash may be sanctioned in terms of proviso to Section 142(3) of CGST Act if it is held that Petitioners are not entitled to carry forward unutilized ITC because they failed to file TRAN-I by December 27, 2017.

Whereas the Respondents emphasized that the government has permitted all registered persons to file TRAN-I by March 31st, 2019 who furnished evidence of attempt to upload TRAN-I up to last stipulated date. The Petitioners cannot take excuse of technical glitches because they did not attempt to upload TRAN-I. The Respondents further relied on the Hon’ble Gujrat High Court judgment in the case of Willowood Chemicals Pvt. Ltd. Vs. Union of India; 2018 (10) TMI 261 (“Willowood Chemicals”)which has upheld vires of Rule 117 of CGST Rules, 2017 inferring that the present set of Petitioners are not assailing vires of Rule 117 of CGST Rules, thus they are not entitled to any relief. On the question of incorrect filing of TRAN-I, it was contended that one opportunity was granted to registered persons to revise TRAN-I, however present Petitioners failed to file revise TRAN-I by last date prescribed under Rule 120A of CGST Rules, 2017.

Issues involved:

Whether the accumulated unutilized credits can be allowed to be carry forwarded in cases where TRAN-01 could not be filed or was wrongly filed by December 27, 2017.?

Held:

The Hon’ble Punjab & Haryana HC passed a very reasoned ruling in the matter of Civil Writ Petition No. 30949 of 2018 dated November 4th, 2019 observing as under:

  • GST is an electronic system based tax regime and most of the people in India are not very conversant with such electronic mechanisms. Therefore, the reasons as provided by the petitioners seem to be justifiable.
  • Accrued unutilized credits are a vested right of the petitioners and cannot be taken away as such by the Respondents just on account of procedural or technical grounds.
  • The court also relied on the judgements cited by the Petitioners in the case of Siddharth Enterprises Vs the Nodal Officer; 2019 (9) TMI 319 (“Siddharth Enterprises”) as well as Krish Authomotors Pvt. Ltd. Vs UOI and others; 2019 (9) TMI 817 (“Krish Authomotors”)
  • Various sections governing the transfer of accumulated unutilized credits from pre-GST regime were summarized from the conjoint reading of those provisions that:
    • A registered person to carry forward or avail credit of duty/tax paid on inputs and capital goods under old taxation statutes was required to file TRAN-I;
    • Certain restrictions are prescribed in proviso to Section 140(1) but restriction in terms of time frame is prescribed under Rule 117 (1) of the CGST Rules;
    • As per Rule 117 (1), TRAN-1 was required to be filed by due date which was declared 27.12.2017. There is no power under Rule 117 (1) to extend last date beyond 27.12.2017, however Rule 117(1A) was inserted w.e.f. 10.9.2018 by which last date was extended up to 31.03.2019.
    • The last date i.e. 27.12.2017 prescribed under Rule 117(1) was extended up to 31.03.2019 where TRAN-I could not be filed due to technical glitches. In other words, a registered person who is able to establish that he has failed to file TRAN-I by 27.12.2017 due to technical glitches, was entitled to file TRAN-I up to 31.03.2019.
    • There is no provision for filing of TRAN-1 at subsequent stage who failed to furnish evidence of attempt to file by 27.12.2017.
    • As per Rule 120A of the CGST Rules, one-time revision/ amendment is permitted within time prescribed under Rule 117, 118, 119 or 120 or within the time period as may be extended by the Commissioner. The Introduction of Rule 117(1A) & Rule 120A and absence of any time period prescribed under Section 140 of the Act indicate that there is no intention of government to deny carry forward of unutilized credit of duty/tax already paid in erstwhile GST regime on the ground of time limit.
  • The court fully agrees with findings of the Hon’ble Delhi HC in the case of Krish Authomotors and the Hon’ble Gujarat HC in the case of Siddharth Enterprises noticed hereinabove and find no reason to take any contrary view.
  • The court was not in agreement with the judgment cited by the Revenue i.e. the Hon’ble Gujrat High Court Judgment in the case of Willowood Chemicals as the Gujarat HC in subsequent judgments & Delhi HC in a number of judgments thereafter have permitted petitioners (therein) to file TRAN-I Forms even after the last stipulated date.
  • The Court also observed that the Sub Rule (1A) added/inserted to Rule 117 w.e.f. 10.09.2018 has not been noticed by the Hon’ble Gujarat HC in the judgment referred by the Revenue in the case of Willowood Chemicals which goes to the roots of findings recorded by the Hon’ble Gujrat High Court. Thus, all the petitions deserve to succeed.

Conclusively, the Hon’ble Punjab & Haryana HC directed the respondents to permit the petitioners to file or revise where already filed incorrect TRAN-1 either electronically or manually statutory Form(s) TRAN-1 on or before 30th November 2019. The Respondents are at liberty to verify genuineness of claim of Petitioners but nobody shall be denied carrying forward legitimate claim of CENVAT / ITC on the ground of non-filing of TRAN-I by December 27, 2017.

Citation: TS-942-HC-2019

Our Comments:

This judgement is in line with plenty of judgements passed by various High Courts in the recent last months and helps the taxpayers to access their vested rights lying in accumulated unutilized credits in the pre-GST regime.

Relevant Provisions:

Section 16 of the CGST Act, 2017 : Eligibility and Conditions for taking input tax credit

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods or services or both.

Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services––

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.

(c) subject to the provisions of section 41 or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed.

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.

Section 140 of the CGST Act, 2017: Transitional arrangements for input tax credit

(1) 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 of eligible duties 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:

Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:-

(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.

(2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Explanation.––For the purposes of this sub-section, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.

(3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:––

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said registered person is eligible for input tax credit on such inputs under this Act;

(iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;

(iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and

(v) the supplier of services is not eligible for any abatement under this Act:

Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.

(4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944.) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, (32 of 1994) but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,-

(a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and

(b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).

(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:

Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:

Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.

(6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:––

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said registered person is not paying tax under section 10;

(iii) the said registered person is eligible for input tax credit on such inputs under this Act;

(iv) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and

(v) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.

(7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.

(8) Where a registered person having centralized registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier:

Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act:

Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralized registration was obtained under the existing law.

(9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.

(10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.

Explanation 1.-For the purposes of sub-sections (1), (3), (4) and (6), the expression “eligible duties” means––

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957.);

(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975.);

(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975(51 of 1975.);

(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and

(vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001) ;

in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.

Explanation 2.-For the purposes of sub-sections (1) and (5), the expression “eligible duties and taxes” means––

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);

(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975; (51 of 1975)

(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975; (51 of 1975)

(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985; (5 of 1986.)

(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985; (5 of 1986.) and

(vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001; (14 of 2001) and

(viii) the service tax leviable under section 66B of the Finance Act, 1994, (32 of 1994.)

in respect of inputs and input services received on or after the appointed day.

Explanation 3.- For removal of doubts, it is hereby clarified that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975)

Section 142 of the CGST Act, 2017: Miscellaneous Transitional Provisions

 (3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944: (1 of 1944.)

Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:

Provided further that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.

Rule 117 of the CGST Rules, 2017: 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 the CENVAT Credit Rules, 2004.

(1A) 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.

(2) Every declaration under sub-rule (1) shall-

(a) in the case of a claim under sub-section (2) of section 140, specify separately the following particulars in respect of every item of capital goods as on the appointed day

(i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and

(ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day;

(b) in the case of a claim under sub-section (3) or clause (b) of sub-section (4) or sub-section (6) or sub-section (8) of section 140, specify separately the details of stock held on the appointed day;

(c) in the case of a claim under sub-section (5) of section 140, furnish the following details, namely:-

(i) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law;

(ii) the description and value of the goods or services;

(iii) the quantity in case of goods and the unit or unit quantity code thereof;

(iv) the amount of eligible taxes and duties or, as the case may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services; and

(v) the date on which the receipt of goods or services is entered in the books of account of the recipient.

(3) The amount of credit specified in the application in FORM GST TRAN-1 shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal.

(4) (a) (i) A registered person who was not registered under the existing law shall, in accordance with the proviso to sub-section (3) of section 140, be allowed to avail of input tax credit on goods (on which the duty of central excise or, as the case may be, additional duties of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975, is leviable) held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty.

(ii) The input tax credit referred to in sub-clause (i) shall be allowed at the rate of sixty per cent. on such goods which attract central tax at the rate of nine per cent. or more and forty per cent. for other goods of the central tax applicable on supply of such goods after the appointed date and shall be credited after the central tax payable on such supply has been paid:

Provided that where integrated tax is paid on such goods, the amount of credit shall be allowed at the rate of thirty per cent. and twenty per cent. respectively of the said tax;

(iii) The scheme shall be available for six tax periods from the appointed date.

(b) The credit of central tax shall be availed subject to satisfying the following conditions, namely:-

(i) such goods were not unconditionally exempt from the whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule;

(ii) the document for procurement of such goods is available with the registered person;

(iii) The registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2), submits a statement in FORM GST TRAN 2 by 31st March 2018, or within such period as extended by the Commissioner, on the recommendations of the Council, for each of the six tax periods during which the scheme is in operation indicating therein, the details of supplies of such goods effected during the tax period;

Provided that the registered persons filing the declaration in FORM GST TRAN-1 in accordance with sub-rule (1A), may submit the statement in FORM GST TRAN-2 by 31st January 2020

(iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal; and

(v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person.

Rule 120A of the CGST Rules, 2017 : Revision of declaration in FORM GST TRAN-1

Every registered person who has submitted a declaration electronically in FORM GST TRAN-1 within the time period specified in rule 117, rule 118, rule 119 and rule 120 may revise such declaration once and submit the revised declaration in FORM GST TRAN-1 electronically on the common portal within the time period specified in the said rules or such further period as may be extended by the Commissioner in this behalf.