Right to avail Transitional Credit not affected due to amendment prescribing ITC time limit

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In Micromax Informatics Ltd vs. Union of India & Ors. [W.P.(C) 8026/2021 & CM 24992/2021 dated September 02, 2021], the Micromax Informatics Ltd (“the Petitioner”) who is seeking the benefit of Transitional Credit has filed the current petition by challenging the retrospective amendment brought forth vide Notification No. 43/2020 – Central Tax dated May 16, 2020 which notified changes made vide Section 128 of the Finance Act, 2020 in the Section 140 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) by prescribing time limit for taking the Input Tax Credit (“ITC”).

Section 140 of the CGST Act mentions provisions relating to Transitional Arrangements from Central Value Added Tax (“CENVAT”) regime to the current regime of Goods and Services Tax (“GST”) to avail ITC.  A detailed judgment in WP(C)No.196/2019 dated May 5, 2020, the petition of which was filed by the Petitioner in the current petition held Rule 117 of Central Goods and Services Tax Rules, 2017 (“CGST Rules”) which prescribes a time limit of 90 days to avail ITC which can be extended further for a period not exceeding 90 days- is directory in nature. A Special Leave Petition SLP (C) No.7425-7428/2020 against this judgment is pending before the Hon’ble Supreme Court on the ground of the judgment being negated by the amendment in Section 140 of the CGST Act.

The Petitioner relies on the judgment of SKH Sheet Metals Components vs. UOI [2020 (38) GSTL 592] wherein the Hon’ble Delhi High Court held that neither the CGST Act nor CGST Rules provides any consequence in case of non-compliance of Section 140 f the CGST Act as well as Rule 117 of the CGST Rules. Since there is no indication to that effect, the provisions are to be seen as directory and not mandatory.

The Hon’ble Delhi High Court in the current matter acknowledged the judgment of SKH Sheet Metals Components (supra) provided in support of the arguments by Petitioner by holding that this judgment covers the issue in hand.

Held, the amendment of Section 140 of the CGST Act does not affect the right of Petitioner to claim transitional credit and it would be unnecessary to deal with the Constitutional challenge to it. Further, noted the Petitioner is at the liberty to apply for Transitional Credit subject to the further order from the Hon’ble Supreme Court in SLP (C) No.7425-7428/2020 (supra).

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