The Madras High Court held that in case the department is unable to permit the filing of TRAN-1 belatedly, they have to credit the corresponding amount in the electronic cash register provided that the credit remained unutilized on the cut-off date.
The single judge bench of Justice C. Saravanan observed that since the input tax credit is equivalent to cash meant to be used for discharging the tax liability, the transition of the input tax credit cannot be restricted or denied merely because there were technical difficulties.
The petitioner/assessee has challenged the communication by the department that the assessee neither attempted to file a Tran-1 return nor came across any technical glitches at the time of filing the TRAN-1 return at the GSTN common portal. Hence, the assessee was informed that, as per the minutes of the 32nd Council Meeting regarding TRAN-1 Credit, the assessee’s request for the enabling of the filing of GST TRAN-1 does not merit consideration.
The petitioner is in the business of manufacturing explosives, and there was a huge fire accident that resulted in a few fatalities among the workers of the petitioner. Under these circumstances, the factory was closed for a period of about two years and, after several rounds of litigation, the petitioner was able to re-open the factory only in August 2018, by which time the Central Excise Act had been replaced and substituted by the Central Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Act, 2017.
The petitioner was required to file a TRAN-1 Application in terms of Rule 117 of the Central Goods and Services Tax Rules, 2017. As an assessee under the Central Excise Act, 1944; the Finance Act, 1994; and as an assessee/dealer under the Tamil Nadu Value Added Tax Act, 2006, the petitioner was required to file Form GST TRAN-1 on the common web portal in terms of Rule 117 of the Central Goods and Services Tax Rules, 2017 read with Section 140 of the Central Goods and Services Tax Act, 2017. The last date for filing a return was December 27, 2017. However, the petitioner was unable to file Form GST TRAN-1 in time as the factory had been closed and was under lock and seal.
The petitioner submitted that a reprieve was given only to those assesses who faced technical problems after loading the information; therefore, Rule 117 of the Central Goods and Services Tax Rules, 2017 was amended by Notification No.48/2018-Central Tax, dated September 10, 2018, with effect from September 10, 2018. The department rejected the request of the petitioner, stating that the petitioner is not entitled to avail the facility under sub-rule (1A) of Rule 117 of the Central Goods and Services Tax Rules, 2017.
The department contended that the benefit of sub-rule (1A) of Rule 117 of the CGST Rules is available only to those who filed returns on Form TRAN-1 on time and not to those, like the petitioner, who did not file Form TRAN-1 on time. Therefore, in the absence of an enabling provision, the benefit of transitional credit cannot be allowed to the petitioner in the year 2020.
The court disposed of the writ petition, by directing the respondents to verify whether the petitioner had any input tax credit on the date of the accident. The monthly returns, which would have been filed for the months of October and November 2016, would show the quantum of unutilized input tax credit on input service tax and capital goods credit.
“If it existed on that day, I see no reason why such credit should not be allowed to the petitioner either by way of suitable credit entry in the electronic cash register of the petitioner or by way of a cash refund to the petitioner. I therefore direct the respondents to verify the same and allow such credit which remained unutilized on the date of accident in the regular returns filed by the petitioner,” the court said.
Case Title: M/s. Vetrivel Explosives Pvt. Ltd. Versus Union of India
Source: livelaw.in
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