Reopening of TRAN-I II with effect from 01st October 2022

Introduction of controversy:

GST was introduced in India with effect from 01st July 2017 as historic reform and with the introduction of same all erstwhile taxes such as VAT, Service Tax, and Excise had been merged into GST. Now the pertinent question is what will happen to the tax credit of existing taxes which is outstanding in the books / returns.

The relevant provision for transition of input tax credit are section 140 to 142 which are dealing with the conditions, circumstances which are relevant for transition of input tax credit.

The original time limit as per section 140 read with rule 117 was within 90 days from appointed day which was extended from time to time. The GSTN portal was not working properly in the initial days and many of the persons deprived of filing form GST TRAN-I and GST TRAN-II hence input tax credit was denied to them. This gave birth to huge litigation in the form of Writ petitions in various parts of Country. These petitions mainly filed on the ground that rule 117 is arbitrary, unconstitutional and violative of article 14 to the extent it imposes a time limit for carrying forward the CENVAT credit to the GST regime.

Landmark judgment of Hon’ble Delhi High Court- Brand Equity Treaties Ltd.

On introduction of GST, in case input tax credit was not availed within period prescribed under rule 117, in absence of any specific provisions in this regard under Act, it is to be held that in terms of residuary provisions of Limitation Act, period of three years should be guiding principle and, thus, a period of three years from appointed date would be maximum period for availing such input tax credit.

Courts cannot 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. Thus, the phrase “technical difficulty” is being given a restrictive meaning which is supplied by the GST system logs. Conscious of the circumstances that are prevailing, we feel 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 three years from the date of commencement of limitation under the Limitation Act, 1963.

Lastly, we also find merit in the submissions of the petitioners that rule 117, whereby the mechanism for availing the credits has been prescribed, is procedural and directory, and cannot affect the substantive right of the registered taxpayer to avail of the existing/accrued and vested CENVAT credit. The procedure could not run contrary to the substantive right vested under sub-section (1) of section 140. While interpreting order VIII rule 1 CPC, the Supreme Court has observed that the time limit for filing written statement is directory in nature and not mandatory, and that “procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice” [Ref: Salem Advocates Bar Association v. Union of India AIR 2003 SC 189]. Reference may also be made to CCE v. Home Ashok Leyland [2007] 7 STT 354 (SC), wherein it was observed that the rule 57E of the Central Excise Rules, 1944 was a procedural provision, which provides procedure for adjustment of MODVAT credit available to the taxpayer and, hence, the right available under the substantive provision cannot be deprived for non-compliance with the procedural provision.

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.

Conclusion:

With the order of Hon’ble Supreme Court (Union of India vs. Filco Trade Centre Pvt. Ltd. , SLP(C) No. 32709-32710/2018) GSTN is directed to open portal from 01-10-2022 to 30-11-2022 for fresh filing /revision of already filed TRAN-I and TRAN-II. This is a one-time opportunity given to all taxpayers who either could not file TRAN-I II one time due to any reason or filed an incorrect TRAN-I II. The claims filed by taxpayers shall be examined by jurisdictional officers within reasonable time period as per applicable statute. It is again categorically stated that those who’s TRAN-I II form was rejected by proper Officers may file appeal u/s 107 of the Act and no need to file a fresh form as per current guidelines by Hon’ble Apex Court.