Super India Paper Product Vs Union of India (Delhi High Court)
1. It is seen that since there is no effective mechanism provided for the revision/rectification of TRAN-1 Form, the Petitioners were forced to approach this Court under Article 226 of the Constitution.
2. There is no dispute as to the fact that the Petitioners filed the TRAN-1 Form within the prescribed time, however, they were precluded from claiming their transitional credit on account of inadvertent error on their part due to filling in of wrong details or omissions.
3. In the opinion of this Court, a genuine mistake should not result in the Petitioners’ losing out on their accumulated credit which is protected by Article 300A of the Constitution.
4. The lack of an effective revisional mechanism would leave the taxpayers remediless, which, to our minds, could not be the intention of the law, and moreover, no provision was brought to our notice which extinguishes the said right of the taxpayer. For such reasons, the present set of cases are also allowed.
5. Respondents are directed to either re-open the online portal so as to enable the Petitioners to file TRAN-1 Form electronically, or to accept the same manually on or before 30th June, 2021. The Respondents shall process the Petitioners’ claims in accordance with law once the TRAN-1 Form is filed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The common thread in this present batch of petitions is that they pertain to transition of CENVAT credit from the erstwhile indirect tax regime to the present Goods and Services Tax (‘GST’) system by virtue of a right specifically conferred on the taxpayers for smooth migration into the new indirect tax regime.
I. BRIEF BACKGROUND:
2. Chapter XX of the CGST Act, 2017 (hereinafter “the Act”), which deals with transitional provisions, allows for transition of unutilized CENVAT credit available under the previous regime. The statute provides for filing form GST TRAN-1 (hereinafter “TRAN-1 Form”) by furnishing details of amount of CENVAT credit sought to be carried forward in the return, relating to the period ending with the day immediately preceding the appointed date, i.e., 1st July, 2017. The last extended date for filing the TRAN-1 Form, was prescribed as 27th December,
3. Unfortunately, the transitionary mechanism was not smooth and easy for numerous taxpayers. Several factors, including technical glitches and shortcomings in the online system, prevented or obstructed them from filing the TRAN-1 Form by the above deadline. Many taxpayers complained of poor/low internet bandwidth and cited various other technological hindrances while accessing the online portal closer to the deadline, that hindered their attempts. After the cut-off date, the filing was blocked on the online
4. Taxpayers narrating their grievances petitioned this Court and several other High Courts in the country seeking directions to Respondent to re- open the portal. Concurrently, the Government took cognizance of the complaints and acknowledged the genuine problems faced by the taxpayers. Resultantly, a redressal mechanism to address the IT-related glitches was set up, being the IT Grievance Redressal Committee (‘ITGRC’). The necessary amendments in the CGST Rules, 2017 (hereinafter “the Rules”) were also made by incorporating Rules 117(1A) and 120A, and correspondingly, the deadline for filing TRAN-1 Form was extended.
5. While this provided an opportunity to taxpayers to file the TRAN-1 Form, the benefit was confined only to a specific class of cases where taxpayers could not submit the declaration before the due date purely on account of technical difficulties on the common portal and in respect of whom the GST Council had made a recommendation for such extension. Taxpayers had to furnish digital evidence before the Nodal Officer of the ITGRC showing their attempt to file the form before the deadline, by way of screenshots, correspondence
6. Hence, all the taxpayers could not avail the benefit of this relaxation, and this batch of Petitioners broadly fall in that category. Few of them have digital evidence to support their case but raise the grievance that Respondents have dealt with them in an unfair and arbitrary manner by unreasonably rejecting the proof adduced by them. Some of the taxpayers do not possess evidence like the screenshots to support their case but contend that digital evidence alone should not be the yardstick to test the genuineness of their claims. Others acknowledge that they committed mistakes while filing the TRAN-1 Form as they were not well-versed with the online system and found it cumbersome and complicated and make a plea that they should be afforded another opportunity to claim their legally vested right.
The view taken by this Court and other High Courts
7. The difficulties faced by the taxpayers while filing the online TRAN-1 Form, occurring largely on account of the technical glitches, have been noted in a plethora of decisions by both this Court as well as other High Courts. It has been acknowledged that the unutilized input tax credit is a vested right of the taxpayers under Article 300A of the Constitution of India, 1950 that cannot be taken away on account of technical grounds.1 It has also been appreciated that, since GST is an electronic-based tax regime, a large segment of the country would need time to be conversant with the system and thus deserve a second chance. It is recognized that many taxpayers do not possess the know-how or the means to file electronic forms, and further considering that the transition happened rather rapidly, they should be given the benefit of the doubt. As on date, there are numerous decisions dealing with varied challenges faced by the taxpayers in meeting the deadline in filing the TRAN-1 Form. In all such situations, this Court has consistently directed the GST authorities to reopen the portal or to allow manual filing of the TRAN-1 Form.2 Some such judgments have been assailed by the Respondents before the Supreme Court, and from amongst them, a few have been rejected while others are pending.3 We are also aware that some High Courts have taken a view that is different from the one taken by this Court, but nonetheless, this Court has consistently upheld the right of taxpayers to claim transition of CENVAT credit.4
8. We must stress that shortcomings faced in the online system during the trial-and-error phase of GST is not the sole ground for allowing the petitions in favour of the taxpayers. Several courts, including this Court, have delved into the rationality/validity of the statutory provisions. Recently, in a batch of petitions, this Court had the occasion to deal with the legal effect of the time period prescribed time under Rule 117 of the Rules for filing the TRAN-1 Form i.e., whether the said provision was directory or mandatory, and concluded that the period was merely directory.5 In the said decision, the Court also delved into the irrationality of Rule 117(1A), since it applied to only one class of persons who faced technical difficulties on the common portal, without defining the said concept anywhere in the Act or the Rules framed thereunder. It observed that the benefit of the decision should be available to all the taxpayers and directed the Revenue to publicize the judgment on their website and by other means so that taxpayers who were unable to file the TRAN-1 Form within the specified date but were otherwise within the period of three years, would be able to take benefit of the judgment and file the requisite TRAN-1 Form. However, the Respondents have assailed the aforesaid decision, and presently, by virtue of the order of the Supreme Court dated 19th June, 2020, the operation of the aforesaid judgment is stayed.
9. We would be remiss to not mention a legislative change which has been brought about, as By virtue of the Finance Act, 2020, an amendment has been introduced in the relevant provisions, with retrospective effect from 1st July, 2017, amending Section 140 of the Act by inserting the words “within such time”. On the strength of this amendment, while dealing with another case relating to filing of TRAN-1 Forms, being SKH Sheet Metal Components v. Union of India6, the Revenue sought to contend that the ratio of the judgment of Brand Equity (supra) ceases to apply. However, the said argument was rejected. We must also note that when we rendered the decision in SKH Sheet Metal (supra), the SLP filed by the Revenue against the Brand Equity (supra) had not been taken up by the Supreme Court and the stay order referred had not been passed. In this background, when these batch of petitions came up for hearing, this Court, taking note of the pending challenge in Brand Equity (supra), adjourned the hearing to await the outcome of the afore-noted matter.
10. Later, counsel for the Petitioners urged that since the facts arising in the present batch of matters have a different hue, the present petitions may be adjudicated upon, notwithstanding the pending challenge in Brand Equity (supra). Accordingly, we proceeded to hear the arguments. When the hearing commenced on 14th December, 2020, we noticed that there were multiple issues regarding the TRAN-1 Form and asked the counsels to file a summary note so that we could club the present petitions into smaller batches on the basis of commonality of issues involved
11. In this backdrop, we have categorized the petitions into four batches. The first three batches are being dealt with in the present judgment, and the remainder of the cases are being decided by separate judgments. For the sake of convenience, the three batches dealt with in the present judgment are tabulated below:
