Introduction: The Kerala High Court recently addressed a crucial issue regarding the time limit for claiming transitional credit under the Goods and Services Tax (GST) Act. The petitioner, Malabar Cements Ltd., had filed a writ petition seeking to challenge the denial of transitional credit for inward supplies made before 01.07.2017. The court’s decision centered on the rejection of the petitioner’s application for extending the limitation period for claiming transitional credit beyond the prescribed time frame.
Detailed Analysis: Malabar Cements Ltd. sought transitional credit for input tax in respect of supplies made before the implementation of the GST Act on 01.07.2017. According to Section 140(5) of the GST Act, a registered person can claim transitional credit within thirty days, with a provision for an extension of up to sixty days, subject to the Commissioner’s order. However, the Commissioner can extend the period only on a sufficient cause being shown.
In this case, the petitioner filed the TRAN-1 return on 27.12.2017, after the initial thirty-day period had expired. Subsequently, the petitioner submitted an application for extending the limitation period, but it was filed more than five years after the TRAN-1 return. The Commissioner rejected the application, citing the delay and the absence of a reasonable cause.
The court, in its analysis, highlighted the provisions of Section 140(5) and emphasized that unless the Commissioner passes an order extending the limitation period, an assessee cannot claim transitional credit beyond thirty days. The rejection of the application after such a significant delay was considered justified.
Conclusion: The Kerala High Court, in dismissing the writ petition, held that the Commissioner did not commit any error of law or jurisdiction in rejecting the belated application for extending the limitation period for claiming transitional credit. The court urged the petitioner, if aggrieved by the merits of the rejection, to pursue statutory remedies available. Importantly, the period spent in prosecuting the writ petition would be excluded while calculating the period of limitation for filing an appeal against the rejection order.
This case underscores the importance of adhering to statutory timelines for claiming transitional credits under the GST regime and the significance of providing a reasonable cause for seeking an extension.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1. The present writ petition has been filed seeking quashing of Exhibits P-4 and P-5 orders passed by the 2nd and 3rd respondents respectively, whereby the petitioner’s claim for transitional credit in respect of inward supplies made before 01.07.2017 have been denied and the petitioner’s application for extending the limitation for claiming the transitional credit within the extended period of limitation of sixty days has been rejected by the 2nd respondent Commissioner vide Exhibit P-4 order.
2. After the GST Act came into force with effect from 01.07.2017, the input tax credit in respect of the inward supplies before 01.07.2017 could have been claimed under the provisions of GST Act within a period of thirty days and with the extended period of limitation of thirty days by the Commissioner as provided under Section 140 of the GST Act. Sub-section (5) of Section 140 of the GST Act reads as under;
(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, within such time and in such manner as may be prescribed, 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 subsection.”
3. Thus, from perusal of Sub-section (5) of Section 140 of the GST Act, it is evident that beyond the period of thirty days an assessee can claim the transitional credit of input tax within another thirty days on an order passed by the Commissioner. Unless the order is passed by the Commissioner extending the period of limitation up to sixty days or less than , an assessee cannot claim the input tax credit in respect of the inward supply taken before 01.07.2017. In the present case, the petitioner claimed input tax credit in his return after the initial period of thirty days expired, but without any order from the Commissioner extending the period of limitation beyond thirty days. He filed an application after five years for extending the time of limitation for claiming transitional credit. The Commissioner therefore, has rejected the application in Exhibit P-4 order stating as under;
“This refers to your application under Ref No.1, corrigendum under Ref. No.2 and letter under Ref. No.3 on the subject. Records show that the TRAN – 1 return is filed by the applicant on 27.12.2017. The application for extension as per the first proviso to Section 140 (5) should have been submitted within a reasonable time, i.e. before filing of TRAN-1 return. The application has been received in this office on 24.1.2023, more than five years of filing of TRAN – 1 return, for which no cause has been provided. Also, the application has ben filed consequent to finding of irregularity in the SSCA on Transitional Credits by the C & AG. As such, the application filed by you under Section 140 (5) of the CGST Act, 2017 is rejected.”
4. I do not find that the Commissioner has committed any error of law or jurisdiction in rejecting the application which has been filed belatedly after five years from the prescribed date. As the limitation period was not extended, the petitioner has been denied the benefit of transitional credit in respect of input tax vide Exhibit P-5 order in original dated 13.03.2023.
5. In view thereof, I do not find much substance to entertain this writ petition. However, if the petitioner is aggrieved by the merits of the order dated 13.03.2023 in Exhibit P-5, he may take recourse of statutory remedy, if any, available to him. So far as the question of limitation is concerned, the period spent in prosecuting this writ petition shall be excluded while calculating the period of limitation in filing the appeal against Exhibit P-5 order.
With the above view this writ petition is finally disposed of.