Facts of the case
Brand Equity Treaties Ltd. ‘The petitioners’ is in the business of advertising. In this case, petitioner claims that in terms of the latest service tax return from April, 2017 to June, 2017, it had accumulated CENVAT credit balance of INR 72,80,529/-. Petitioner forms part of a bigger conglomerate and the tax operations are undertaken at group level. Owing to dependence at group level in the context of tax compliances and multiple entities involved, petitioner was unable to file the declaration in Form TRAN-1 within the prescribed due date. As a result, it was deprived of taking forward the accumulated credit in the GST regime.
The new regime entitled the taxpayers to carry forward the amount of CENVAT credit accrued till 30 June 2017, i.e. the last day before the introduction of GST, in the manner prescribed by filing a declaration in form GST TRAN-1 (TRAN-1). The CGST Rules prescribed a time limit of 90 days for such transition, which was extended only in case of technical glitches. Several taxpayers, including the Petitioner (in the present case), could not file the TRAN-1 declaration and did not fall within the category of system fault or technical glitches. The Petitioner approached the Delhi High Court under its writ jurisdiction to impugn the arbitrary time limit imposed under Rule 117 for carrying forward the transitional credits due to missing the deadline prescribed under Rule 117.
Judgement by the High Court
Rule 117 as being directory in nature, insofar as it prescribes the time-limit for transitioning of credit and therefore, the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. This however, does not mean that the availing of CENVAT credit can be in perpetuity. 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.
Accordingly, since all the Petitioners have filed or attempted to file Form TRAN-1 within the aforesaid period of three years they shall be entitled to avail the Input Tax Credit accruing to them. They are thus, permitted to file relevant TRAN-1 Form on or before 30.06.2020. Respondents are directed to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually. Respondents shall thereafter process the claims in accordance with law. We are also of the opinion that other taxpayers who are similarly situated should also be entitled to avail the benefit of this judgment. Therefore, Respondents are directed to publicise this judgment widely including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 till date are permitted to do so on or before 30.06.2020.
We may further add that the credit standing in favour of an assessee is “property” and the assesse could not be deprived of the said property save by authority of law in terms of Article 300 (A) of the Constitution of India. There is no law brought to our notice which extinguishes the said right to property of the assessee in the credit standing in their favour.
This judgement as passed by the Hon’ble High Court will be beneficial to all the taxpayers whose credit amounts were not carried forward and at this point of time since taxpayers are struggling from the economic crisis on account of Covid-19 lockdown and are facing liquidity crunch. While the Court has extended the benefit of this judgement to all taxpayers facing TRAN-1 filing issues, its availability to those who are registered outside Delhi or even those whose plea were rejected in past by jurisdictional High Courts.