Transitional ITC – A never ending saga
♣ Disallowing ITC would lead to violation of Article 300A of the Constitution of India.
♣ Rules have acted far beyond the scope of the act and hence such arbitrary timelines implied by the rules should be set aside and the registered person should be allowed to carry forward transitional ITC.
♣ GST is in “trial & error” phase and FORM GST TRAN-1 could not be uploaded due to technical glitches in GST portal for which the registered person should not be punished.
♣ Procedural timelines for TRAN-1 are directory and not mandatory
2. Meanwhile, the argument that rules have acted far beyond the scope of act was corrected with retrospective amendment vide Finance Act, 2020 under the GST Act, 2017 w.e.f. 01.07.2017 so as to facilitate relevant rules, determine timelines for filing TRAN-1.
3. After retrospective amendment, the instant question & the validity of the judgment was once again tested before courts in the case of SKH Sheet Metal Components vs. UOI wherein the courts allowing ITC made following observation:
“19………the said amendment came into force after the date of the decision in Brand Equity (Supra). The said amendment was also not cited before the Court to contest the petitions. With that being said, since, there is no specific challenge to the amendment introduced by Section 128 of the Finance (Amendment) Act, 2020, we do not want to venture into legality of the said provision viz-a-viz the judgment of Brand Equity (Supra)”
4. Further, it observed that in spite of the amendment, it can be said without hesitation that the said decision is not entirely resting on the fact that statute [CGST Act] did not prescribe for any time limit for availing the transition of the input tax credit. There are several other grounds and reasons enumerated in the said decision and discussed hereinafter, that continue to apply with full rigour even today, regardless of amendment to Section 140 of the CGST Act. Thus, one can safely state that inspite of the retrospective amendment, all the previous judgments allowing TRAN-1 ITC will withstand.
5. To support the above mentioned contention, the Supreme Court dismissed the SLP of the department wherein the Punjab & Haryana High Court had held that nobody shall be denied to carry forward legitimate claim of CENVAT/ITC on the ground of non-filing of TRAN-1 by 27.12.2017.
6. From the above summary, it can be substantiated that the department is in no mood to compromise with the current rulings and are taking all possible legal routes to disallow the flow of transitional ITC to such persons. However, we are of the opinion that prima facie the issue is settled in favour of the assessee and those who have missed TRAN-1 ITC can claim the same by relying on ratio of the above mentioned judgments.
In case of any clarification/queries/feedback, please feel free to contact the undersign:
|CA. Kevin Shah||Adv. Deep Shah||CA. Rovin Kothari|
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