Facts of the Case

The petitioner, Kerala Agencies, Kottarakkara, represented by its Managing Partner, Sri Abraham Thomas, approached the High Court of Kerala in relation to difficulties concerning the availment of Transitional Credit while migrating to the Goods and Services Tax regime.

The dispute arose in the context of the petitioner’s attempt to avail eligible transitional credit during migration from the pre-GST indirect tax regime to the GST framework.

The record of the writ petition included, among other documents:

  • A representation sent to the State Tax Officer dated 27.10.2018;
  • Purchase bills dated 20.06.2017;
  • Circular No. 39/13/2018-GST dated 03.04.2018;
  • An earlier judgment of the High Court of Kerala in W.P.(C) No. 41377 of 2018 dated 01.02.2019;
  • Clarifications sought by the authority dated 14.03.2019;
  • Reply filed by the petitioner dated 27.03.2019;
  • Order of the first respondent dated 30.03.2019;
  • Application submitted to the State GST Nodal Officer dated 21.02.2019; and
  • Other supporting documents concerning the transitional credit dispute and the IT Grievance Redressal Mechanism.

When the writ petition came up before the High Court, it was not disputed that the issue raised by the petitioner stood completely addressed by the judgment of the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

Issues Involved

The principal issues involved in the matter were:

  1. Whether a registered taxpayer facing difficulty in availing Transitional Credit during migration to the GST regime should be permitted to file or revise the relevant transitional credit declaration.
  2. Whether the petitioner could obtain the benefit of the directions issued by the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr.
  3. Whether the facility for filing or revising FORM GST TRAN-1 and FORM GST TRAN-2 should extend to aggrieved registered assessees irrespective of:
    • whether they had earlier filed a writ petition before a High Court; or
    • whether their cases had already been considered or decided by the Information Technology Grievance Redressal Committee (ITGRC).
  4. Whether the petitioner’s transitional credit claim should be verified on merits by the competent officers after filing or revision of the relevant forms.

Petitioner’s Arguments

The petitioner’s case arose from the inability or difficulty in effectively availing Transitional Credit while migrating to the GST regime.

The petitioner relied upon the circumstances reflected in its representations, purchase documents, correspondence with the authorities, proceedings before the nodal mechanism, and the framework created under Circular No. 39/13/2018-GST.

The petitioner’s grievance was essentially connected with securing the benefit of eligible Transitional Credit under the GST migration framework.

By the time the writ petition was taken up for consideration, the Supreme Court had already issued comprehensive directions in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., dealing with difficulties faced by taxpayers in filing or revising declarations and availing Transitional Credit.

Accordingly, the petitioner’s case was required to be governed by those Supreme Court directions.

Respondents’ Arguments / Position

The respondents included the Joint Commissioner and Principal Nodal Officer, the State Tax Officer, the State GST Nodal Officer, the Central GST Nodal Officer, the Goods and Services Tax Network, and the Goods and Services Tax Council.

Before the High Court, it was not disputed that the issue raised in the writ petition stood completely addressed by the Supreme Court judgment in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

Therefore, the controversy did not require an independent determination inconsistent with the directions already issued by the Supreme Court.

Court Order / Findings

The High Court observed that the writ petition related to the issue of availing Transitional Credit while migrating to the GST regime.

The Court specifically recorded that it was not in dispute that the issue raised in the writ petition stood completely addressed by the Supreme Court judgment in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

The High Court referred to the directions issued by the Supreme Court in its order dated 22.07.2022 in the Filco Trade Centre case.

The Supreme Court directions, as applied by the High Court, provided in substance as follows:

  1. Opening of GST Common Portal:
    GSTN was directed to open the common portal for filing the concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for a period of two months, from 01.09.2022 to 31.10.2022.
  2. Benefit to Any Aggrieved Registered Assessee:
    Any aggrieved registered assessee was permitted to file the relevant form or revise an already filed form irrespective of:
    • whether the taxpayer had filed a writ petition before a High Court; or
    • whether the taxpayer’s case had been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  3. GSTN to Prevent Technical Glitches:
    GSTN was required to ensure that there were no technical glitches during the relevant period.
  4. Verification by Proper Officers:
    The concerned officers were given 90 days thereafter to verify the veracity of the Transitional Credit claim and pass appropriate orders on merits after granting a reasonable opportunity to the concerned parties.
  5. Reflection in Electronic Credit Ledger:
    The Transitional Credit allowed after verification was to be reflected in the taxpayer’s Electronic Credit Ledger.
  6. Guidelines by GST Council:
    If required, the GST Council could issue appropriate guidelines to field formations for scrutiny of Transitional Credit claims.

Final Decision

The High Court held that the directions issued by the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr. would apply to the petitioner’s case as well.

Accordingly, the writ petition was disposed of on the terms of the Supreme Court directions in Filco Trade Centre.

Important Clarification

A significant clarification emerging from the judgment is that the relief concerning filing or revision of TRAN-1 and TRAN-2 was not confined only to taxpayers who had already approached a High Court.

The Supreme Court directions, applied by the Kerala High Court, extended to any aggrieved registered assessee, irrespective of:

  • whether a writ petition had previously been filed before a High Court; or
  • whether the taxpayer’s case had been decided by the ITGRC.

However, the opening of the portal or permission to file or revise the transitional forms did not amount to automatic acceptance of the Transitional Credit claim.

The concerned officers retained the authority and obligation to:

  • verify the veracity of the claim;
  • examine the claim on merits;
  • grant an appropriate and reasonable opportunity to the concerned party; and
  • pass appropriate orders thereafter.

Only the Transitional Credit found allowable after such verification was to be reflected in the Electronic Credit Ledger.

Relevant Sections / Legal Provisions Involved

The matter concerns the statutory framework governing transitional input tax credit under the Goods and Services Tax regime, particularly:

  • Section 140 of the Central Goods and Services Tax Act, 2017 – Transitional arrangements for input tax credit.
  • Section 140 of the Kerala State Goods and Services Tax Act, 2017 – Transitional credit provisions under the State GST framework, as applicable.
  • Rule 117 of the Central Goods and Services Tax Rules, 2017 – Procedure and time limit relating to submission of declarations for transitional credit.
  • FORM GST TRAN-1 – Declaration for carrying forward eligible transitional credit into the GST regime.
  • FORM GST TRAN-2 – Declaration concerning transitional credit in applicable cases.
  • Circular No. 39/13/2018-GST dated 03.04.2018 – IT Grievance Redressal Mechanism relating to technical difficulties faced by taxpayers on the GST portal.

Link to Download the Order-https://mytaxexpert.co.in/uploads/1783490029_1432compressed.pdf

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