Facts of the Case

The petitioner, Anand Oil Industries, represented by its proprietrix Smt. Noby Leela, approached the High Court of Kerala in connection with the availment of Transitional Credit while migrating from the pre-GST indirect tax regime to the Goods and Services Tax regime.

The dispute concerned the petitioner’s inability to avail eligible Transitional Credit through the prescribed GST mechanism. The materials forming part of the writ petition included the petitioner’s GST registration certificate, an application for revision of VAT return, a revised KVAT monthly return for June 2017, representations seeking another opportunity to file TRAN-1, communications rejecting such request, an order concerning the KVAT refund application, calculation of eligible Transitional Credit and Circular No. 39/13/2018-GST dated 3 April 2018.

The petitioner sought relief in relation to the opportunity to claim Transitional Credit during migration to GST.

When the writ petition came up before the High Court, it was undisputed that the issue raised in the petition had been completely addressed by the Supreme Court in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912.

Issues Involved

The principal issues arising in the matter were:

  1. Whether the petitioner could be granted an opportunity to file or revise the prescribed declaration for availing Transitional Credit under the GST regime.
  2. Whether taxpayers who faced difficulties while filing or revising TRAN-1 and TRAN-2 could avail the benefit of the directions issued by the Supreme Court in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another.
  3. Whether the Supreme Court’s directions permitting aggrieved registered assessees to file or revise the relevant Transitional Credit forms would apply to the petitioner’s case.
  4. Whether such opportunity was available irrespective of whether the taxpayer had earlier filed a writ petition before a High Court or whether the taxpayer’s case had been considered by the Information Technology Grievance Redressal Committee (ITGRC).

Petitioner’s Arguments

The petitioner’s case was fundamentally based on the grievance concerning availment of eligible Transitional Credit during migration to the GST regime.

The petitioner had sought another opportunity for filing TRAN-1 and had placed on record representations made for such opportunity. The petitioner also relied upon the relevant supporting materials, including the revised KVAT monthly return for June 2017 and the calculation of eligible Transitional Credit.

The petitioner’s grievance was that the benefit of eligible Transitional Credit should not be denied merely because the prescribed declaration could not be filed or appropriately dealt with during the migration to the GST system.

In view of the subsequent Supreme Court decision in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, the controversy concerning reopening of the GST portal for filing or revising TRAN-1 and TRAN-2 stood addressed.

Respondents’ Arguments / Position

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 & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912.

Accordingly, the matter did not require an independent adjudication contrary to or beyond the framework already laid down by the Supreme Court. The rights of the petitioner and the corresponding verification process were required to be governed by the directions issued in the Filco Trade Centre case.

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 & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912.

The High Court referred to the directions issued by the Supreme Court on 22 July 2022 in the Filco Trade Centre matter and noted the following framework:

  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 two months, from 1 September 2022 to 31 October 2022.
  2. Opportunity to All Aggrieved Registered Assessees: 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.
  3. ITGRC Decision Not a Bar: The opportunity was also available irrespective of whether the taxpayer’s case had been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  4. GSTN to Ensure Glitch-Free Portal: GSTN was required to ensure that there were no technical glitches during the permitted period.
  5. Verification by Proper Officers: The concerned officers were granted 90 days thereafter to verify the correctness and genuineness of the Transitional Credit claim and to pass appropriate orders on merits.
  6. Reasonable Opportunity: Before passing appropriate orders, the concerned taxpayer was required to be granted an appropriate and reasonable opportunity.
  7. Credit to Electronic Credit Ledger: Transitional Credit allowed after verification was required to be reflected in the Electronic Credit Ledger.
  8. GST Council Guidelines: If required, the GST Council could issue appropriate guidelines to field formations for scrutiny of Transitional Credit claims.

The Kerala High Court held that the aforesaid directions of the Supreme Court would apply to the case of Anand Oil Industries as well.

Accordingly, the writ petition was disposed of on those terms.

Important Clarification

The judgment is significant because the High Court did not grant Transitional Credit automatically merely on the basis of the taxpayer’s claim.

The relief consisted of applying the Supreme Court-mandated mechanism under which an aggrieved registered assessee could file or revise the relevant TRAN-1 or TRAN-2 form. Thereafter, the competent authorities retained the power and duty to verify the veracity of the Transitional Credit claim and pass an appropriate order on merits after providing a reasonable opportunity to the taxpayer.

Therefore, the judgment should not be interpreted as automatic approval of the quantum of Transitional Credit claimed by the petitioner. The admissibility and correctness of the credit remained subject to verification by the competent authorities.

Another important clarification is that, under the Supreme Court directions applied by the Kerala High Court, the opportunity was not restricted only to taxpayers who had already approached a High Court. It extended to aggrieved registered assessees irrespective of whether they had filed writ petitions and irrespective of whether their cases had been decided by the ITGRC.

Sections / Legal Provisions Involved

Section 140 of the Central Goods and Services Tax Act, 2017 — Transitional arrangements for Input Tax Credit and carry-forward of eligible credit from the pre-GST regime into the GST regime, subject to applicable statutory conditions.

Corresponding Transitional Credit Provisions under the State GST Framework — Relevant to migration of eligible credit into the GST regime.

FORM GST TRAN-1 — Declaration mechanism associated with specified Transitional Credit claims during migration to GST.

FORM GST TRAN-2 — Prescribed mechanism relevant to specified categories of Transitional Credit claims.

Electronic Credit Ledger Provisions — Allowed Transitional Credit, after due verification, was required to be reflected in the taxpayer’s Electronic Credit Ledger in accordance with the Supreme Court directions.

Circular No. 39/13/2018-GST dated 3 April 2018 — The circular formed part of the petitioner’s exhibits and concerned the grievance-redressal framework relating to technical difficulties faced by taxpayers under GST.

Link to Download the Order-https://mytaxexpert.co.in/uploads/1783491166_1436compressed.pdf

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