Facts of the Case

The writ petition concerned the petitioner’s claim for availing Transitional Credit while migrating to the Goods and Services Tax regime.

Anand Oil Industries, represented by its proprietrix, approached the Kerala High Court in relation to difficulties concerning the filing of FORM GST TRAN-1 and availing eligible transitional credit during migration to GST.

The record before the Court included the petitioner’s GST registration certificate, an application for revision of VAT return, revised KVAT monthly return for June 2017, representations seeking another opportunity to file TRAN-1, letters rejecting such requests, an order concerning a KVAT refund application, calculation of eligible transitional credit, and Circular No. 39/13/2018-GST dated 03 April 2018.

At the time of consideration of the writ petition, it was not disputed before the Kerala High Court that the issue raised in the petition stood completely addressed by the judgment of 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 involved were:

  1. Whether the petitioner could be granted an opportunity to file or revise the relevant declaration for availing transitional credit while migrating to the GST regime.
  2. Whether the directions issued by the Supreme Court in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another regarding reopening of the GST common portal for TRAN-1 and TRAN-2 would apply to the petitioner.
  3. Whether an aggrieved registered assessee could file the relevant transitional credit form or revise an already filed form irrespective of whether:
    • the taxpayer had earlier filed a writ petition before a High Court; or
    • the taxpayer’s case had been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  4. Whether the petitioner’s transitional credit claim was required to be verified on merits by the competent officers after providing a reasonable opportunity.

 Petitioner’s Arguments

The petitioner’s case, as reflected from the proceedings and documents placed before the Court, concerned the inability to avail eligible transitional credit during migration to the GST regime and the request for another opportunity to file TRAN-1.

The petitioner had made representations seeking another opportunity for filing TRAN-1. The materials forming part of the writ petition also included letters rejecting such requests and a calculation of the transitional credit claimed to be eligible.

In substance, the petitioner sought the benefit of an effective opportunity to claim transitional credit in accordance with law.

 Respondent’s Arguments

The judgment does not separately record any detailed substantive counter-arguments advanced by the respondents on the merits of the petitioner’s transitional credit entitlement.

Significantly, the Court expressly recorded that it was not in dispute before the Court 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 was governed by the directions already issued by the Supreme Court concerning filing and revision of TRAN-1 and TRAN-2 for availing transitional credit.

 Court Order / Findings

The Kerala High Court noted that the Supreme Court, considering the difficulties faced by taxpayers in filing or revising declarations and availing transitional credit while migrating to the GST regime, had issued directions in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another.

The Supreme Court directions, as reproduced and applied by the Kerala High Court, were substantially 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 two months, from 01 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; or
    • whether the taxpayer’s case had been decided by the ITGRC.
  3. GSTN to Ensure Absence of Technical Glitches:
    GSTN was required to ensure that there were no technical glitches during the specified period.
  4. Verification by Concerned Officers:
    The concerned officers were granted 90 days thereafter to verify the veracity of the transitional credit claim and pass appropriate orders on merits after granting an appropriate reasonable opportunity to the concerned parties.
  5. Reflection in Electronic Credit Ledger:
    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.

 Important Clarification

This judgment is important because the Kerala High Court did not undertake an independent determination of the quantum or final admissibility of the petitioner’s transitional credit claim.

Instead, the Court applied the binding directions issued by the Supreme Court in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912.

Therefore:

  • The opportunity to file or revise TRAN-1/TRAN-2 did not automatically amount to final allowance of transitional credit.
  • The concerned officers retained authority to verify the veracity and admissibility of the claim on merits.
  • A reasonable opportunity was required to be granted to the concerned parties before passing an appropriate order.
  • Only the transitional credit ultimately allowed after verification was to be reflected in the Electronic Credit Ledger.
  • The benefit of the Supreme Court’s directions extended to aggrieved registered assessees irrespective of whether they had previously approached a High Court or whether their cases had been considered by the ITGRC.

 Sections / Provisions Involved

Section 140 of the Central Goods and Services Tax Act, 2017 — Transitional arrangements for input tax credit.

Rule 117 of the Central Goods and Services Tax Rules, 2017 — Procedural framework relating to submission of declaration in FORM GST TRAN-1 for transitional credit.

FORM GST TRAN-1 — Declaration relating to transitional credit during migration to GST.

FORM GST TRAN-2 — Form concerning specified transitional credit claims under the applicable GST framework.

Electronic Credit Ledger — Allowed transitional credit, after verification in accordance with the Supreme Court directions, was to be reflected in the Electronic Credit Ledger.

Circular No. 39/13/2018-GST dated 03 April 2018 — Included among the petitioner’s exhibits and related to the grievance-redressal mechanism concerning technical difficulties faced by taxpayers.

Important Note on Provisions: The Kerala High Court judgment itself primarily addresses the issue of availing transitional credit and applies the Supreme Court directions in Filco Trade Centre. The references to Section 140 and Rule 117 identify the principal statutory and procedural framework ordinarily governing GST transitional credit and TRAN-1.

Link to download the order-https://mytaxexpert.co.in/uploads/1783491166_1436compressed.pdf

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