Facts of the Case

M/s Moothedan Overseas approached the High Court of Kerala in relation to the issue of availing Transitional Credit while migrating to the Goods and Services Tax regime. The petitioner’s grievance arose in the context of filing or revising the relevant declarations required for carrying forward eligible transitional credit into the GST system.

The case record shows that the petitioner had placed materials concerning its eligible transitional credit, including a representation dated 1 December 2018, a tabular statement of eligible transitional credit based on import bills, and Circular No. 39/13/2018-GST dated 3 April 2018. The petitioner also relied upon earlier judicial proceedings and orders relevant to the transitional credit grievance.

When the writ petition came up before the High Court, it was not disputed that the issue stood fully addressed by the Supreme Court judgment in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another.

The Kerala High Court therefore considered the Supreme Court’s directions governing taxpayers facing difficulties in filing or revising declarations and availing transitional credit during migration to GST. The operative portion reproduced on pages 3 and 4 of the uploaded judgment specifically sets out the Supreme Court’s portal-opening, verification and electronic-credit-ledger directions.

Issues Involved

The principal issues arising in the matter were:

  1. Whether the petitioner’s grievance concerning availment of GST Transitional Credit during migration to the GST regime stood covered by the Supreme Court’s decision in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another.
  2. Whether the petitioner could obtain the benefit of the opportunity to file or revise TRAN-1 and TRAN-2 forms pursuant to the directions of the Supreme Court.
  3. Whether the benefit of the Supreme Court’s directions extended to an aggrieved registered assessee irrespective of whether the taxpayer had earlier 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).
  4. Whether the concerned officers were required to verify the transitional credit claim on merits and provide reasonable opportunity before passing appropriate orders.
  5. Whether allowed transitional credit was required to be reflected in the taxpayer’s Electronic Credit Ledger.

Petitioner’s Arguments

The petitioner’s case, as emerging from the writ proceedings and the materials recorded in the judgment, was founded on the grievance relating to the inability or difficulty in availing eligible Transitional Credit while migrating to the GST regime.

The petitioner had pursued its claim through a representation and supporting materials concerning eligible transitional credit based on import bills. The petitioner also placed reliance on the administrative grievance-redressal mechanism under Circular No. 39/13/2018-GST and earlier judicial proceedings.

In substance, the petitioner sought an effective opportunity for its transitional credit claim to be considered within the GST framework, particularly in circumstances where taxpayers had faced difficulties while filing or revising transitional credit declarations.

Since the Supreme Court had subsequently issued comprehensive directions in Filco Trade Centre, the petitioner’s grievance became governed by those directions.

Respondent’s Arguments

The judgment does not separately record detailed respondent submissions in an elaborate argumentative form. However, the High Court expressly noted 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.

Accordingly, the controversy was treated as governed by the binding directions of the Supreme Court rather than requiring an independent adjudication of the transitional credit dispute on a different legal basis.

Court Order / Findings

The High Court held that the issue raised in the writ petition was completely addressed by the Supreme Court’s ruling in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912.

The Court noted the Supreme Court’s directions dated 22 July 2022, issued in view of difficulties faced by taxpayers while filing or revising declarations and availing Transitional Credit during migration to GST.

The material directions applied by the High Court were as follows:

  1. 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. 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
    • the taxpayer’s case had been decided by the ITGRC.
  3. GSTN was required to ensure that there was no technical glitch during the specified period.
  4. The concerned officers were granted 90 days thereafter to:
    • verify the veracity of the transitional credit claim;
    • pass appropriate orders on merits; and
    • grant appropriate reasonable opportunity to the concerned parties.
  5. The transitional credit ultimately allowed was required to be reflected in the Electronic Credit Ledger.
  6. If required, the GST Council could issue appropriate guidelines to field formations for scrutiny of transitional credit claims.

After reproducing and considering these binding directions, the Kerala High Court expressly held that the Supreme Court’s directions would apply to the case at hand as well. The writ petition was accordingly disposed of on those terms.

Important Clarification

A significant clarification arising from the judgment is that the benefit of the Supreme Court’s transitional credit mechanism was not confined only to taxpayers who had already approached a High Court.

The directions extended to any aggrieved registered assessee, irrespective of:

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

Another important clarification is that reopening the portal did not automatically amount to final allowance of transitional credit. The concerned officers retained the authority and duty to verify the veracity of the claim and decide it on merits, after granting appropriate reasonable opportunity to the taxpayer.

Thus, the judicial relief created an opportunity to file or revise the transitional credit forms, while the substantive admissibility of the credit remained subject to verification and adjudication in accordance with law.

Sections / Legal Provisions Involved

The dispute concerns GST Transitional Credit under the transitional provisions of the GST law, particularly the mechanism for claiming or revising transitional credit through FORM GST TRAN-1 and FORM GST TRAN-2 while migrating to the GST regime. The matter is connected with the statutory framework governing transitional credit, including Section 140 of the Central Goods and Services Tax Act, 2017, read with the applicable procedural rules governing TRAN-1 and TRAN-2 declarations.

The judgment also concerns the implementation of the directions issued by the Supreme Court in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912. The Kerala High Court expressly recorded that the issue raised in the writ petition stood completely addressed by the Supreme Court’s ruling.

Link to download the order -https://mytaxexpert.co.in/uploads/1783419083_1373compressed.pdf

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