Facts of the Case

Alpha Trading Company, represented by its proprietor, approached the High Court of Kerala by filing WP(C) No. 23626 of 2019 in relation to the issue of availing Transitional Credit while migrating to the Goods and Services Tax regime.

The dispute arose in the context of difficulties faced by taxpayers in filing or revising declarations required for carrying forward eligible pre-GST credit into the GST regime. The petitioner had placed on record its GST registration certificate, representations made before the departmental authorities, correspondence between officers, Circular No. 39/13/2018-GST dated 3 April 2018, and earlier judicial decisions dealing with difficulties concerning transitional credit.

When the writ petition came up for consideration, it was not disputed before the 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, reported as 2022 SCC OnLine SC 912.

Accordingly, the High Court considered the directions issued by the Supreme Court for enabling taxpayers to file or revise TRAN-1 and TRAN-2 forms and claim Transitional Credit.

Issues Involved

The principal issues arising in the matter were:

  1. Whether the petitioner could be permitted to avail Transitional Credit while migrating to the GST regime.
  2. Whether taxpayers facing difficulties in filing or revising declarations for Transitional Credit could obtain relief through reopening of the GST common portal.
  3. Whether the Supreme Court directions in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another would apply to the petitioner’s case.
  4. Whether the benefit of filing or revising TRAN-1 and TRAN-2 was available irrespective of whether the taxpayer had earlier filed a writ petition before a High Court.
  5. Whether such benefit was available irrespective of whether the taxpayer’s case had previously been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  6. Whether the Transitional Credit claim was required to be automatically accepted or remained subject to verification on merits by the competent officers.

Petitioner’s Arguments

The petitioner’s case concerned its entitlement to avail Transitional Credit while migrating to the GST regime.

The materials forming part of the writ petition reflected that the petitioner had pursued the matter before the authorities and relied upon documents and judicial precedents concerning difficulties in transitioning eligible credit into the GST framework.

The petitioner’s claim was required to be considered in light of the Supreme Court’s decision in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, which comprehensively addressed the difficulties faced by taxpayers in filing or revising declarations for Transitional Credit.

The essential basis of the petitioner’s case was that the mechanism directed by the Supreme Court for filing or revising TRAN-1 and TRAN-2 should equally apply to the petitioner.

Respondents’ Arguments / Position

The judgment records that it was not in dispute before the High 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.

Therefore, no surviving controversy requiring an independent determination on the broader Transitional Credit issue remained before the High Court.

The matter was consequently disposed of by applying the directions already issued by the Supreme Court.

Court Order / Findings

The High Court of Kerala held that the issue involved 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 specifically noted the directions issued by the Supreme Court on 22 July 2022 in relation to the difficulties faced by taxpayers while filing or revising declarations and availing Transitional Credit during migration to the GST regime.

The Supreme Court directions, as noticed and applied by the High Court, provided in substance that:

  1. The Goods and Services Tax Network (GSTN) was directed to open the common portal for filing the relevant 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.
  3. The benefit was also available irrespective of whether the taxpayer’s case had been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  4. GSTN was required to ensure that there was no technical glitch during the relevant period.
  5. The concerned officers were given 90 days thereafter to verify the veracity of the Transitional Credit claim and pass appropriate orders on merits.
  6. Before passing such orders, an appropriate and reasonable opportunity was required to be granted to the concerned parties.
  7. The Transitional Credit ultimately allowed upon verification was required to be reflected in the Electronic Credit Ledger.
  8. If required, the GST Council could issue appropriate guidelines to field formations for scrutiny of Transitional Credit claims.

The Kerala High Court expressly held that the above directions of the Supreme Court would apply to the case of Alpha Trading Company as well.

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

Important Clarification

This judgment is significant because it does not create an independent or separate mechanism for the petitioner alone. Instead, the High Court applies the uniform mechanism directed by the Supreme Court in Filco Trade Centre to the petitioner’s case.

A crucial clarification is that the opportunity to file or revise TRAN-1 and TRAN-2 does not amount to automatic acceptance of the Transitional Credit claim.

The claim remains subject to:

  • verification of its veracity by the competent officer;
  • examination on merits;
  • grant of an appropriate reasonable opportunity to the concerned party; and
  • passing of an appropriate order by the competent authority.

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

Another important clarification is that the Supreme Court’s relief was framed broadly for an “aggrieved registered assessee.” The mechanism was not confined only to taxpayers who had already approached a High Court. It also operated irrespective of whether the taxpayer’s matter had previously been decided by the ITGRC.

Sections / Rules / Forms Involved

Section 140 of the Central Goods and Services Tax Act, 2017
This provision deals with transitional arrangements for carrying forward eligible input tax credit from the pre-GST indirect tax regime into the GST regime, subject to statutory conditions.

Rule 117 of the Central Goods and Services Tax Rules, 2017
This rule concerns the procedural framework associated with declarations for Transitional Credit.

GST TRAN-1
The form relevant to specified claims for carrying forward eligible Transitional Credit into the GST regime.

GST TRAN-2
The form relevant to specified categories of Transitional Credit claims under the GST transitional framework.

Electronic Credit Ledger
The Supreme Court-directed mechanism contemplated that credit found allowable after verification would be reflected in the taxpayer’s Electronic Credit Ledger.

 Link to download the order - https://mytaxexpert.co.in/uploads/1783492823_1442compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.