Facts of the Case

The petitioner, White Stone, approached the Kerala High Court in relation to difficulties concerning the availment of Transitional Credit while migrating to the Goods and Services Tax regime.

The dispute concerned the taxpayer’s ability to avail transitional credit through the prescribed GST transitional forms. The exhibits appended to the writ petition indicate that the petitioner had placed on record, among other documents, its provisional GST registration certificate in Form GST REG-06, Form GSTR-3B for July 2017-18, the credit carried-forward summary issued by the GST portal, and communications made to the GST Department and GST Help Desk regarding the grievance.

During consideration of the writ petition, it was not disputed before the Kerala High Court that the issue raised by the petitioner stood completely addressed by the Supreme Court’s judgment in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another, 2022 SCC OnLine SC 912.

Accordingly, the High Court considered the binding directions issued by the Supreme Court concerning filing or revision of TRAN-1 and TRAN-2 for availing transitional credit.

Issues Involved

The principal issues arising in the matter were:

  1. Whether the petitioner could avail or pursue GST Transitional Credit while migrating to the GST regime through the relevant transitional credit forms.
  2. Whether the directions issued by the Supreme Court in Union of India & Another vs Filco Trade Centre Pvt. Ltd. & Another would govern and apply to the petitioner’s case.
  3. Whether an aggrieved registered taxpayer 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 transitional credit claim would remain subject to verification by the competent tax authorities on merits before being reflected in the Electronic Credit Ledger.

Petitioner’s Arguments

The petitioner’s grievance related to the availment of Transitional Credit during migration to the GST regime.

From the judgment and the petitioner’s exhibits, the petitioner’s case was connected with the transitional credit carried forward into the GST system and the difficulties encountered in relation to the GST portal and departmental grievance mechanism.

The petitioner relied upon the legal position governing taxpayers facing difficulties in filing or revising declarations for transitional credit. By the time the matter was considered, the Supreme Court had already comprehensively addressed such grievances in Filco Trade Centre.

The petitioner was therefore entitled to have its case governed by the directions issued by the Supreme Court for filing or revising the relevant forms for transitional credit.

Respondent’s Arguments

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

Therefore, no separate substantive controversy survived for independent adjudication by the Kerala High Court on the underlying transitional credit issue.

The matter was consequently disposed of by applying the Supreme Court’s directions to the petitioner’s case.

Court Order / Findings

The Kerala High Court held that the issue raised in the writ petition was completely covered by the Supreme Court’s judgment in Filco Trade Centre.

The High Court specifically took note of the directions issued by the Supreme Court on 22 July 2022 and held that those directions would apply to the petitioner’s case as well.

The operative framework reproduced by the High Court was as follows:

  1. Opening of GST Common Portal:
    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, namely from 1 September 2022 to 31 October 2022.
  2. Right to File or Revise Forms:
    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. No Technical Glitch:
    GSTN was required to ensure that there was no technical glitch during the relevant period.
  4. Verification by Proper Officers:
    The concerned officers were granted 90 days thereafter to verify the veracity of the transitional credit claim and pass appropriate orders on merits.
  5. Reasonable Opportunity:
    Before deciding the claim, the concerned parties were required to be granted an appropriate and reasonable opportunity.
  6. Reflection in Electronic Credit Ledger:
    Transitional credit allowed after verification was required to be reflected in the taxpayer’s Electronic Credit Ledger.
  7. GST Council Guidelines:
    If required, the GST Council could issue appropriate guidelines to field formations for scrutiny of transitional credit claims.

Final Order of the Kerala High Court

The High Court expressly held that the above directions of the Supreme Court would apply to the case on hand as well.

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

Important Clarification

This judgment is significant because it does not record an automatic or unconditional grant of transitional credit to the petitioner.

The legal effect of the order is that the petitioner’s case became governed by the Supreme Court’s uniform mechanism laid down in Filco Trade Centre. The relevant transitional credit form could be filed or revised under that mechanism, but the claimed credit remained subject to:

  • verification of the veracity of the claim;
  • scrutiny by the concerned officers;
  • adjudication on merits;
  • grant of reasonable opportunity to the concerned taxpayer; and
  • reflection in the Electronic Credit Ledger only to the extent the transitional credit was allowed.

A further important clarification is that the Supreme Court’s directions, as reproduced and applied by the Kerala High Court, extended to any aggrieved registered assessee, irrespective of whether the taxpayer had previously approached a High Court or whether the matter had been decided by the ITGRC.

The judgment therefore reinforces the broad and uniform application of the Supreme Court’s transitional credit remedy rather than restricting relief only to taxpayers who had previously instituted litigation.

Sections / Statutory Provisions Involved

Section 140 of the Central Goods and Services Tax Act, 2017

The principal substantive provision governing transitional arrangements for input tax credit upon migration from the pre-GST indirect tax regime to GST.

Rule 117 of the Central Goods and Services Tax Rules, 2017

The procedural framework historically associated with submission of the declaration in FORM GST TRAN-1 for transitional credit claims.

FORM GST TRAN-1

Relevant transitional declaration for carrying forward or claiming eligible credit while migrating to the GST regime, subject to applicable statutory conditions.

FORM GST TRAN-2

Relevant transitional form applicable in specified circumstances for eligible transitional credit claims.

Electronic Credit Ledger

The Supreme Court-directed mechanism contemplated reflection of the transitional credit in the Electronic Credit Ledger after verification and allowance of the claim.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783490867_1385compressed.pdf

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