Facts of the Case

The petitioner, K. Dineshkumar, aged 51 years and proprietor of M/s Krishna Enterprises, Sankaramangalam, Pattambi, Palakkad, approached the Kerala High Court in relation to the issue of availing Transitional Credit while migrating to the Goods and Services Tax regime.

The dispute concerned the petitioner’s claim to transitional credit through the prescribed GST transitional forms. The record of the writ petition, particularly the appendix to the judgment, showed that the petitioner had produced documents relating to closing stock inventory, stock details available on the Department’s website, and copies of Form GST TRAN-2 for several months.

The petitioner’s exhibits included:

  • Closing stock inventory;
  • Screenshot evidencing stock details on the Department’s website dated 10 December 2019;
  • Form GST TRAN-2 for July 2017;
  • Form GST TRAN-2 for August 2017;
  • Form GST TRAN-2 for September 2017;
  • Form GST TRAN-2 for October 2017;
  • Form GST TRAN-2 for November 2017;
  • Form GST TRAN-2 for December 2017;
  • Notice issued by the first respondent dated 31 October 2019;
  • Reply filed by the petitioner before the first respondent dated 31 October 2019; and
  • Order issued by the first respondent dated 10 December 2019.

The core controversy, therefore, arose in the context of the petitioner’s attempt to avail GST Transitional Credit during migration from the pre-GST indirect tax regime to the GST regime.

When the writ petition came up before the Kerala High Court, it was not disputed that the issue raised in the petition stood completely addressed by the judgment of the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

Issues Involved

The principal issues involved in the writ petition were:

  1. Whether the petitioner could avail Transitional Credit while migrating to the GST regime through the prescribed TRAN forms.
  2. Whether the petitioner’s grievance regarding filing or revising the relevant Transitional Credit declaration stood governed by the Supreme Court’s directions in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr..
  3. Whether the benefit of reopening the GST common portal for filing or revising TRAN-1 and TRAN-2 was available to the petitioner.
  4. Whether the Supreme Court’s directions applied irrespective of whether an aggrieved registered assessee had earlier filed a writ petition before a High Court.
  5. Whether such relief was available irrespective of whether the taxpayer’s case had already been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  6. Whether the Transitional Credit claim was required to be verified on merits by the competent tax authorities after filing or revision of the relevant forms.

Petitioner’s Arguments

The judgment is brief and does not separately record detailed oral submissions of the petitioner. Therefore, the petitioner’s case should not be expanded beyond what emerges from the judicial record.

In substance, the petitioner’s grievance concerned the availability and availing of Transitional Credit during migration to the GST regime.

The documentary record indicated reliance on closing stock details and GST TRAN-2 declarations for the period from July 2017 to December 2017. The petitioner had also placed on record the departmental notice dated 31 October 2019, the reply filed on the same date, and the subsequent order dated 10 December 2019.

The petitioner’s claim ultimately fell within the framework created by the Supreme Court in Filco Trade Centre for taxpayers facing difficulties in filing or revising declarations for availing Transitional Credit.

Respondent’s Arguments

The judgment similarly does not record any separate detailed counter-arguments on merits by the respondents.

The significant recorded position before the Kerala High Court was 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 & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr..

Accordingly, no independent controversy requiring a separate adjudication on the underlying Transitional Credit dispute survived before the High Court beyond applying the binding directions issued by the Supreme Court.

Court Order / Findings

The Kerala High Court held that the issue raised by the petitioner was completely covered by the Supreme Court’s decision in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

The High Court specifically took note of the Supreme Court’s directions issued on 22 July 2022, which addressed difficulties faced by taxpayers in filing or revising declarations and availing Transitional Credit while migrating to GST.

The operative framework noticed by the Kerala High Court was 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.
  3. 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 was required to ensure that no technical glitch occurred during the prescribed period.
  5. The concerned officers were granted 90 days thereafter to verify the correctness and veracity of the Transitional Credit claims.
  6. The competent officers were required to pass appropriate orders on merits after granting a reasonable opportunity to the concerned parties.
  7. Any Transitional Credit ultimately allowed was required to be reflected in the Electronic Credit Ledger.
  8. Where necessary, the GST Council could issue appropriate guidelines to field formations for scrutiny of such claims.

After recording these directions, the Kerala High Court expressly held that the Supreme Court’s directions would apply to the petitioner’s case as well.

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

Important Clarification

This judgment is important because it does not record an automatic allowance of the petitioner’s Transitional Credit claim on merits.

The legal effect of the order is that the petitioner’s case became governed by the mechanism and directions laid down by the Supreme Court in Filco Trade Centre. The opportunity to file or revise TRAN-1/TRAN-2 did not dispense with verification of the underlying claim.

The following distinction is crucial:

  • Opportunity to file/revise TRAN-1 or TRAN-2: Extended under the Supreme Court’s directions.
  • Final entitlement to Transitional Credit: Subject to verification of the claim by the competent officer.
  • Verification period: The Supreme Court directions noticed by the High Court granted the concerned officers 90 days thereafter.
  • Principles of natural justice: Appropriate reasonable opportunity was required to be granted to the parties concerned.
  • Credit ledger reflection: Only the Transitional Credit found allowable after the prescribed process was to be reflected in the Electronic Credit Ledger.

Another significant clarification is that the Supreme Court’s relief was framed broadly enough to cover an aggrieved registered assessee irrespective of whether a writ petition had previously been filed before a High Court or whether the ITGRC had already considered the taxpayer’s case.

Further, the judgment itself states that the issue before the High Court stood completely addressed by the Supreme Court ruling. Therefore, the Kerala High Court did not independently formulate a new test for Transitional Credit; it applied the binding Supreme Court framework to the petitioner’s case.

Sections / Statutory Provisions Involved

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

The principal statutory provision associated with carry-forward and migration of eligible pre-GST credits into the GST regime is Section 140 of the CGST Act, 2017, dealing with Transitional Arrangements for Input Tax Credit.

Section 140 of the Kerala State Goods and Services Tax Act, 2017

Since the proceedings involved the Kerala State GST authorities, the corresponding transitional credit framework under the KSGST Act, 2017 is also relevant.

Rule 117 of the CGST Rules, 2017

Rule 117 concerns the procedural framework for submission of declarations relating to Transitional Credit, particularly FORM GST TRAN-1.

Rule 117 and Connected Transitional Credit Rules / TRAN-2 Framework

The case directly concerned Transitional Credit and the filing of TRAN-1 and TRAN-2, with the petitioner’s exhibits specifically including GST TRAN-2 forms for July 2017 to December 2017.

Important Accuracy Note on Sections

The Kerala High Court’s short judgment does not expressly reproduce or adjudicate specific statutory sections or rules in its operative reasoning. The above provisions are stated as the relevant statutory framework governing GST Transitional Credit and TRAN forms. The express basis of disposal was the Supreme Court ruling in Filco Trade Centre.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783491366_1387compressed.pdf

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