Facts of the Case

The Telangana High Court considered together two writ petitions concerning the filing or revision of Form GST TRAN-1 and TRAN-2 for availing transitional input tax credit under the GST regime.

In W.P. No. 409 of 2020, M/s. Pokarna Limited challenged the time limit prescribed for filing Form GST TRAN-1 under Rule 117(1) and the first proviso thereto of the Central Goods and Services Tax Rules, 2017 and the corresponding Telangana Goods and Services Tax Rules, 2017. The petitioner also questioned the consequential notifications and orders prescribing or extending the filing timelines.

The petitioner contended that the prescribed limitation and consequential notifications were arbitrary, illegal and unreasonable and were violative of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India. It was further contended that the impugned restrictions were ultra vires Sections 140 and 164 and Section 174(2)(c) of the CGST Act, 2017 and the corresponding provisions of the TGST Act, 2017.

M/s. Pokarna Limited sought a consequential direction requiring the authorities to accept its Form GST TRAN-1 and credit ₹27,35,391 to its Electronic Credit Ledger.

In W.P. No. 11616 of 2021, Anu Advance Composite Products Pvt. Ltd. challenged the failure of the concerned authorities to permit uploading of TRAN-1 credit despite repeated representations, including the representation dated 08.03.2021. The petitioner sought a direction to complete the process, permit filing of TRAN-1 and allow availment of transitional credit.

The common grievance in both writ petitions was the inability to file, revise or upload the relevant transitional credit forms for claiming credit carried forward into the GST regime.

Issues Involved

  1. Whether the petitioners were entitled to further time to file fresh or revised Form GST TRAN-1 and TRAN-2 for availing transitional credit.
  2. Whether the time restriction prescribed under Rule 117 of the CGST Rules, 2017 and the corresponding TGST Rules could defeat the petitioners’ claims for transitional credit.
  3. Whether the petitioners’ grievances stood covered by the Supreme Court’s directions in Union of India vs Filco Trade Centre Pvt. Ltd., 2022 SCC OnLine SC 912.
  4. Whether any further adjudication by the Telangana High Court was necessary after the Supreme Court had directed reopening of the GST portal for filing or revising TRAN-1 and TRAN-2.
  5. Whether the petitioners could pursue their transitional credit claims irrespective of whether they had earlier filed writ petitions or whether their cases had been considered by the Information Technology Grievance Redressal Committee (ITGRC).

Petitioner’s Arguments

The petitioners sought directions requiring the respondents to provide further opportunity for filing revised Form GST TRAN-1 and TRAN-2 or fresh Form GST TRAN-1 and TRAN-2.

M/s. Pokarna Limited specifically challenged the statutory-rule-based time restriction and consequential notifications governing TRAN-1 filing. It asserted that denial of transitional credit due to the prescribed filing limitation was arbitrary, illegal and unreasonable and violated constitutional protections under Articles 14, 19(1)(g), 265 and 300A.

It was also contended that the impugned time restrictions and consequential measures were ultra vires Sections 140 and 164 and Section 174(2)(c) of the CGST Act, 2017 and the corresponding provisions of the TGST Act, 2017.

M/s. Pokarna Limited accordingly sought acceptance of its TRAN-1 and credit of ₹27,35,391 to its Electronic Credit Ledger.

Anu Advance Composite Products Pvt. Ltd. contended that, despite repeated representations, the authorities had not allowed it to upload TRAN-1 credit. It sought completion of the process and permission to file TRAN-1 and avail transitional credit.

Respondent’s Arguments / Position

During the hearing, the Court was informed that the controversy raised in the writ petitions had already been decided by the Supreme Court in Union of India vs Filco Trade Centre Pvt. Ltd., 2022 SCC OnLine SC 912.

The learned counsel appearing for the parties agreed that the directions issued by the Supreme Court sufficiently protected and covered the interests of the petitioners.

It was further submitted before the High Court that the period initially granted up to 31.10.2022 had subsequently been extended by the Supreme Court up to 30.11.2022.

Court Order / Findings

The Telangana High Court examined the Supreme Court’s order in Union of India vs Filco Trade Centre Pvt. Ltd. and noted the directions governing filing and revision of TRAN-1 and TRAN-2.

The Supreme Court had directed GSTN to open the common portal for filing the relevant forms for availing transitional credit through TRAN-1 and TRAN-2.

The Supreme Court further permitted any aggrieved registered assessee 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 Information Technology Grievance Redressal Committee (ITGRC).

The Supreme Court also directed GSTN to ensure that there were no technical glitches during the permitted filing period.

The concerned officers were granted 90 days thereafter to verify the veracity of the transitional credit claims and pass appropriate orders on merits after granting reasonable opportunity to the concerned parties.

The allowed transitional credit was thereafter required to be reflected in the Electronic Credit Ledger.

The Supreme Court further observed that, if required, the GST Council could issue appropriate guidelines to field formations for scrutiny of such claims.

The Telangana High Court recorded that counsel for the parties agreed that the Supreme Court’s directions sufficiently covered the interests of the petitioners. The Court also noted that the filing period had subsequently been extended by the Supreme Court up to 30.11.2022.

Accordingly, the High Court held that no grievance of the petitioners survived.

The writ petitions were disposed of. Pending miscellaneous applications, if any, were also closed. There was no order as to costs.

Important Clarification

The Telangana High Court did not independently adjudicate the constitutional validity of Rule 117 or finally determine the petitioners’ transitional credit entitlement on merits.

Instead, the Court disposed of the writ petitions because the Supreme Court’s directions in Union of India vs Filco Trade Centre Pvt. Ltd. had already provided a uniform mechanism for aggrieved registered assessees to file or revise TRAN-1 and TRAN-2.

Therefore, the substantive transitional credit claim remained subject to verification by the competent authorities on merits. The opportunity to file or revise TRAN-1/TRAN-2 did not by itself amount to automatic allowance of the claimed credit.

The judgment is significant because the benefit of the Supreme Court-directed mechanism was not confined only to taxpayers who had already approached a High Court or whose cases had been accepted by ITGRC. The mechanism extended to any aggrieved registered assessee falling within the Supreme Court’s directions.

Sections and Legal Provisions Involved

Section 140 of the CGST Act, 2017 — Transitional arrangements for input tax credit.

Section 164 of the CGST Act, 2017 — Power of the Government to make rules.

Section 174(2)(c) of the CGST Act, 2017 — Saving of rights, privileges, obligations and liabilities under repealed laws.

Corresponding Section 140 of the TGST Act, 2017 — Transitional arrangements for input tax credit.

Corresponding Section 164 of the TGST Act, 2017 — Rule-making power.

Corresponding Section 174(2)(c) of the TGST Act, 2017 — Saving provision.

Rule 117(1) of the CGST Rules, 2017 — Filing of declaration in Form GST TRAN-1 for transitional credit.

First Proviso to Rule 117(1) of the CGST Rules, 2017 — Relevant extension mechanism concerning the filing period.

Corresponding Rule 117 of the TGST Rules, 2017 — Transitional credit filing mechanism.

Article 14 of the Constitution of India — Equality before law and equal protection of laws.

Article 19(1)(g) of the Constitution of India — Right to practise any profession or carry on any occupation, trade or business.

Article 265 of the Constitution of India — No tax shall be levied or collected except by authority of law.

Article 300A of the Constitution of India — No person shall be deprived of property save by authority of law.

Article 226 of the Constitution of India — Writ jurisdiction of High Courts.

Section 151 of the Code of Civil Procedure, 1908 — Inherent powers of the Court, invoked in the interlocutory applications.

Concerned / Related Case Law

Union of India vs Filco Trade Centre Pvt. Ltd., 2022 SCC OnLine SC 912

This was the controlling Supreme Court decision expressly relied upon by the Telangana High Court.

The Supreme Court directed reopening of the common GST portal for filing or revising TRAN-1 and TRAN-2 so that aggrieved registered assessees could pursue transitional credit claims. The benefit was made available irrespective of whether a taxpayer had filed a writ petition before a High Court or whether the taxpayer’s case had been decided by ITGRC.

GSTN was directed to ensure that no technical glitch occurred during the relevant period. The jurisdictional officers were thereafter required to verify the claims and pass appropriate orders on merits after granting reasonable opportunity to the parties. Allowed credit was to be reflected in the Electronic Credit Ledger.

The Telangana High Court treated these directions as sufficient to address the grievances raised by the petitioners and therefore disposed of the writ petitions.

Link to download the order

https://www.mytaxexpert.co.in/uploads/1783323734_1221compressed.pdf

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