Facts of the Case

The petitioner, M/s Indwell Constructions Private Limited, challenged the Show Cause Notice dated 05.04.2021 and sought the benefit of transitional Input Tax Credit that could not be effectively carried forward into the GST regime. The petitioner also requested permission to file or revise GST TRAN-1 electronically or manually, transfer transitional credit from the ISD registration to the principal GST registration, and challenged the constitutional validity of Section 128 of the Finance Act, 2020, Rule 117, Rule 120A of the CGST Rules, and Circular No. 39/13/2018-GST.

Issues Involved

  1. Whether the petitioner should be permitted to file or revise GST TRAN-1 and TRAN-2 to claim transitional Input Tax Credit.
  2. Whether the petitioner was entitled to carry forward transitional credit under Section 140 of the CGST Act.
  3. Whether the challenge to Section 128 of the Finance Act, 2020, Rule 117, Rule 120A and the related GST Circular required adjudication in view of the Supreme Court directions.
  4. Whether the authorities were required to verify and allow eligible transitional credit after reopening of the GST portal.

Petitioner’s Arguments

  • The petitioner submitted that it had been deprived of its legitimate transitional Input Tax Credit.
  • It sought permission to file or revise GST TRAN-1 either electronically or manually to claim the entire eligible credit.
  • It requested transfer of transitional credit from the ISD registration to the principal GST registration.
  • The petitioner challenged the constitutional validity of Section 128 of the Finance Act, 2020, Rule 117, Rule 120A, and the impugned GST Circular, contending that the prescribed time limits were arbitrary and beyond the scope of Section 140 of the CGST Act.

Respondent’s Arguments

The respondents submitted that the issue regarding filing or revising TRAN-1 and TRAN-2 had already been considered by the Hon'ble Supreme Court in Special Leave to Appeal (C) Nos. 32709-32710 of 2018. The Supreme Court had directed reopening of the GST portal for all eligible taxpayers to file or revise TRAN-1 and TRAN-2 and had also provided a mechanism for verification of transitional credit claims by the tax authorities.

Court Order / Findings

The Andhra Pradesh High Court observed that the controversy stood substantially covered by the directions issued by the Hon'ble Supreme Court regarding reopening of the GST portal for filing or revising TRAN-1 and TRAN-2.

The Court further noted that the Supreme Court had subsequently extended the time for opening the GST common portal after the Union of India sought extension due to technical difficulties.

Accordingly, the High Court disposed of the writ petition by directing that the petitioner's case shall be governed by the same directions issued by the Hon'ble Supreme Court. The authorities were required to process the claim in accordance with those directions, verify the transitional credit on merits, provide reasonable opportunity of hearing, and reflect the admissible credit in the Electronic Credit Ledger.

Important Clarification

  • The judgment reiterates that eligible registered persons are entitled to file or revise TRAN-1 and TRAN-2 in accordance with the directions of the Hon'ble Supreme Court.
  • The benefit is available irrespective of whether a taxpayer had previously approached the High Court or the IT Grievance Redressal Committee.
  • The tax authorities must verify transitional credit claims on merits before allowing or rejecting them.
  • Admissible transitional credit is required to be reflected in the Electronic Credit Ledger after verification.
  • The decision follows the binding directions of the Hon'ble Supreme Court concerning reopening of the GST portal for transitional credit claims.

Sections Involved

  • Section 140 of the CGST Act, 2017
  • Section 128 of the Finance Act, 2020
  • Rule 117 of the CGST Rules, 2017
  • Rule 120A of the CGST Rules, 2017
  • Articles 14, 19 and 300A of the Constitution of India

Link to Download the Order  https://www.mytaxexpert.co.in/uploads/1785395205_2324compressed.pdf

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