Facts of the Case

This common order disposed of a batch of ten writ petitions — including W.P. Nos. 1690/2019, 6072/2019, 6111/2019, 6123/2019, 6124/2019, 6125/2019, 2251/2020, 2254/2020, 4453/2020, 5283/2020 and 13347/2019 — filed by various traders and businesses, including the lead petitioner Ambica Fertilizers through its partner Shrikant Dwarkadas Bhutada, since the facts and the issue involved were identical. The Bombay High Court, Aurangabad Bench, dealt with the facts of Writ Petition No. 1690/2019 as representative of the batch. The petitioner had filed Form TRAN-1 under Section 140(3) of the Central Goods and Services Tax Act, 2017 (and the corresponding Maharashtra GST provision) claiming transitional input tax credit, but inadvertently omitted approximately Rs. 13,17,956. There was no facility to revise Form TRAN-1 after 27 December 2017, and the petitioner's representation seeking permission to correct the omission was not allowed, leading to a challenge to the vires of Rule 117 and Rule 120A of the CGST Rules, 2017, and a prayer for a mandamus permitting revision of Form TRAN-1 and filing of Form TRAN-2.

Issues Involved

  1. Whether Rule 117 and Rule 120A of the Central Goods and Services Tax Rules, 2017 are ultra vires the Central Goods and Services Tax Act, 2017.
  2. Whether the time limit prescribed under Rule 117(1) for filing/revising Form TRAN-1 is directory or mandatory.
  3. Whether the petitioner could be permitted to correct Form TRAN-1 and file Form TRAN-2 for the omitted transitional credit.

Petitioner's Arguments

  • Relying on Nelco Limited vs Union of India, 2020 SCC OnLine Bom 437, and on Section 140 read with Rule 117(1), contended that the time prescribed under Rule 117(1) is directory and not mandatory.
  • Relied on the unreported judgment in Heritage Lifestyles and Developers Pvt. Ltd. vs Union of India (W.P. (St) No. 3705/2020), where the Court directed acceptance of a belated TRAN-1 and credit in the electronic credit ledger, to seek similar treatment.
  • Sought liberty to correct Form TRAN-1 and separately file Form TRAN-2 for consideration on merits, while conceding that most other petitioners in the batch had not even filed the relevant forms.

Respondent's Arguments

  • The Assistant Solicitor General and counsel for the State relied on Nelco Limited (supra), particularly paragraph 86, to submit that the constitutional validity of Rule 117 and Section 140(1) had already been upheld as intra vires.

Court Order/Findings

  • Held that the challenge to the vires of Section 140 and Rule 117 stood already negatived by the Court's own decision in Nelco Limited vs Union of India.
  • Distinguished Heritage Lifestyles, clarifying it did not hold that Section 140 and Rule 117 are directory; relief there was granted on the specific facts of eligibility shown by that petitioner.
  • Nonetheless, in the interest of justice, permitted the lead petitioner in W.P. No. 1690/2019 to correct Form TRAN-1 and file Form TRAN-2, without prejudice to the rights and contentions of both parties.
  • Directed the jurisdictional Assessing Authority to consider, within four weeks, whether the corrected/filed forms can be entertained under Section 140 of the CGST Act, 2017 and Rule 117(1) of the CGST Rules, 2017, along with all other issues on merits, and to communicate the decision within one week thereafter.
  • If the claim is accepted, reliefs are to be granted within four weeks of allowance; if the order is adverse, the petitioner is at liberty to pursue appropriate proceedings.

Important Clarification

  • The constitutional validity of Rule 117 and Section 140(1)/140(3) of the CGST Act, 2017 as intra vires stands settled by the Bombay High Court's ruling in Nelco Limited vs Union of India; a favourable outcome in another case on its own facts does not convert that time limit into a directory one.
  • Even where a vires challenge fails, a taxpayer able to show a genuine, inadvertent omission in Form TRAN-1 may still be permitted — without prejudice to the department's contentions — to seek correction and file Form TRAN-2 for the Assessing Authority's consideration on merits.

Sections Involved

  • Section 140, Central Goods and Services Tax Act, 2017 — governs transitional arrangements for input tax credit carried forward from the pre-GST regime.
  • Rule 117, Central Goods and Services Tax Rules, 2017 — prescribes the time limit and procedure for filing Form TRAN-1 to claim transitional credit.
  • Rule 120A, Central Goods and Services Tax Rules, 2017 — provides for revision of a declaration filed in Form TRAN-1.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee. The constitutional challenge to Rule 117 and Rule 120A was rejected, following Nelco Limited, so the department succeeds on the vires question. However, the lead petitioner was permitted to correct Form TRAN-1 and file Form TRAN-2 for consideration by the Assessing Authority on merits, with liberty to pursue further remedies if that consideration proves adverse. The same order governs the other connected petitioners.

Related Case Laws

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Case Details

  • Court: Bombay High Court, Bench at Aurangabad
  • Case No.: Writ Petition No. 1690 of 2019, with connected Writ Petition Nos. 6072/2019, 6111/2019, 6123/2019, 6124/2019, 6125/2019, 2251/2020, 2254/2020, 4453/2020, 5283/2020 and 13347/2019
  • Coram: Hon'ble R. D. Dhanuka and S. G. Mehare, JJ.
  • Date: 13.04.2022

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