Facts of the Case

The petitioner, M/s.Vetrivel Explosives Pvt. Ltd., manufactures explosives. A fire accident on 1.12.2016 caused fatal injuries to workers, and the factory remained closed for about two years amid litigation, reopening only in August 2018 — by when the Central Excise Act, 1944 had been replaced by the CGST Act, 2017. The petitioner was required to file Form GST TRAN-1 under Rule 117 of the CGST Rules, 2017 read with Section 140 of the CGST Act, the last date being 27.12.2017, but could not do so as the factory was under lock and seal. Rule 117 was later amended by Notification No.48/2018-Central Tax dated 10.9.2018, inserting sub-rule (1A) for assessees facing technical glitches after uploading information. The fourth respondent, by communication dated 19.11.2020, rejected the petitioner's request to file TRAN-1, holding it had neither attempted to file it nor faced any glitch, and was ineligible per the 32nd GST Council Meeting minutes. The petitioner challenged this before the Madurai Bench of the Madras High Court.

Issues Involved

  1. Whether transitional credit under Rule 117 read with Section 140 can be denied for failure to file TRAN-1 in time due to factory closure after a fire accident, as opposed to a portal "technical glitch."
  2. Whether the rejection was justified solely because sub-rule (1A) of Rule 117 is framed for technical difficulties.

Petitioner's Arguments

  • The inability to file TRAN-1 was purely due to the factory being closed and sealed after the fire accident and consequent litigation, not any fault of the petitioner.
  • Denying credit merely for not fitting the technical-glitch language of Rule 117(1A) was unduly restrictive, given that input tax credit is equivalent to cash.
  • Reliance was placed on P.Preetha v. GST Council, Avatar Petro Chemicals (P) Ltd. v. GST Council and Suriya Engineering Works v. Superintendent of GST & Central Excise, granting similar relief.

Respondent's Arguments

  • Sub-rule (1A) of Rule 117 applies only to those who filed TRAN-1 in time (by 27.12.2017) and then faced technical difficulties, not to those who never filed at all.
  • In absence of an enabling provision, transitional credit could not be permitted to the petitioner in 2020.
  • Brand Equity Treaties Ltd. v. Union of India (Delhi HC), treating the 90-day period as directory, was under Supreme Court challenge, so could not be relied on.

Court Order / Findings

  • Since input tax credit is equivalent to cash for discharging tax liability, its transition cannot be restricted or denied merely for difficulties in filing, including circumstances like the accident here; the cited decisions had granted similar relief.
  • If belated TRAN-1 filing cannot be permitted, the unutilised amount must instead be credited to the electronic cash ledger.
  • Respondents were directed to verify unutilised ITC as on 1.12.2016 from returns filed for October–November 2016, and if found, allow it via cash-ledger credit or cash refund.
  • The petition was disposed of in these terms, no costs, and the connected miscellaneous petition closed.

Important Clarification

  • Transitional credit cannot be denied purely because failure to file TRAN-1 in time does not fit the "technical glitch" language of Rule 117(1A); genuine impossibility, like a factory closure after a fatal accident, can also warrant relief.
  • Where belated filing itself cannot be permitted, the remedy is crediting the verified unutilised credit to the cash ledger or refunding it, not extinguishing it.

Sections Involved

  • Section 140, Central Goods and Services Tax Act, 2017 – transitional arrangements for input tax credit.
  • Rule 117, Central Goods and Services Tax Rules, 2017 – TRAN-1 filing procedure and time limit, including sub-rule (1A).
  • Article 226, Constitution of India – writ jurisdiction invoked to challenge the rejection.

Decision – In Favour of

The petition was disposed of with directions, substantially in favour of the Assessee. Instead of quashing the communication outright or granting an unconditional refund, the Court directed verification of the petitioner's unutilised credit as on the date of the fire accident, to be allowed via cash ledger or refund if found to exist.

Related Case Laws

The judgment refers to P.Preetha v. GST Council (2022), Avatar Petro Chemicals (P) Ltd. v. GST Council (W.P.(MD) No.7093 of 2020) and Suriya Engineering Works v. Superintendent of GST & Central Excise (W.P.(MD) No.7377 of 2020). No other related case laws are available on this site at present.

Case Details

  • Court: Madurai Bench of Madras High Court
  • Case No.: W.P.(MD) No.8250 of 2021
  • Coram: Justice C. Saravanan
  • Date of Order: 13.04.2022

Link to Download the Order

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