Deciding a companion transitional-credit matter on the same day as its detailed ruling in Avatar Petro Chemicals, the Madurai Bench of the Madras High Court has directed verification and transition of a sole proprietor's unutilised input tax credit accrued under the erstwhile Tamil Nadu VAT regime.

Facts of the Case

P.Preetha, proprietrix of M/S. Deshini Yamaha ("the petitioner"), had input tax credit that had accrued under the Tamil Nadu Value Added Tax Act, 2006 prior to the introduction of GST, which could not be transitioned in time by filing Form TRAN-1 in terms of Section 140 of the CGST Act, 2017. The petitioner sent a representation dated 26.06.2020 explaining the reasons for the delay and relied on the Delhi High Court's decision in Brand Equity Treaties Limited vs Union of India (then under challenge before the Supreme Court in a pending SLP). The petitioner filed this writ petition seeking a mandamus to permit filing of GST TRAN-1, either by reopening the GSTN portal or by allowing manual filing, to claim credit on eligible duties under Section 140(3) of the CGST Act, 2017.

Issues Involved

  1. Whether unutilised input tax credit accrued under the TNVAT regime lapses for failure to timely upload TRAN-1.
  2. Whether the petitioner was entitled to manual filing of TRAN-1 or a direct credit entry in lieu of electronic filing.

Petitioner's Arguments

  • Input tax credit accrued under the TNVAT regime could not be transitioned in time despite a representation dated 26.06.2020 explaining the difficulty.
  • Relied on the Court's own detailed order delivered earlier the same day in Avatar Petro Chemicals (W.P.(MD) No.7093 of 2020) and on the Delhi High Court's ruling in Brand Equity Treaties.

Respondent's Arguments

  • No distinct opposing contention on merits is recorded in the order; the Standing Counsel for the respondents appeared and the matter proceeded on the basis of the Court's contemporaneous ruling on the identical issue.

Court Order / Findings

  • The Court adopted and reproduced its detailed reasoning from the same day's order in Avatar Petro Chemicals, holding that transitional credit validly earned under the pre-GST regime is indefeasible and cannot be defeated by a portal's inability to accept or rectify TRAN-1.
  • Disposed of the writ petition by directing the respondents to verify whether the petitioner had genuinely not utilised the TNVAT input tax credit, and, if transition was permissible but for the technical difficulty, to allow manual filing of TRAN-1 or make a direct credit entry in the Electronic Credit Register.
  • No costs were awarded.

Important Clarification

  • The principle of indefeasibility of pre-GST transitional credit applies uniformly regardless of whether the credit originated under CENVAT or state VAT law; a portal's technical inability to process TRAN-1 cannot extinguish a genuine, verifiable claim to unutilised credit.

Sections Involved

  • Section 140(3), CGST Act, 2017 — transition of credit on inputs held in stock/eligible duties for persons not registered under earlier law.
  • Rule 117, CGST Rules, 2017 — procedure for filing TRAN-1.

Decision – In Favour of

In favour of the Assessee, disposed of with directions for verification and transition of the unutilised credit.

Related Case Laws

This order should be read together with the same Bench's detailed ruling in M/S.Avatar Petro Chemicals Private Limited vs GST Council & Ors. (W.P.(MD) No.7093 of 2020), delivered the same day, and with Brand Equity Treaties Ltd. vs Union of India (Delhi High Court).

Case Details

  • Court: Madras High Court, Madurai Bench
  • Case No.: Writ Petition (MD) No.11614 of 2020
  • Coram: Hon'ble Mr. Justice C. Saravanan
  • Order Date: 04.03.2022

Link to Download the Order

https://mytaxexpert.co.in/uploads/1787075758_4609compressed.pdf

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