UNION OF INDIA V. BRAND EQUITY TREATIES LTD. - JUN.19, 2020 - SUPREME COURT
Issue: Whether transitional credit can be availed by the assessee, wherein the assessee failed to furnish Form GST TRAN-1 within the time prescribed under the GST law?
Background: The Hon'ble High Court of Delhi had ruled in favour of the assessee vide its Order dated May 05, 2020. For a gist of the Hon'ble High Court's ruling, refer the section in this post: http://vsrca.in/gst/failure-to-file-tran-1/#brand-equity
Held: Operation of the aforesaid Order of the Hon'ble Delhi High Court is stayed.
Amba Industrial Corporation v. Union of India - Jun.18, 2020 - High Court of Punjab & Haryana
Background: Assessee failed to file Form GST TRAN-1 within the time limit prescribed under Rule 117 of CGST Rules. Hence, the assessee has challenged the validity of Rule 117(1A) ibid. It also prayed for direction to the GST Department to either permit filing of Form GST TRAN-1 or avail the transitional input tax credit in Form GSTR-3B (viz., the monthly return).
Held: Rule 117(1A) ibid is not invalid. The GST Department should permit the assessee to upload Form GST TRAN-1 by June 30, 2020. If the Department fails to permit such upload, the assessee can avail the transitional input tax credit in Form GSTR-3B of July 2020. The Department would verify the authenticity of the claim.
Brand Equity Treaties Ltd. v. Union of India – May.5, 2020 – High Court of Delhi
There is no provision in the Central Goods and Services Tax (CGST) Act, 2017, which prescribes time limit for transition of CENVAT credit. Rather, such time limit is prescribed only under Rule 117 of CGST Rules, 2017 (a delegated legislation). Hence, Rule 117 ibid is only directory in nature, to the extent it prescribes time limit for filing Form GST TRAN-1. Similarly, the right to transitional credit would not be forfeited even if it is not availed within such period.
Further, insertion of Rule 117(1A) ibid to cover cases involving technical difficulties and the extensions granted for filing Form GST TRAN-1 substantiates that the time period for filing is not considered mandatory either by the Legislature or the Executive. However, it does not mean transitional credit can be availed in perpetuity. Rather, transitional credit should be availed within three years from July 01, 2017 by virtue of the provisions of Limitation Act.
Summary of Ruling:
The petitioners have been permitted to file Form GST TRAN-1 on or before June 30, 2020 and avail the transitional credit. The Government has been directed to enable the petitioners to file Form GST TRAN-1 electronically or to accept the same manually. Thereafter, the Proper Officer can process the claims in accordance with law.
Even other taxpayers (who have not been able to file Form GST TRAN-1) should be entitled to file Form GST TRAN-1 by June 30, 2020. Therefore, the Government has been directed to publicise the said judgment widely, including publishing it on their website.
Author's Comment(s):
The judgment does not refer the recent retrospective amendment in Section 140 of the CGST Act vide Finance Act, 2020. Through the said amendment, the power to prescribe time limit for filing Form GST TRAN-1 is provided in the CGST Act itself. Plausibly, the hearing for the aforesaid judgment was concluded before the said amendment. However, paragraph 17 of the said judgment notes that credits under the erstwhile regime stood accumulated, acquired and vested to the taxpayers. In this backdrop, it appears the said amendment too may be challenged but the outcome of such challenge would be interesting to wait and watch.
Similarly, the High Court has critically noted the extensions granted to file Form GST TRAN-1, thereby observing that the time limits were not sacrosanct. Hence, it remains to be seen how the judiciary would take cognisance of the frequent extensions granted for various compliance under the GST law.
