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Judgment
In this writ petition, the petitioner is challenging the action of the respondents, in non-transitioning the credit of value added tax paid into
petitioner’s electronic credit ledger in Form GST PMT-2, on the basis of declaration in Form GST TRAN-1 filed on 27.12.2017 through GST
Portal; not allowing the petitioner to avail the credit of the amount in Form GSTR-3B; and utilize the same in discharge of its tax liability under the
Central Goods And Service Tax Act, 2017 (for short ‘CGST Act’) and Telangana State Goods and Service Tax Act, 2017 (for short ‘SGST
Act’).
The petitioner contends that, it is into the business of non-banking financial company engaged in financing automobiles in the form of loans and
financial leases to its customer and has operations in 14 States across India, including in the State of Telangana. For the purposes of carrying on
business in the State of Telangana, the petitioner obtained registration under the provisions of the Telangana State Value Added Tax Act, 2005 (for
short, ‘the TVAT Act’), as well as under the provisions of the Finance Act, 1994, for the purpose of service tax payable on leasing activity.
It is the contention of the petitioner that upon introduction of Goods and Service Tax Act, 2017 (for short ‘GST Act’), w.e.f. 01.07.2017, the
petitioner got itself registered under the CGST Act and SGST Act, in the State of Telangana and has been filing returns and paying applicable GST
both under CGST and SGST on its transactions without any adverse remarks.
It is the further contention of the petitioner that with the introduction of GST, with effect from 01.07.2017, and in terms of provisions of Section
142(11)(c) of the CGST Act read with Section 142(10)(c) of the TGST Act, the petitioner became entitled to take credit of Value Added Tax or
Service Tax paid under the existing law, namely, the TVAT Act, or the Finance Act, 1994, proportionate to the extent of supplies made after the
appointed day and such credit is to be calculated in the manner to be prescribed.
It is also contended that as per Rule 118 of the Central Goods and Services Tax Rules, 2017 (for short, ‘the CGST Rules’) read with Rule
118 of the Telangana Goods and Services Tax Rules, 2017 (for short, ‘the SGST Rules’) every person to whom Section 142(11) of CGST Act,
applies, shall within the period specified in Rule 117 of the CGST Act or such further period as extended by the Commissioner, is required to submit a
declaration electronically in Form GST TRAN-1 furnishing the proportion of supply on which the Value Added Tax or Service Tax has been paid
before the appointed day, but the supply is to be made after the appointed day and the input tax credit admissible thereon.
It is the claim of the Petitioner, that it had paid the service tax on 10% interest portion of leasing contracts under the provisions of Finance Act,
1994, which were entered into before the introduction of GST Act, 2017. Similarly, it is also claimed that 100% of VAT on the entire value of lease
rentals receivable, is paid upfront in the first month of entering into contract itself under the relevant provisions of the TVAT Act, even though the
tenure/ term of lease / rental contracts is spread over a period of time.
Thus, the petitioner claims that with the introduction of CGST and SGST Act, 2017, having regard to the provisions of the CGST Act and the SGST
Act and the Rules made thereunder, the petitioner became entitled to avail the transitional VAT credit in a sum of Rs.21,07,574/-, in respect of lease /
rental contracts / agreements, where the tenure / term is continuing post introduction GST w.e.f. 01.07.2017, as the petitioner is now required to
discharge liability under the GST Act, 2017.
The petitioner contends that it had, in terms of the provisions of the CGST Act and the SGST Act read with the Rules made thereunder, declared
an amount of Rs. 21,07,574/- as transitional credit in Form GST TRAN-1, by uploading the same electronically on GST portal through GSTN Network,
as mandated under the Act and the Rules, on 27.12.2017, being the last date notified under Rule 117 of CGST Rules.
It is the contention of the petitioner that though it had encountered certain technical difficulties/glitches on the GSTN portal, even while uploading
the above information, however, by making efforts, the petitioner could upload the information in Form GST TRAN-1 on 27.12.2017 at 11.13 AM; that
upon uploading the Form GST TRAN-1 electronically, the petitioner received acknowledgment of successful filing of the said form electronically and
received an Application Reference Number (‘ARN’) AA361117203771H; and that in addition to receiving the ARN number, the petitioner also
received the confirmation mail from an email ID of the respondents “[email protected]†confirming the successful filing of the transition form
by the petitioner and the ARN number provided to the petitioner for the above said filing made.
Petitioner contends that despite the petitioner successfully uploading the information and submission of Form GST TRAN-1 for transition of credit
of Rs.21,07,574/-, as claimed in column 11 of the said form, the same was not reflected in the online electronic credit ledger of the petitioner
maintained by the respondents. The petitioner would thus, contend that non-reflection of the transitional credit in the online electronic credit ledger of
the petitioner, despite the petitioner having filed the same in time as prescribed in Rule 117 of the CGST and the SGST Rules, is due to the technical
glitches that have been encountered in the GSTN network and was not due to any fault on the part of the petitioner.
As a result of the transitional credit not getting reflected in the electronic credit ledger of the petitioner maintained in Form GST PMT-2 on the
common portal of the respondents, which is showing credit as ‘NIL’, the petitioner is unable to utilize the accrued credits for discharge of its
liability under both the CGST as well as the SGST Act causing financial hardship.
The petitioner would further contend that on noticing that the credit was not being reflected in the electronic ledger on the common portal, the
petitioner immediately raised a query on this aspect of technical error on the part of GSTN on 02.01.2018 and also followed it up by addressing a letter
to the CEO of the GSTN, New Delhi, on 19.03.2018, requesting them to look into the issue and provide a solution for getting the credit transitioned.
The petitioner would further contend that the petitioner also addressed letters subsequent thereto, to all the concerned, including meeting the
concerned authorities of GST in the Telangana Commissionerate at Hyderabad as well as the GST authorities of the State.
Despite the petitioner making its best efforts, in explaining to the authorities concerned about the petitioner uploading the Form GST TRAN-1 on
27.01.2017 successfully seeking transitional credit of Rs.21,07,574/-, there was no response, nor the grievance of the petitioner was resolved. As the
petitioner was not getting any response, nor the issue getting resolved, whereby the credit is reflected in electronic ledger of the petitioner on common
portal, the petitioner addressed an email on 18.03.2019, wherein it has brought to the notice of the GST authorities, that when a similar issue arose in
respect of petitioner’s branches at Delhi and Haryana, the concerned authorities in the respective States, reopened the portal for filing of TRAN-1
and sought for similar resolution even in the State of Telangana, as the last date for making corrections in Form GST TRAN-1 was notified as
31.03.2019. However, it is claimed that the said request of the petitioner did not elicit any response from the 4th respondent.
As no response was forthcoming from the respondents, nor the transitional credit claimed is getting reflected in its electronic ledger, the petitioner
once again on 13.05.2020, addressed a letter to the GST Telangana Commissionerate and requested the said authority to consider the issue and refer
the matter to the 2nd respondent for redressal. An e-mail dt. 15.05.2020 was sent to the 2nd respondent, requesting for resolving the issue of
transitional credit at the earliest, so that the petitioner company can overcome the issue of outflow of cash flow during Covid-19 period.
Upon the petitioner addressing the letter dt. 13.05.2020 and e-mail dt.15.05.2020, the petitioner received an email communication dt.05.06.2020
from the Assistant Commissioner of the State GST i.e., 3rd respondent, informing the petitioner that the case of the petitioner was sent to ITGRC
through GSTN, but the same was not considered for reopening for filing Form GST TRAN-1, “as no technical issues were noticed in their log.â€
The petitioner contends that the said e-mail communication is wholly improper, a non-speaking and arbitrary, for the reason that it did not consider
the evidence submitted by the petitioner by its earlier communication and that no opportunity of hearing was accorded to the petitioner before deciding
to reject the petitioner’s plea to look into the issue of technical glitches on the GSTN.
The petitioner contends that the claim for transitional credit as filed on 27.02.2017 cannot be denied by the respondents by observing that “no
technical issues were noticed in their logâ€, since, it is common knowledge that the GSTN network through which implementation of GST and
transition from the existing regime of VAT/Central Excise/Service Tax was undertaken, had faced technical glitches. The fact of the GST portal
having technical glitches has also been taken note by the Central Board of Indirect Taxes and Customs, which had issued Circular bearing
No.39/13/2018-GST dt.03.04.2018 on the issue of addressal of grievances of taxpayers due to technical glitches on the GST portal, wherein in para
1, it has been stated that, “A large number of taxpayers could not complete the process of TRAN-1 filing either at the stage of original or
revised filing as they could not digitally authenticate the TRAN-1s due to IT related glitches.â€.
The petitioner would further contend that when a similar issue arose in petitioner’s own case in the State of Maharashtra, the petitioner
approached the Hon’ble High Court of Bombay by way of a writ petition, being WP-LD-VC-85 of 2020, and the Hon’ble High Court was
pleased to allow the writ petition and directed the respondents to allow the transitioning of credit of the amount into petitioner’s electronic credit
ledger within a period of four weeks from the date of the said order. The Petitioner seeks for grant of similar relief even in the present writ petition.
Opposing the relief sought for by the petitioner, a voluminous counter-affidavit is filed on behalf of respondents 1 and 6.
The respondents, by the counter-affidavit filed, have contended that there are absolutely no merits in the writ petition and that though the
transitional provision permitting to carry forward of CENVAT credit of eligible duties, no legitimate right can be claimed for allowing such credit.
No counter-affidavit has been filed on behalf of respondents 2 to 5.
Heard Sri Keerthi Karan Kota, learned counsel for the petitioner; Sri Namavarapu Rajeshwar Rao, learned Assistant Solicitor General, appearing
for the respondents.
Firstly, it is to be noted that though a counter-affidavit, which is no short of an exposition on GST law is filed by respondents 1 and 6, the same
does not answer the specific grievance of the petitioner anywhere. Secondly, by the counter-affidavit, the respondents in one breathe claim that the
network has been working seamlessly and without failure, as a result of which, large number of people have filed Form GST TRAN-1 returns
correctly within the prescribed time and it is only handful of persons, like the petitioner, who did not do so. However, by the same counter affidavit, the
respondents on the other hand state that as large taxpayers have faced IT glitches on GSTN network, on the recommendation of GST Council in its
26th meeting held on 10.03.2018, an IT Grievance Redressal Mechanism (ITGRM) was put in place, vide CBIC Circular No.39/13/2018-GST
dt.03.04.2018, wherein cases pertaining to non-filing of Form GST TRAN-1 due to IT glitches was sought to be addressed and also the period for
submitting declarations electronically was extended. The said stand of the respondents is self-contradictory, to say the least.
Further, judicial notice can be taken of the fact that transition to GST with effect from 01.07.2017 was not a smooth affair and in fact had resulted
in a chaotic situation across the country, due to failure of GSTN network. Having regard to the said fact, various High Courts, have allowed the writ
petitions filed by the affected parties before the respective High Courts and directed the respondents to accept the Form GST TRAN-1 manually. If
the assertion of respondents that there were no technical glitches in the GSTN network and the transition to GSTN was smooth, is to be accepted,
there was no necessity either for the GST Council to recommend for a redressal mechanism at its 26th council meeting or for the CBIC to extend
time for filing Form GST TRAN-1 from time to time till 27.012.2017. Thus, the claim of the respondents that there were no technical glitches in GSTN
network and it is only a handful of people, like the petitioner, who could not file the transition claim form electronically, are seeking to make such
allegation, is without any substance or basis and lacks bonafides, as the said claim is contrary to the actual situation that prevailed at the relevant time,
apart from being a self serving statement.
Further, the claim of the respondents that the Government cannot be held responsible for negligence and dereliction of duty by a responsible
taxpayer and if the contention of the petitioner were to be accepted by providing facility of filing/revision of Form GST TRAN-1, it would jeopardize
the Government revenue on account of similar demands from other taxpayers who could not file/revise in time due to negligence and it would be
difficult for the Government to verify bona fides of such claim, is also without any merit for the reason that the factum of petitioner filing the
declaration in Form GST TRAN-1 on 27.12.2017 at 11.13 AM is not in dispute. It is also to be seen that upon such filing of TRAN-1 form, the
petitioner is in receipt of ARN number generated from the respondents system and also an email acknowledging the said submission of form
electronically, from the respondents e-mail id. Thus, it would be wholly inappropriate to allege negligence on the part of the taxpayer, like the
petitioner, who despite the Network put in place by the respondents having technical glitches, by spending substantial time had uploaded the Form GST
TRAN-1 before the due date, i.e. by 27.12.2017.
The respondents, being fully aware of the situation that prevailed with regard to the working of the network, instead of being sensitive to the issue,
and taking steps proactively to resolve the grievance of the petitioner, chose to make allegation of negligence on the part of the petitioner without any
basis. If only the petitioner acted in a negligent manner, the petitioner would not have uploaded the form on 27.12.2017 at 11.13 AM from its system
by logging into the GSTN network maintained by the respondents. The petitioner can have control only on its system and but not on the working of the
GSTN network. Once, the petitioner has uploaded the required information by submitting the Form GST TRAN-1 electronically on the portal by using
its system, the duty cast on a responsible taxpayer gets complete and it is for the authorities to ensure that their systems capture the information fed in
by the taxpayer correctly, and no hardship is caused to the taxpayer.
In the facts of the present case, even though the petitioner is in receipt of an acknowledgment number and also an email confirming successful
submission of the Form GST TRAN-1 electronically, the information furnished thereunder is not transitioned into online electronic credit ledger of the
petitioner maintained on the portal, which admittedly is in the control of the respondents. The respondents instead of taking steps to set-right their
house in order, are alleging negligence on the part of the petitioner. The said action of the respondents is a highly reprehensible and only goes to show
the high-handed attitude and approach of the respondents in dealing with the taxpayers, forgetting the fact that no tax can be collected without
authority of law, which implies that the respondents grant the benefit / concession to which a tax payer is entitled to otherwise. By denying the
transitional credit as in the present case, the respondents are compelling the tax payer like petitioner to pay tax in full without availing the benefit of
adjustment / debit from its credit ledger.
It is also to be seen that though the respondents filed a lengthy counter-affidavit, it neither denied or disputed the ARN number generated from
their systems and the email received by the petitioner of successful filing of GST TRAN-1 Form. In the absence of any denial to the ARN number or
email sent to the petitioner, it is not open for the respondents now to turn around and allege the petitioner to be a non-filer. Further, no explanation is
offered by the respondents as to which transaction the ARN number referred to by the petitioner is relatable to, if under the said ARN number, the
petitioner has not filed Form GST TRAN-1 on 27.12.2017.
Since, the counter-affidavit does not deal with the said specific contention of the petitioner, it is to be construed that the respondents do not dispute
the fact of petitioner filing form GST TRAN-1 electronically on 27.12.2017 claiming a transitional credit of Rs.21,07,574/-. As the factum of the
petitioner filing the form GST TRAN-1 within the time prescribed stands confirmed, the natural corollary is that the amount claimed as transitional
credit available to it, has to be reflected automatically in the online electronic credit ledger. The entitlement of the petitioner to the said credit is another
aspect, which needs to be gone into by the concerned authority by examining the claim by calling for such information from the petitioner after putting
the petitioner on notice, but the same cannot be denied to be transitioned at the initial stage itself.
In an identical situation, in petitioner’s own case, the Bombay High Court in WP-LD-VC-85 of 2020 considering a similar issue of transitional
credit of Rs.17,07,673/- claimed through TRAN-1 filed on 27.12.2017 not being transitioned into the petitioner’s electronic credit ledger despite
successful filing, by its judgement dt.29.10.2020 while observing that the action of the respondents is unfair and unjust, held as under:
“18. At the outset, we must say that it is not disputed that Petitioner’s Form GST TRAN-1 filing on 27th December, 2017 was
successful. The only issue is that the credit of Rs.17,07,673/- has not been transitioned in the Petitioner’s electronic credit ledger despite
the successful filing. It is not also in dispute that after filing TRAN-1, which filing was successful, the credit of Rs.17,07,673/- is not
appearing in the Petitioner’s electronic credit ledger/register and despite making grievance to the authorities, as discussed earlier,
Petitioner did not receive any positive response. We are unable to comprehend that even though, admittedly, the filing was successful, the
credit is not being reflected in the Petitioner’s ledger and merely on the ground that no technical error has been found on the GSTN, the
grievance of the Petitioner has not been addressed.
19…..
20…..
In this case, we are not examining the issue, whether the Petitioner is entitled to VAT tax credit as claimed by the Petitioner which will be
examined by the authorities. What we are concerned with is that despite the admitted successful filing of Form TRAN-1 by the Petitioner on
27th December, 2017, the request of the Petitioner for transitioning of credit has not been approved by the ITGRC merely on the basis that
there were no technical glitches on the GSTN side. There is no further explanation or clarification or evidence on the issue by the
Respondents. Even the learned Sr. Counsel for the Respondents has only reiterated this stand during his submission.
The whole objective of digitalization is to convenience the tax payers and not to harass them. We are conscious that the GST system is
still evolving in its implementation. We are of the view that merely because there were no technical glitches in the GSTN with respect to the
Petitioner’s TRAN-1 which was admittedly filed in time, the claim of the Petitioner, if it was otherwise eligible in law, cannot be rejected
for no apparent fault on the part of the Petitioner. This cannot be the objective of the GST system or digitization. Such a situation cannot be
countenanced as it would be wholly unfair and unjust.
We are, therefore, of the view that this is a fit case for invocation of our writ jurisdiction.â€
By holding as above, the Bombay High Court allowed the writ petition and directed the respondents to take such action as may be necessary for
transitioning the credit of such amount into petitioner’s credit ledger/electronic credit ledger within four weeks from the date of the order.
In the facts of the present case, we see no reason to take a different view from the one as expressed by the Bombay High Court, merely because
the respondents chose to file a counter in the present writ petition alleging negligence on the part of the petitioner, which in our concerned view, as
detailed herein above is without any basis, unsubstantiated apart from being reprehensible.
Further, as the various activities under GST are technology driven, and given the fact that there exists no seamless connectivity between a tax
payer and the respondent network, and a tax payer is required to go through various intermediate service provides, more so in the initial stage of
implementation by migrating from existing system of indirect taxation, it would be highly improbable to expect the transition to be smooth and without
glitches as being claimed by the respondents.
For the reasons indicated above and also for the reason that we are in concurrence with the views expressed by the Bombay High Court on the
same issue, in the petitioner’s own case, the petitioner is liable to succeed even in the present writ petition.
Accordingly, the writ petition is allowed. The respondents are directed to transition the credit of amount of Rs. 21,07,574/- claimed by the
petitioner, into petitioner’s electronic credit ledger in Form GST PMT-2 maintained on the portal, within a period of four weeks from the date of
the order.
However, it is made clear that we have not examined the merits of the claim of the petitioner with regard to the eligibility or otherwise of the said
amount claimed as VAT credit available on the notified date.
Pending miscellaneous petitions, if any, shall stand closed in the light of this final order. No order as to costs.