This common order will dispose of both the writ petitions.
2. We have hard Sri M.Naga Deepak, learned counsel for the petitioners and Mr.B.Narasimha Sarma, learned Senior Standing Counsel for Income Tax Department, for all the respondents.
3. Grievance of the petitioners in both the writ petitions pertain to alleged inaction of the respondents in permitting the petitioners to rectify the errors made by the petitioners in Transition Form – l (TRAN-l).
4. Be it stated that both the petitioners are service providers and are registered under the provisions of the Central Goods and Services Tax Act, 2017 (briefly ‘the CGST Act’ hereinafter).
5. It is stated that petitioner in W.P.No.14987 of 2021 had Central Value Added Tax (CENVAT) credit to the tune of ₹ 4,36,419.00 (Rupees four lakhs, thirty six thousand, four hundred and nineteen only) in its account as on 30.06.2017. Petitioner in W.P.No.14998 of 2021 had CENVAT credit to the tune of ₹ 5,39,568.00 (Rupees five lakhs, thirty nine thousand, five hundred and sixty eight only) in its account as on 30.06.2017.
5.1. In view of Section 140 of the CGST Act, read with Rule 117 of the Central Goods and Service Tax Rules, 2017 (briefly ‘the CGST Rules’ hereinafter), petitioners were entitled to carry forward the above credits when the Goods and Service Tax (GST) regime came into force.
5.2. Petitioners filed TRAN –l form in both the cases on 26.12.2017, which is stated to be within the period specified for submission of such form. It is stated that initially the due date for filing TRAN-l form was 27.12.2017, which was subsequently extended to 31.03.2020. It is further stated that due to inadvertence, in the column under the heading ‘Eligible duties paid on such inputs’, petitioners entered ‘0’ in place of the CENVAT credit to be carried forward.
5.3. Realizing the mistake made, petitioners submitted representations dated 04.03.2020 requesting respondent No.1 to permit them to rectify the inadvertent error in the TRAN-l form. However, there has been no response from the respondents. Aggrieved, the present writ petitions have been filed.
6. Identical counter affidavits have been filed on behalf of respondents 1 to 5 in both the cases. For convenience, we take up the counter affidavit filed by the respondents in W.P.No.14987 of 2021.
6.1. Stand taken in the counter affidavit is that facility for one time revision of TRAN-l form was inserted in the CGST Rules, 2017 as Rule 120A vide notification No.34/2017/CT dated 15.09.2017. Last date for such revision of TRAN-l declaration was extended up to 27.12.2017.
6.2. It is further stated that though petitioners had filed TRAN-1 declarations within the time limit, in terms of Rule 117(4) of the CGST Rules, petitioners had to file TRANS -2 form by 31.03.2018. But no such TRAN – 2 forms were filed by the petitioners by such date.
6.3. GST Council in its 13th and 14th meetings had considered the representations of the petitioners seeking permission to revise TRAN-l forms to include transitional credit of the aforesaid amounts, but has not approved such revision, which was communicated to the petitioners by the GST net work vide email dated 09.07.2021.
7. Learned counsel for the petitioners submits that there is no provision either under the CGST Act, or under the CGST Rules, for rectification of errors made in TRAN-l form. Therefore, this court should direct the respondents to permit the petitioners to rectify the errors in TRAN –l form, and thereafter to take a decision on the claim of the petitioners for carrying forward of the CENVAT one way or the other.
7.1. In support of his contention, learned counsel for the petitioners has relied on a decision of the High Court of Delhi in SUPER INDIA PAPER PRODUCTS BENLON INDIA LTD. vs. UNIN OF INDIA 2021(6)TMI 108, as well as a decision of the Karnataka High Court in UNION OF INDIA vs. M/s ARAVIND LIFESTYLE BRANDS LTD 2019(12) TMI 780.
8. On the other hand, Mr. B.Narasimha Sarma, learned counsel for the respondents has taken us through the provisions of Section 140 of the CGST Act, and Rule 117 of the CGST Rules, more particularly to sub-rule (4) of Rule 117, and contends that sufficient opportunity was granted to the petitioners for rectification of TRAN-1 forms, but petitioners did not file TRAN – 2 forms by 31.03.2018. Belatedly, petitioners filed two representations. He submits that GST Council has taken a considered decision to not accede to the request of the petitioners. If at this stage, prayer of the petitioners is allowed, it may open the flood gates of similar claims. He has tried to distinguish the cases relied upon by the petitioners, particularly, the Karnataka High Court (2 supra), in which the tax payer had admitted to filing rectified TRAN -1, but the same could not be filed due to error generated in the GST network. Contending that there is no merit in the writ petitions, he therefore, seeks dismissal of the same.
9. In his reply, learned counsel for the petitioners while reiterating his contentions made earlier, submits that the requirement of filing TRAN-2 is for a different purpose. It enables a registered person not registered under the existing law, to avail of input tax credit of goods held in stock on the appointed day in respect of which he is not in possession of any documents evidencing payment of central excise duty. Objective of TRAN -2 is not rectification or correction of TRAN – 1.
10. Submissions made by learned counsel for the parties have received the due consideration of the court.
11. As is evident, on and from 01.07.2017, the indirect tax system in the country had undergone transformation, inasmuch as, GST regime had come into force. Since there was a transition from the earlier system of tax payment to the new system, a transitional provision has been provided for in Section 140 of the CGST Act. As per sub-section (1) thereof, a registered person, other than a person opting to pay tax under Section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending with the date immediately preceding the appointed day (appointed day being 28.06.2017) in the prescribed manner. Though not relevant, Section 10 provides for payment of composite levy in lieu of payment of CGST.
12. Correspondingly, Chapter XIV of the CGST Rules contains the transitional provisions. As per sub-rule (1) of Rule 117, which forms part of the transitional provisions, every registered person entitled to take credit of input tax under Section 140, shall within ninety days from the appointed day, submit a declaration electronically in FORM – GST TRAN -1, as prescribed specifying therein the amount of input tax credit of eligible duties and taxes to which he is entitled under the provisions of Section 140. As per the first proviso, the Commissioner may, on the recommendations of the GST Council, extend the period of ninety days by a further period not exceeding ninety days. Sub-rule (4) deals with a situation when a registered person (registered under the GST law), who was not registered under the existing law, is allowed to avail input tax credit on goods held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty. In such a situation, clause (a)(i) provides that such a registered person be allowed to avail the benefit of input tax credit. As per clause (b), the credit of central tax shall be availed of subject to satisfying the conditions mentioned therein, which include submission of a statement furnishing details of stock held by him etc., in FORM GST TRAN -2.
13. Thus in this case the appointed day was 28.06.2017. As per subrule (1) of Rule 117, the TRAN – 1 form had to be filed within ninety days from the appointed day. Under the first proviso this period could be extended by ninety days i.e., up to 27.12.2017. However, from the counter affidavit of the respondents it is evident that the due date for filing of TRAN-1 form was extended from 27.12.2017 to 31.03.2020.
14. The situation which is evident in the two writ petitions is that, according to the petitioners, they made an inadvertent error in not claiming the benefit of input tax credit while filing the TRAN – 1 form. There is no provision for rectification of such mistake made in the TRAN – 1 form. Therefore, they filed representations dated 04.03.2020 requesting respondent No.1 to allow them to rectify such inadvertent error. The representations were filed within the extended period for filing of TRAN – 1 form i.e., 31.03.2020.
15. We find that by the CGST (7th amendment) Rules, 2017, Rule 120A has been inserted in the CGST Rules. It provides that every registered person, who has filed FORM GST TRAN – 1 within the time period, may revise such declaration and submit the revised declaration in FORM GST TRAN – 1 electronically under the common portal within the time period specified in Rules 117 to 120, or such further period as may be extended by the Commissioner in this behalf.
16. As we have seen, the limitation under sub-rule (1) of Rule 117 of the CGST Rules, was 90 days from the appointed day, which was extendable by a further period not exceeding 90 days as per the first proviso. In other words, the revised declaration in FORM GST TRAN – 1 had to be filed within 180 days i.e., within 27.12.2017. While the due date for filing of TRAN – 1 form was extended from 27.12.2017 to 31.03.2020, the due date for filing revised declaration in TRAN – 1 form was not extended.
17. In the backdrop of the above factual and statutory provisions, we may now advert to the Delhi High Court decision in Super India Paper Products case (1 supra).
17.1. That decision dealt with a number of issues, one of the issues being that the tax payers had filed TRAN-1 within time, but because of inadvertent mistake on the part of the tax payers, incorrect details were furnished in TRAN -1. On revision of their TRAN-1 forms, Delhi High Court took the view that because of inadvertent mistake made by the tax payers, they should not lose out of their accumulated credit, which is protected by Article 300-A of the Constitution of India. Referring to an earlier decision of the Delhi High Court in BLUE BIRD PURE PVT. LTD. v. UNION OF INDIA 2019(29)G.S.T.L. 660, it was held that the deadline for making the revision coincided with the last date for filing the return i.e., 27.12.2017, thus rendering the facility of revision impractical and meaningless.
18. Similarly, Karnataka High Court in Aravind Lifestyle Brands Ltd. (2 supra) took the view that in the earlier days of implementation of GST, there was an inadvertent mistake while filling up Form GST TRAN-1, which was however filed within time. Time for rectifying such mistake expired on 27.12.2017. Therefore, Division Bench of the Karnataka High Court concurred with the view taken by the learned Single Judge as well as of the Delhi High court and other High Courts permitting the petitioner to submit revised TRAN – 1 electronically by opening the online portal for that purpose or to submit manually.
19. Mr. B.Narasimha Sarma, learned counsel for the respondents has submitted that the decision of the Delhi High Court and a similar decision of the Gujarat High Court has been appealed against by the Revenue before the Supreme Court, and the Supreme Court has granted stay.
20. We have carefully analyzed the provisions of sub-rule (1) of Rule 117 and sub-rule (4) of Rule 117. While the former deals with filing of TRAN -1 form, the latter deals with filing of TRAN – 2 form. TRAN – 1 form was to be filed by a registered person who was entitled to take credit of input tax under Section 140 by making an electronic declaration in TRAN – 1 form. On the other hand, the person registered under GST law, but not registered under the existing law (earlier law), could avail benefit of input tax credit in respect of goods held in stock on the appointed day for which he did not have any documentary evidence to show payment of central excise duty. To deal with such a situation, submission of Form TRAN –2 was provided. Therefore, the objective of both TRAN -1 and TRAN -2 forms are distinct. It cannot be said that filing of TRAN – 2 form was meant for rectification of mistakes in TRAN – 1 form. Had that been so, the legislature would not have carried out the amendment leading to insertion of Rule 120A, which provides for revision of TRAN -1 form within the overall period of 180 days i.e., up to 27.12.2017.
21. Courts have held time and again that rules and procedures are intended to sub-serve the cause of justice. In fact procedure is often referred to as ‘handmaid of justice’. Laws and procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice. It is intended to further the ends of justice and not a thing designed to trip people up.
22. In MANGALORE CHEMICALS AND FERTIIZERS LIMITED vs. DEPUTY COMMISSIONER 1991 (55) ELT 437, the appellant was entitled to the benefit of an exemption notification. There was no dispute that appellant was eligible for refund to be adjusted against sale tax payable for respective years. But the controversy before the Supreme Court was since the appellant had not actually secured prior permission whether it would be entitled to adjustment upon refund as the wordings of the concerned notification were that until permission for renewal was granted by the Deputy Commissioner of Commercial Taxes, the new industry should not be allowed to adjust the refunds. Supreme Court summed up the contention of the Revenue as under:
“No doubt you were eligible and entitled to make the adjustments. There was also no impediment in law to grant you such permission. But see language of Clause 5. Since we did not give you the permission you cannot be permitted to adjust. Is this the effect of the law?”
22.1. In the said case Supreme Court observed that a distinction between the provisions of a statute which are of substantive character and were built-in with certain specific objectives of policy on the one hand and those which are merely procedural and technical in their nature on the other hand must be kept clearly distinguished. In the facts of that case Supreme Court held that the objection was purely technical. According to the Supreme Court, the Revenue had told the appellant as follows:
“We are sorry. We should have given you the permission. But now that the period is over, nothing can be done.”
22.2. Supreme Court referred to the words of Lord Denning to answer the above in the following terms:
“Now I know that a public authority cannot be estopped from doing its public duty, but I do think it can be estopped from relying on a technicality and this is a technicality.”
22.3. Further, reference was made to “Statutory Interpretation” of Francis Bennion, whereafter it was quoted therefrom as under:
“Unnecessary technicality: Modern Courts seek to cut down technicalities attendant upon a statutory procedure where these cannot be shown to be necessary to the fulfillment of the purpose of the legislation.”
22.4. Finally Supreme Court allowed the appeal and directed the concerned Deputy Commissioner of Commercial Taxes to grant permission to the appellant for adjustment against taxes due for the respective years on refund.
23. This decision was usefully referred to by a Division Bench of the Bombay High Court in HERITAGE LIFESTYLES AND DEVELOPERS PRIVATE LIMITED vs. UNION OF INDIA 2021 (1) Bom CR 345. That was a case where petitioner could not file GST TRAN-I on or before 27.12.2017 but had manually applied for GST TRAN-I on 07.5.2018 within the extended time line. Though respondents had found the petitioner to be eligible for credit, the same was, however, denied on the ground that petitioner did not file TRAN-I on or before 27.12.2017. In the facts and circumstances of that case, Bombay High Court took the view that when there was no dispute to the fact that petitioner was otherwise eligible for credit then to deny the benefit of such input credit merely on technical grounds cannot be justified. It was held that merely on technical ground an admitted input credit was sought to be denied to the petitioner, which was wholly unfair and a travesty of justice. Accordingly Bombay High Court directed the respondents to accept the TRAN-I filed by the petitioner and to give the benefit of input tax credit in the electronic credit ledger of the petitioner.
24. We are dealing with a situation where the taxpayers have already paid CENVAT, and under law, they are entitled to carry forward the credit of such CENVAT into the new system. This right is a substantive right, and in our view, should not be permitted to be extinguished on technicalities.
25. In the light of the above, we are of the considered view that representations of the petitioners dated 04.03.2020 submitted to respondent No.1 should be considered on their own merit.
26. Accordingly, we direct respondent No.1 to take a decision on the representations of the petitioners dated 04.03.2020 either by reopening the online portal, or manually, within a period of four weeks from the date of receipt of a copy of this order.
27. Both the writ petitions are accordingly allowed to the extent indicated above.
28. Interlocutory applications pending, if any, shall stand closed. No order as to costs.