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HomeGST UPDATESTransitional Provisions amended retrospectively from 01.07.2017 - what next?

Transitional Provisions amended retrospectively from 01.07.2017 – what next?

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CA. Gaurav Gup

CA. (Dr.) Gaurav Gupta

Rule 117 of the CGST Rules, 2017 provides a time limit of 90 days for filing of the prescribed form, TRAN 1 ( as extended from time to time) which enables an assessee to avail the benefit of the accumulated CENVAT credit as provided under Section 140 (1) of the CGST Act, 2017.  The time was extended till December 27, 2017 to file TRAN-1 vide Oder No. 9/2017-GST dated 15.11.2017.

The prescription of time limit for filing TRAN-1 under Rule 117 has been challenged before various Courts by the assessees who were not able to file TRAN-1 within the stipualted time.  Amongst others, the reccent judgement of Hon’ble Delhi High Court in the case of Brand Equity Treaties Limited Vs Union Of India, the Hon’ble Court held that read down the provision [Rule 117] as being directory in nature, insofar as it prescribes the time-limit for transitioning of credit and therefore, the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed.  The Court reached the conclusion on the observation that In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years (as provided under Limitation Act, 1963) should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit. The Court further held that all the Petitioners who have filed or attempted to file Form TRAN-1 within the aforesaid period of three years they shall be entitled to avail the Input Tax Credit accruing to them.  Similar decision was awarded in the case of  M/s Siddharth Enterprises vs The Nodal Officer, wherein Hon’ble Gujarat High Court held that due date contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit is procedural in nature and thus should not be construed as a mandatory provision.  Other main decisions which are in favour of Assessee in TRAN-1 matters are as follows:

  • A.B. Pal Electricals v Union of India (W.P.(C) 6537/2019 – Delhi HC
  • Blue Bird Pure Pvt. Limited vs. Union of India 2019 SCC OnLine 9250 – Delhi HC
  • SARE Realty Projects Pvt. Limited vs. Union of India [W.P.(C) 1300/2018]
  • Bhargava Motors vs. Union of India [W.P.(C) 1280/2019] -Delhi HC
  • Kusum Enterprises Pvt. Limited vs. Union of India [W.P.(C) 7423/2019] -Delhi HC
  • M/s Aadinath Industries &Anr vs Union of India, W.P. (C) 9775/2019-Delhi HC
  • Lease Plan India Private Limited vs Govt of NCT of Delhi and Ors, W.P.(C) 3309/2019-Delhi HC
  • Godrej & Boyce Mfg. Co. Ltd. vs Union of India, [W.P.(C) 8075/2019] -Delhi HC
  • Krish Automotors Pvt. Ltd. v UOI 2019-TIOL-2153-HC-DEL-GST
  • Adfert Technologies Pvt Ltd v Union of India in CWP No. 30949/2018 (O&M) – P&H HC
  • Hans Raj Sons vs. Union of India & Ors. [CWP 36393/2019]
  • Silicon Constructions Pvt. Ltd. vs. Union of India [CWP 14192-2019]

Further, Hon’ble Supreme Court dismissed the SLP filed to Appeal (C) No.4408/2020 (Adfert Technologies)

Thus, the Assessees who failed to file their TRAN-1 could now file their TRAN -1 till 30.06.2020.  However, one must notice in the decision that the provisions of Section 140 of the CGST Act, 2017 as exmained by the Hon’ble Courts did not incorporate the amendment as brought out by the Finance Act, 2020.   Vide Section 128 of the Finance Act, 2020, Section 140 of the CGST Act, 2017 is amended with effect from 1.07.2017.  Vide the said amendment, the power to prescribe time limit has been introduced in the various sub sections of Section 140 of the CGST Act, 2017.  The said Section is to come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.  Accordingly, Notification No. 43/2020 –Central Tax dated 16.5.2020 notified that the  Central Government has appointed 18.05. 2020 as the date on which the provisions of Section 128 of the Finance Act, 2020 shall come into force.

Thus, with the said notification effecting the amendment of Section 140 of the CGST Act, 2017, one would wonder whether the decision of Hon’ble Delhi Court in the case of Brand Equity (supra).  It is most likely that the government with the enactment of this provision shall now proceed to challenge the decisions of Honble High courts before Hon’ble Supreme Court citing the amendment which has been brought to effect vide Notification No. 43/2020 –Central Tax dated 16.5.2020.  The shortcoming of the Act not providing for timeline is sought to be removed by the amendment as brought out by Finance Act, 2020.  Thus, there are very improtant questions which would lie before Hon’ble High Court:

  • Whether the input tax credit is a substantial right and shall not denied despite the amendment in the CGST Act, 2017 vide Finance Act, 2020?
  • Whether the limitation would now apply to December 27, 2017 or 30.06.2020 as held in the case of Brand Equity?
  • Whether “technical glitches” (as read by Hon’ble Delhi High Court in Brand Equity”) would be read to the benefit of the assessees even after the amendment by Finance Act, 2020?
  • Whether the amendment to Section 140 of CGST Act, 2017 vide Finance Act, 2020 shall be prospective or restrospective?
  • Whether the assessees who have filed their TRAN-1 post December 27, 2017 but before the amendment as effected from May 18, 2020 shall be given

What should assessee do now?

Assessees who failed to file their TRAN-1 should immediately file their TRAN-1 manually on or before June 30, 2020 relying on the judgement of Brand Equity.  They should refer the said decision and file the TRAN-1 manually before their jurisdictional officers.  Also, such assessees should explore the option of filing a writ but in any case they should not miss the deadline of June 30, 2020 to file their TRAN -1,  claim of their eligible Input Tax Credit.  Similar filing of TRAN-2 be done in case of traders claiming Input Tax Credit on opening stock.  I trust Hon’ble Supreme Court would read the provisions in favour of Assessees and should uphold the decisions of all Hon’ble High courts allowing beenfit of Input Tax Credit to the assessees and which have held that mere procedural lapse would not lapse a substantial right.

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