* IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 29.05.2020 Pronounced on: 16.06.2020 + W.P.(C) 13151/2019 SKH SHEET METALS COMPONENTS ..... Petitioner Through: Mr. Dharnendra K. Rana, Advocate with Ms. Anshika Aggarwal, Advocate. versus UNION OF INDIA & ORS. ..... Respondents Through: Mr. Sreemithun, Advocate for UOI. Mr. Harpreet Singh, Standing Counsel for GST. CORAM: HON BLE MR. JUSTICE MANMOHAN HON BLE MR. JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J 1. Petitioner has invoked Article 226 of Constitution of India for seeking writ of mandamus directing Respondents to allow it to avail short transitioning of Input Tax Credit ( ITC ) amounting to Rs. 5,51,33,699/- by either updating electronic credit ledger at their back end,in accord with details of credit submitted by Petitioner or allowing them to revise Form GST TRAN-1, in conformity with returns filed under existing laws that stand repealed by Central Goods and Service Tax Act, 2017 ( CGST Act ). W.P.(C) 13151/2019 Page 1 of 32 BRIEF FACTUAL BACKGROUND 2. Petitioner- SKH Sheet Metals Components Private Limited, set up its unit at Pune, Maharashtra for manufacture of final products and sale to OEMs. indirect tax structure prevailing in India, prior to 1st July, 2017, comprised of multifarious duties and taxes imposed by Centre as well as States. Excise duty was levied under Central Excise Act, 1994 ( Excise Act ) on manufacture of excisable goods; service tax was imposed under Finance Act, 1994 ( Finance Act ) on provision of services in taxable territory. Similarly, sale of goods was exigible to Value Added Tax ( VAT ) imposed under respective State VAT enactments and Central Sales Tax ( CST ) under Central Sales Tax Act, 1956 ( CST Act ), depending on whether goods were sold intra-state or inter-state. [hereinafter legislations referred hereinabove are being collectively referred to as Existing Laws ]. In this regard, Petitioner obtained registration with jurisdictional authorities under various legislations listed hereinabove. It also availed CENVAT credit of specified duties and taxes paid on inputs, capital goods and input services in terms of Cenvat Credit Rules, 2004 ('Credit Rules') and input tax credit of VAT paid on purchases in terms of Maharashtra VAT Act, 2002 ( MVAT Act ). Petitioner periodically filed returns by way of forms specified under above-noted legislations, and declared details of input balance of credit, credit availed during return period, and closing balance of credit available for carry forward for next period. For period ending 30th June, 2017, closing balance of credit available for carry forward, as declared by Petitioner, reflects figures tabulated hereunder: W.P.(C) 13151/2019 Page 2 of 32 Return Amount (Rs.) ER-1 3,86,54,605/- ST-3 1,64,79,081/- Form 231 1,01,24,382/- TOTAL 6,52,58,081/- 3. indirect tax regime had its watershed moment with advent of Goods and Service Tax, which has become operational by way of several enactments [hereinafter referred as GST laws ], w.e.f. 1st July, 2017 ( Appointed Date ) and existing laws stand repealed. GST laws framed by parliament and state legislatures, recognize fact that taxpayers had ITC under existing laws, and provide for elaborate transitional arrangements to save pending as well future claims relating to existing law made before, on or after appointed day. In order to achieve this objective, GST laws permit registered persons to migrate amount of CENVAT Credit that was carried forward in returns under existing laws in electronic credit ledger under GST laws. 4. Petitioner asserts that it is entitled to transitional credit of Rs. 6,52,58,081/- comprising of Central Excise Cenvat credit of Rs. 3,86,54,605/-, Service Tax Cenvat credit of Rs. l,64,79,081/- and Input MVAT credit of Rs. l,01,24,382/. In order to avail credit in electronic W.P.(C) 13151/2019 Page 3 of 32 credit ledger under GST laws, on 27th August, 2017, much before last date specified by Central Government, Petitioner filed Form prescribed for this purpose, known as GST TRAN-l . However, on submission of said Form, Petitioner realized that as against total credit of Rs. 6,52,58,081/-, only Rs. l,01,24,382/- was reflected on common GST portal. CENVAT credit of Rs. 5,51,33,6991/- comprising of Central Excise and Service Tax of Rs.3,86,54,605/- and Rs.1,64,79,0811/- respectively was not displayed in electronic credit ledger. 5. Vide email dated 9th October, 2017, Petitioner brought mismatch to notice of Respondents, and difficulty faced in utilization of entire credit, since Cenvat under Central Excise and Service Tax had not been replicated in Electronic Credit Register. Respondents suggested that since common portal itself enables taxpayers to make necessary amendments, Petitioner could avail said option to rectify error. Around this time, Respondents issued Order number 9/2017 GST, extending date of filing for GST TRAN-1 till 27 December 2017. Petitioner claims that it filed revised declaration in nature of Form GST TRAN-I on 27th December, 2017 and reflected correct figures under column 5(a) of Form, however, amount was still not transferred to electronic credit register and was shown as blocked credit . Petitioner then registered complaint dated 5th February, 2018, with GST helpdesk. GST helpdesk duly acknowledged complaint, generated request ID and informed Petitioner that they were working on issue and status thereof shall be updated and intimated. W.P.(C) 13151/2019 Page 4 of 32 6. Thereafter, Petitioner vide letter dated 6th February, 2018, made further representations to Assistant Commissioner of CGST as also to Principal Commissioner of CGST, Pune Commissionerate. However, said complaint did not translate into any positive outcome. In meantime, CBIC issued circular granting relief to taxpayers who had faced IT glitches at stage of filing original or revised return on Goods and Service Tax Network ( GSTN ) portal. Petitioner worked towards availing benefit of said circular and submitted representation dated 12 th April, 2018 to Deputy Commissioner of CGST as also Principal Commissioner of CGST, but this attempt also turned out to be futile. Subsequently, Respondents issued trade notice No. 33/2018 dated 19th April, 2018 intimating about formation of IT Grievance Redressal Committee ( ITGRC ) for purpose of resolution of difficulties faced by taxpayers in filing returns Forms. In order to avail benefit of said notice, Petitioner, yet again pursued matter with Respondents and vide email dated 24th April, 2018, submitted another representation in prescribed format. In response thereto, Office of Principal Commissioner, CGST vide email dated 25th April, 2018 sought clarification on various points which were promptly provided on 26th April, 2018. receipt of said communication was acknowledged by authorities vide email dated 4 th May, 2018, stating that it is acknowledged that grievance received by you to this office has been forwarded to Nodal Officer, GSTN, to take necessary action against your complaint at their end . However, aforesaid representations also did not bring forth any favorable outcome. Nevertheless, Petitioner continued to follow up with Respondents, W.P.(C) 13151/2019 Page 5 of 32 seeking rectification of problem. Petitioner s AR also made personal visits to Office of Principal Commissioner of CGST and each time he was informed that issues raised by Petitioner were being examined and shall be resolved after due and proper verification. 7. When all efforts made by Petitioner failed, it filed Writ Petition No. 712/2018 before Bombay High Court. During course of hearing, counsel representing Respondents informed Court that GST Council in its 32nd meeting had resolved that ITGRC which was originally mandated to consider cases relating to technical glitches, would now also consider cases involving human errors and it would be appropriate for Petitioner to make representation before Jurisdictional Commissioner who upon examination and satisfaction of grievance of Petitioner, shall forward case to Respondent No. 2 for undertaking appropriate action. note produced by Respondents inter alia reads as under: Petitioners can make representation to jurisdictional Commissioner about issue. same will be examined and jurisdictional Commissioner if prima facie satisfied, will forward same to Secretariat GST Council with copy to ITGRC. decision will be taken at that level and communicated to Petitioners. 8. After considering contents of note and minutes of 32 nd GST Council meeting, Bombay High Court vide order dated 27.02.2019 disposed of petition with direction to Petitioner to file representation before concerned Authorities in terms of 32nd GST Council meeting. said is extracted hereunder: 1. In light of note placed on record by Shri Mishra W.P.(C) 13151/2019 Page 6 of 32 annexing therewith Office Memorandum dated 19th February, 2019 issued by Government of India, Goods and Service Tax Council seeking to address certain non technical issues, namely, human errors and putting in place mechanism to take corrective measures, we do not think anything survives in this writ petition. It is disposed of. 2. However, learned counsel for petitioner brings to our notice that cut-off date mentioned in this Office Memorandum is 25th February, 2019 whereas this Office Memorandum is dated 19th February, 2019. This period is hopelessly inadequate for accessing authorities and by emode. On instructions, Shri Mishra says that if petitioner forwards its requests or grievances within period of one week from today, concerned authorities will attempt to redress them and will not throw them out only on ground that they are received beyond cut-off date. statement made by Shri Mishra, on instructions, is accepted as undertaking to this Court. (Emphasis Supplied) 9. Accordingly, Petitioner filed yet another representation before Respondent No. 4. This representation was acknowledged by Respondents vide communication dated 13th May, 2019 intimating him that representation had been forwarded to Respondent No. 3, vide letter dated 14th March, 2019. Ultimately, vide letter dated 12 th July, 2019 case of Petitioner was rejected by ITGRC and prospect and possibility of resolution were finally put to rest. relevant portion of letter is extracted hereinbelow: Your representation pertaining to TRAN-1 credit was forwarded to this office by Nodal Officer, CGST, Pune-I Commissionerate vide e-mail dated 27/04/2018. It was submitted to IT Grievance Redressal Committee (ITGRC) for W.P.(C) 13151/2019 Page 7 of 32 appropriate decision in matter. As per decision received from ITGRC, your case has not been approved. decision has already been communicated by this office to Nodal Officer, CGST, Pune-I Commissionerate vide e-mail dated 20/03/2019. 10. Since letter rejecting Petitioner s case did not elucidate any reasons for rejection, Petitioner vide letter dated 1st August, 2018 requested Respondents to provide them reasons for denial. No response was received to said letter. Petitioner then filed RTI application requesting for reasons for rejection. This request was turned down in following manner: This information sought under RTI does not fall under definition of Information transitional credit as per section 2(f) of RTI Act, 2005. CIC vide its decision No. CIC/POWER/A/2017/105911 dated 01.12.2017 held that '...RTI Act is not proper law for redressal of grievances and that there are other appropriate fora for resolving such matters... ' Hence, no further action is required in matter. 11. In above factual background, Petitioner has filed present writ petition, invoking extraordinary writ jurisdiction of this Court under Article 226 of Constitution of India. SUBMISSIONS OF PARTIES 12. Learned counsel for Petitioner narrated factual background and argued that Respondents have acted in most unreasonable manner by denying Petitioner benefit of transitional provision without any cogent reason. Petitioner is seeking transition of ITC that had accrued and vested in its favour under erstwhile regime. Petitioner had acted promptly and W.P.(C) 13151/2019 Page 8 of 32 filed statutory GST TRAN-I form within specified time. However, since there was bona fide error in filling same, Petitioner filed revised return correcting same and yet, entire credit is still not exhibited in electronic credit ledger. short transitioning is due to some problem at Respondent s end. issue was flagged, but was not rectified on account of frivolous and baseless reasons. He further argued that Petitioner has been tirelessly following up with Respondent and submitted litany of complaints and representations, however all of those have fallen on deaf ears. conduct of Respondents reflects their narrow mindset and attitude in resolution of troubles faced by taxpayers. They are only interested in finding ways and means to deny Petitioner benefit which is legitimately due to it. Learned counsel for Petitioner also relied upon several decisions such as Blue Bird Pure Private Limited (Delhi High Court) W.P.(C) 3798/2019, Adfert Technologies Private Limited (P&H High Court) CWP No. 30949/2018(O&M), Vertiv Energy India Private Limited (Delhi High Court) W.P.(C) 10811/2018, Lease Plan India Private Limited (Delhi High Court) W.P.(C) 3309/2019, Godrej & Boyce Manufacturing Company Limited (Delhi High Court) W.P.(C) 8075/2019, JakapMetind Private Limited (Gujarat High Court) R/Special Civil Application No. 19951/2018 and Siddharth Enterprises (Gujarat High Court) R/Special Civil Application No. 5758/2019 to argue that several Courts have permitted similarly situated taxpayers to file Form GST TRAN-1 beyond stipulated period of time. This Court has also come to rescue of several taxpayers who had faced difficulties in filing statutory form GST TRAN-1 on GSTN portal, within period specified. Courts have in fact, gone step further and extended benefit even to those W.P.(C) 13151/2019 Page 9 of 32 taxpayers, who may not have faced technical glitch on portal but were otherwise prevented in filing TRAN-1 form on account of certain human errors or factors and reasons which were beyond their control. In this regard, learned counsel for Petitioner specifically relied upon decisions of this Court in case of M/s Blue Bird Pure Pvt. Ltd. vs. Union of India &Ors. 2019 SCC OnLine Del 9250 as also case of A.B. Pal Electricals Pvt. Ltd. v. Union of India [W.P.(C) 6537/2019] decided vide judgment dated 17th December, 2019. above-noted cases, were not strictly covered by concept of technical glitches , however, considering fact that GST system was still in trial and error phase as far as its implementation is concerned, Court agreed to fact that certain taxpayers were having genuine difficulties in filing returns and claiming input tax credit through GSTN portal and allowed filing of TRAN-1 Form beyond stipulated date. Learned Counsel also relied upon detailed decision rendered by this Court recently in batch of cases titled as Brand Equity Treaties Ltd. And Ors. v. Union of India, [2020] 116 taxmann.com 415 (Delhi). He argued that Petitioner s case is identical to one of cases decided in said batch i.e. Micromax Informatics Ltd. v Union of India [WP(C) No. 196/2019], where Court had taken note of facts similar to this case and allowed belated filing of TRAN-1. In said case, Court also held that Rule 117 of GST Rules is directory in nature in so far as it prescribes time limit for transitioning of credit and it cannot result in forfeiture of rights of taxpayers, if same is not availed within period prescribed therein. Accordingly, this Court allowed taxpayers to avail input tax credit by permitting them to file TRAN-1 form on or before 30th June, 2020. Learned counsel for Petitioner further submitted that W.P.(C) 13151/2019 Page 10 of 32 irrespective of said decision, since admittedly TRAN-1 form in case of Petitioner was filed well before specified date, notwithstanding benefit granted by Court in said judgment, Petitioner is entitled to transition credit. 13. Mr. Harpreet Singh, Senior Standing Counsel for GST on other hand opposed petition and submitted that Petitioner is not entitled to benefit being sought in present petition. Mr. Harpreet Singh argued that Petitioner can also not avail benefit of judgment of this Court in case of Brand EquityTreaties Ltd. (supra), as recently, with passing of Finance (Amendment) Act, 2020 which has been given presidential assent on 27th March, 2020, Section 140 of CGST Act has been retrospectively amended. He submits that vide Section 128 of Finance (Amendment) Act, 2020, words within such time have been inserted in Section 140 (1) and this amendment has been given retrospective effect from 1st July, 2017. Thus, Central Government has been granted power to prescribe time limit for filing TRAN-1. absence of power to prescribe time limit for filing TRAN-1 was critical factor that weighed with this Court in case of Brand Equity Treaties (supra) to hold that limitation period under Rule 117 for filing TRAN-1 is merely directory and not mandatory. But, by virtue of retrospective amendment, there has been change in circumstances and benefit of judgment in case of Brand Equity (supra) is no longer available to Petitioner. Mr. Harpreet Singh further argued that ITGRC set up vide circular No. 39/13/2018 dated 3rd April 2018, examined Petitioner s case, but did not find any merit, for granting relaxation, considering fact that there was no technical glitch W.P.(C) 13151/2019 Page 11 of 32 faced by Petitioner while uploading TRAN-1 Form. case of Petitioner fell in category taxpayer has successfully filed TRAN-I, but no technical error has been found . Since Petitioner did not encounter any technical glitch on portal, his request to file revised TRAN-1 form beyond limitation period was not accepted. Mr. Harpreet Singh further argued that pursuant to directions given by Bombay High Court in Petitioner s earlier writ petition No. 712/2019, its representation was considered again by ITGRC. However, since discrepancy in electronic credit ledger is because of human error, benefit of aforenoted circular has not been extended to Petitioner. ANALYSIS AND FINDINGS 14. issue raised by Petitioner is not new, but recurrent one. Petitioner before us made attempt to transition available credit under existing laws by filing Form TRAN-1, but electronic credit ledger under GST laws does not reflect entire credit. ITC seems to have vanished in rigmarole of statutory GST Forms. credit actually available for transition and what was actually transferred, can be explained by following tabulation: Form TRAN-I filed on 27.8.2017 under Credit Credit not Section 140(1) of CGST Act for actually transitioned transitioning closing balance of credits transitioned to in erstwhile returns in Electronic Electronic Credit Credit Ledger of Ledger of Petitioner Petitioner Erstwhile Return Amount (Rs.) Amount (Rs.) Amount (Rs.) W.P.(C) 13151/2019 Page 12 of 32 ER-1 (Excise) 3,86,54,605/- 1,01,24,382/- 5,51,33,699/- ST-3 (Service Tax) 1,64,79,094/- Form 231 (Maharashtra 1,01,24,382/- VAT) TOTAL 6,52,58,081/- 1,01,24,382/- 5,51,33,699/- 15. aforesaid error occurred while filing requisite TRAN-1 , as apparently Petitioner failed to fill in correct details in right column, which is evident from screenshot of Form GST TRAN-1, annexed along with petition. same is extracted hereinbelow: Sr. Registration no. under Tax Date of filing Balance CENVAT Credit No. existing law period of return CENVAT credit admissible as ITC 1. AACCV0528KXM001 062017 10/07/2017 3,86,54,605.00 1,01,24,382.00 2. AACCV0528KST001 062017 13/08/2017 1,64,79,094.00 0.00 16. When we make comparison of figures reflected in screenshot with those in statutory returns, it is revealed that credit which was reflected in Form 231 under Maharashtra VAT Act of Rs. 10,124,382/- instead of being added to remaining amount reflected in tax returns under Excise Act (ER-1) and Service Tax Act (ST-3), was instead erroneously reflected under heading CENVAT Credit admissible as ITC . Thus, for this clerical mistake, there has been short transitioning of credit, as result whereof , Petitioner stands to lose huge amount of ITC, totaling to Rs. 5,51,33,699/- that stood vested in it sfavour under erstwhile regime. W.P.(C) 13151/2019 Page 13 of 32 GST system and its procedural fallibility and shortcomings 17. stand of Respondent, in nutshell, is that since Petitioner has committed this mistake, it ought to suffer for same. Let us assume that indeed mistake happened purely on account of human error, for which Petitioner alone is worthy of blame. Does it mean that for this blunder, law will provide no restitution and it is fait accompli for Petitioner? In our view, that should never be case and law should provide for remedial avenue. In our view, stand of Central Government, focusing on condemning Petitioner for clerical mistake and not redressing grievance, is unsavory and censurable. Tax laws, as it is, are complex and hard to interpret. Moreover, no matter how well conversant taxpayers may be with tax provisions, errors are bound to occur. Therefore, if tax filing procedures do not provide for appropriate avenue to correct bona fide mistake, same would lead to taxpayers avoiding compliances. We cannot ignore fact that necessary Forms under GST are difficult to identify and Government had to put efforts to assist citizens in understanding procedures. Till date, GST awareness campaigns and citizen outreach programmes are in place to acquaint taxpayers with GST filing procedures. Particularly, with entire system being online, interface between taxpayers and authorities is entirely electronic. This requires some basic fundamental knowledge for using technology. Since GST law is major tax reform in indirect taxation, difficulties faced in filing of statutory forms is understandable. In this process, human errors cannot be ruled out and if they occur, solution is not to criticize taxpayer for fault, but instead, W.P.(C) 13151/2019 Page 14 of 32 Government should endeavour to find resolution. government should support its citizens by making burden of compliance and payment as simple as possible. intent and efforts of Government should be to extend proper assistance, information and education to taxpayers so that they fulfil their obligations. This should be critical area of focus in area of tax administration which would ensure compliance with tax laws and also build confidence amongst taxpayers. Indeed, by explaining significance of payment of taxes, and role that taxpayer plays in building nation, Government endeavors to encourage and motivate citizens to be tax compliant. If we strive to achieve this goal, it is necessary that we must also provide appropriate channels for resolution of their genuine problems. successful resolution, positive response and effective, timebound redressal mechanism is crucial for building confidence amongst taxpayers and for successful tax administration. We have in series of decisions, discussed as to how advent of GST law created challenges for taxpayers because of lack of understanding of procedures provided therein. In fact, in recent decision in Brand Equity (supra), this aspect has been discussed elaborately and we need not reiterate same. Finance (Amendment) Act, 2020 and its impact; Judgment in Brand Equity (supra) 18. To deny Petitioner relief sought by them, only explanation alluded to in counter affidavit is that benefit of judgment of this Court in Brand Equity (supra) is no longer available. It is argued that in view of retrospective amendment to Section 140 of CGST Act, 2017, introduced W.P.(C) 13151/2019 Page 15 of 32 by Finance (Amendment) Act, 2020, there has been relevant change in circumstancesand thus above-said decision is no longer valid. power to prescribe time limit for filing TRAN-1 has been provided by insertion of words within such time in Section 140 with retrospective effect from 1st July, 2017. It has been argued that now that amendment specifically provides for prescribing time limit for filing TRAN-1 Form, period so provided under Rule 117 would have legal sanctity and therefore factor which weighed with this Court to hold that limitation period provided under Rule 117 for filing TRAN-1 is merely directory and not mandatory, no longer holds good. 19. above amendment to Section 140 came to be notified on 18 th May 2020, vide notification No. 43/2020 dated 16th May 2020. Thus, said amendment came into force after date of decision in Brand Equity (Supra). said amendment was also not cited before Court to contest petitions. With that being said, since, there is no specific challenge to amendment introduced by Section 128 of Finance (Amendment) Act, 2020, we do not want to venture into legality of said provision viz-a-viz judgment of Brand Equity (Supra). 20. Nevertheless, all things considered, in spite of amendment, we can say without hesitation that said decision is not entirely resting on fact that statute [CGST Act] did not prescribe for any time limit for availing transition of input tax credit. There are several other grounds and reasons enumerated in said decision and discussed hereinafter, that continue to apply with full rigour even today, regardless of amendment to W.P.(C) 13151/2019 Page 16 of 32 Section 140 of CGST Act. Arbitrary distinction of timelines under Rules 117 & 117 (IA) 21. Petitioner s case has been rejected on ground of being non- technical human error and benefit of Rule 117(1A) has not been given. Let us elaborate on this aspect and note some of relevant provisions. Here, we are concerned only with sub-section (1) of section 140 and Rule 117 and 117(1A). same are extracted below: AmendedSection 140 of CGST Act 140. (1) registered person, other than person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, amount of CENVAT credit carried forward in return relating to period ending with day immediately preceding appointed day, furnished by him under existing law within such time and in such manner as may be prescribed: Rule 117 and Rule 117 (1A) 117. Tax or duty credit carried forward under any existing law or on goods held in stock on appointed day.-(1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of appointed day, submit declaration electronically in FORM GST TRAN-1, duly signed, on common portal specifying therein, separately, amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under provisions of said section: Provided that Commissioner may, on recommendations of Council, extend period of ninety days by further period W.P.(C) 13151/2019 Page 17 of 32 not exceeding ninety days. Provided further that where inputs have been received from Export Oriented Unit or unit located in Electronic Hardware Technology Park, credit shall be allowed to extent as provided in sub-rule (7) of rule 3 of CENVAT Credit Rules, 2004. [(1A) Notwithstanding anything contained in sub-rule (1), Commissioner may, on recommendations of Council, extend date for submitting declaration electronically in FORM GST TRAN-1 by further period not beyond [31st December, 2019], in respect of registered persons who could not submit said declaration by due date on account of technical difficulties on common portal and in respect of whom Council has made recommendation for such extension.] 22. first proviso of Rule 117, stipulates that Commissioner on recommendations of Council can extend period of ninety days for filing TRAN-1, by further period, not exceeding ninety days. As also noticed in Brand Equity (supra), Government amended rules and introduced Sub-rule (1A) empowering Commissioner to extend date for submitting declaration electronically in Form GST TRAN-I by further period (not beyond 31.12.2019). This sub-rule is applicable to registered persons who could not submit said declaration by due date on account of technical difficulties on common portal and in respect of whom GST Council had made recommendation for such extension. This Sub-rule (1A) begins with non-obstante clause - notwithstanding anything contained in Sub Rule (1) . Thus, by introducing said provision, notwithstanding embargo introduced under Rule 117 (1) of W.P.(C) 13151/2019 Page 18 of 32 CGST Rules, Government opened narrow window for registered persons who faced technical difficulties on common portal while filing Form TRAN-1. Central Government has been consistently extending time period for filing Form TRAN-1 even beyond 31.12.2019 for those taxpayers who are covered by Rule 117 (1A). Recently in view of order No. 01/2020-GST dated 7th February, 2020 issued by Government of India, Ministry of Finance, period was extended upto 31st March 2020. Thus, when we contrast time limit stipulated under Rule 117 (1) and Rule 117(1A), we find that time limit of 90 days is not sacrosanct. In Brand Equity (supra), that court has observed that government has not ascribed any meaning to words technical difficulties on common portal and it cannot be interpreted in restrictive manner. relevant portion is extracted hereinbelow: 18. In above noted circumstances, arbitrary classification, introduced by way of sub Rule (1A), restricting benefit only to taxpayers whose cases are covered by technical difficulties on common portal subject to recommendations of GST Council, is arbitrary, vague and unreasonable. What does phrase technical difficulty on common portal imply? There is no definition to this concept and respondent seems to contend that it should be restricted only to technical glitches on common portal . We, however, do not concur with this understanding. Technical difficulty is too broad term and cannot have narrow interpretation, or application. Further, technical difficulties cannot be restricted only to difficulty faced by or on part of respondent. It would include within its purview any such technical difficulties faced by taxpayers as well, which could also be result of respondent s follies. After all, completely new system of accounting; reporting of turnover; claiming credit of prepaid taxes; and, payment of taxes was introduced with implementation of GST regime. basket of Central and W.P.(C) 13151/2019 Page 19 of 32 State taxes were merged into single tax. New forms were introduced and, as aforesaid, all of them were not even operationalised. Just like respondents, even taxpayers required time to adapt to new systems, which was introduced as completely online system. Apart from shortcomings in system developed by GSTN Ltd., assessees also faced challenges posed by low bandwidth and lack of computer knowledge and skill to operate system. It is very unfair on part of respondents, in these circumstances, to expect that taxpayers should have been fully geared to deal with new system on day-one, when they themselves were completely ill-prepared, which led to creation of complete mess. respondents cannot adopt different standards one for themselves, and another for taxpayers. GST regime heralded system of seamless input tax credits. successful migration to new system was formidable and unprecedented task. fractures in system, after its launch, became visible as taxpayers started logging in closer to deadline. They encountered trouble filing returns. Petitioners who are large and mega corporations - despite aid of experts in field, could not collate humongous data required for submission of statutory forms. Courts cannot be oblivious to fact that large population of this country does not have access to Internet and filing of TRAN-1 was entirely shifted to electronic means. Nodal Officers often reach to conclusion that there is no technical glitch as per their GST system laws, as there is no information stored/logged that would indicate that taxpayers attempted to save/submit filing of Form GST TRAN-1. Thus, phrase technical difficulty is being given restrictive meaning which is supplied by GST system logs. Conscious of circumstances that are prevailing, we feel that taxpayers cannot be robbed of their valuable rights on unreasonable and unfounded basis of them not having filed TRAN-1 Form within 90 days, when civil rights can be enforced within period of three years from date of commencement of limitation under Limitation Act, 1963. W.P.(C) 13151/2019 Page 20 of 32 19. introduction of Sub rule (1A) in Rule 117 is patchwork solution that does not recognise entirety of situation. It sneaks in exception, without addressing situations taken note of by us. This exception, as worded, is artificial construction of technical difficulties, limiting it to those existing on common portal. It is unfair to create this distinction and restrict it to technical snags alone. In our view, there could be various different types of technical difficulties occurring on common portal which may not be solely on account of failure to upload form. access to GST portal could be hindered for myriad reasons, sometimes not resulting in creation of GST log-in record. Further, difficulties may also be offline, as result of several other restrictive factors. It would be erroneous approach to attach undue importance to concept of technical glitch only to that which occurs on GST Common portal, as pre- condition, for assesee/tax payer to be granted benefit of SubRule (1A) of Rule 117. purpose for which Sub-Rule (1A) to Rule 117 has been introduced has to be understood in right perspective by focusing on purpose which it is intended to serve. purpose was to save and protect rights of taxpayers to avail of CENVAT credit lying in their account. That objective should also serve other taxpayers, such as petitioners. approach of Government should be fair and reasonable. It cannot be arbitrary or discriminatory, if it has to pass muster of Article 14 of Constitution. government cannot turn blind eye, as if there were no errors on GSTN portal. It cannot adopt different yardsticks while evaluating conduct of taxpayers, and its own conduct, acts and omissions. extremely narrow interpretation that respondents seek to advance, of concept of technical difficulties , in order to avail benefit of Sub Rule (1A), is contrary to statutory mechanism built in transitory provisions of CGST Act. legislature has recognized such existing rights and has protected same by allowing migration thereof in new regime under aforesaid provision. In order to avail benefit, no restriction has been put under any provisions of Act in terms of time period W.P.(C) 13151/2019 Page 21 of 32 for transition. time limit prescribed for availing input tax credit with respect to purchase of goods and services made in pre-GST regime, cannot be discriminatory and unreasonable. There has to be rationale forthcoming and, in absence thereof, it would be violative of Article 14 of Constitution. Further, we are also of view that CENVAT credit which stood accrued and vested is property of assessee, and is constitutional right under Article 300A of Constitution. same cannot be taken away merely by way of delegated legislation by framing rules, without there being any overarching provision in GST Act. We have, in our judgment in A.B. Pal Electricals (supra) emphasized that credit standing in favour of assessee is vested property right under Article 300A of Constitution and cannot be taken away by prescribing time-limit for availing same. . 23. aforesaid reasoning still holds good. Additionally, we would like to observe that rule suffers from vice of vagueness and concept of technical difficulty on common portal and its applicability has not been adequately defined anywhere. Because of absence of any defining words, there is no predictability about application of this Rule for class of cases to which it would apply, as is demonstrated in case in hand. In absence of criteria, application of provision would suffer from arbitrariness. It would be apposite to note that GST Council in its 32nd meeting expanded mandate of ITGRC to include those cases where taxpayers who had been victims of system failure, whether technical or otherwise. This becomes evident from office memorandum of GST Council, dated 19th February 2019, relevant portion whereof is extracted hereinbelow: In 32nd GST Council Meeting, it was decided that ITGRC shall also consider certain nontechnical issues viz. W.P.(C) 13151/2019 Page 22 of 32 errors apparent on face of record, where following conditions are satisfied: i. TRAN-1, including revision thereof, has been filed on or before 27th December, 2017 and there is error apparent on face of record (such cases of error apparent on face of record will not cover instances where there is mistake like wrong entry of amount e.g. Rs. 10,000 /- entered for Rs.1,00,000/- ); and ii. case has been recommended to ITGRC through GSTN by concerned jurisdictional Commissioner or officer authorised by him in this behalf in case of credit of Central taxes/duties, by Central authorities and in case of credit of State taxes, State authorities, notwithstanding fact that taxpayer is allotted to Central or State authority). (Emphasis Supplied) This indicates that GST Council recognized that there could be errors apparent on face of record that could be non-technical in nature and merit leniency. In line with spirit of decision of GST Council and blurring thin line between technical and non-technical difficulty, keeping in view that entire filing is electronic, we find restrictive applicability of Rule 117 (1A) to be arbitrary, as is demonstrated in facts of present case. Concept of ITC and its significance; Whether procedural timelines for TRAN-1 are directory and mandatory? 24. We must not lose sight of real intention of Legislature that emerges by reading scheme of CGST, especially transitional W.P.(C) 13151/2019 Page 23 of 32 provisions and those dealing with ITC. GST seeks to consolidate multiple taxes into one, and thus it is imperative to have provisions to ensure that transition to GST regime is very smooth and hassle-free and no ITC (Input Tax Credit)/benefits earned in existing regime are lost. In fact, uninterrupted and seamless chain of ITC is heart and soul of Goods and Services Tax. This mechanism is built-in to avoid cascading of taxes. Respondents themselves claim one of most important features of GST system is that entire supply chain would be subject to GST to be levied by Central and State Government concurrently. As tax charged by Central or State Governments would be part of same tax regime, credit of tax paid at every stage would be available as set-off for payment of tax at every subsequent stage. ( Ref: GST Flyer; CBIC Website) Significantly, for cases covered under Section 140 (1) of CGST act, ITC under existing laws is vested right. This credit stood vested in favour of taxpayer and would have been utilized for payment of outgoing taxes under respective legislations, but for repeal of existing laws. In order to claim this credit, declaration in form GST TRAN-1 is required to be furnished on common portal within ninety days from appointed day i.e. 1st July, 2017 or within such extended time. Thus, closing balance of CENVAT credit /VAT in last returns filed under existing law can be taken as credit in electronic credit ledger. Such credit would be available only when returns for previous last six months have been filed under existing laws. Thus, on analysis of provisions of Central Goods and Service Tax Act and Rules framed thereunder, mind of legislature on input tax credit becomes clear. transitional provisions and language of section 140 of Act in particular, even W.P.(C) 13151/2019 Page 24 of 32 after amendment, manifests intention behind said provision is to save accrued and vested ITC under existing law. If legislature has provided for saving same by allowing migration under new tax regime, we have to interpret rules keeping this objective in focus. This is reason courts have held that CENVAT credit which stood accrued to Petitioner is vested right and is protected under Article 300A of Constitution of India and could not be taken away by Respondents, without authority of law, on frivolous grounds which are untenable. 25. Now, when we examine timelines framed by Central Government, we must remain focused on importance of aforenoted provisions, in relation to object that is intended to be achieved. At same time, we also have to examine consequences that would follow if we construe provision to be directory and not mandatory. purpose of timelines prescribed is just to hasten migration of taxes from erstwhile regime to new GST laws and for swift streamlining of ITC. timeline introduced by Rule 117 is purely procedural and as discussed above same was not treated as sacrosanct. Central Government has continuously extended same, by carving out exception under Rule 117 (1A). Moreover, under none of provisions of Act, we can infer intention of legislature to create this distinction by way of subordinate legislation. We also cannot decipher any intent to deny extension of time to deserving cases where delay in filing was on account of human error. This interpretation would run counter to object sought to be achieved under Section 140 of Act which is governing provision and exhibits true legislative intent. situation before us is not where W.P.(C) 13151/2019 Page 25 of 32 statute fixes any timelines for transitioning of credit. After retrospective amendment of Section 140, we can interpret that power to fix timeline and its extension has been prescribed to Central Government which was done vide Rule 117. This Rule provides for time period of 90 days and also stipulates that same can be extended for further period not exceeding 90 days. However, under Rule 117 (1A), multiple extensions beyond 180 days have been granted for taxpayers who faced technical difficulties on common portal . Yet, deserving non- technical cases like present one have been ignored and this exclusion is arbitrary and irrational. Moreover, if we were to look for provision in statute that would stipulate consequence for failure to adhere to timelines, we would find none. Rule 117 of CGST rules also does not indicate any consequence for non-compliance of condition. Both Act and Rules do not provide any specific consequence on failure to adhere to timelines. Since consequences for non-consequence are not indicated, provision has to be seen as directory. Pertinently, non- observance of timelines would prejudice only one party- registered person/taxpayer. If we interpret timelines to be mandatory, failure to fulfil obligation of filing TRAN-1 within stipulated period, would seriously prejudice taxpayers, for whose benefit section 140 has been provided by legislature. In view of above discussion, interpreting procedural timelines to be mandatory would run counter to intention of legislature and defeat purpose for which transitionary provisions have been provided and have to be construed as directory and not mandatory. W.P.(C) 13151/2019 Page 26 of 32 Form was originally filed well within prescribed time limit 26. There is another factor that persuades us to come to aid of Petitioner. In instant case, Form TRAN-1 was filed promptly, within stipulated period. Immediately, when Petitioner noticed that entire credit had not been transitioned, it started corresponding with Respondent with hope that matter would be resolved and mistake would be rectified. facts narrated above recount various representations and efforts made by Petitioner in this direction. It saw glimmer of hope when Respondents recognized that taxpayers had faced technical glitches on GSTN portal and created IT Grievance Redressal Committee to redress such issues. However, Petitioner was not extended benefit. Thereafter, when another representation was submitted, pursuant to Bombay High Court order, Petitioner s case was differentiated. It is contended that since Petitioner faced no technical glitch at stage of filing of Form, case does not qualify for any relaxation. decision of ITGRC is contrary to decision of 32nd meeting of GST Council and office memorandum dated 19th February 2019 referred above. GST Council categorically expanded mandate of ITGRC and observed that it would also look into cases where there is error apparent on face of record (such cases of error apparent on face of record will not cover instances where there is mistake like wrong entry of amount e.g. Rs. 10,000 /- entered for Rs.1,00,000/- ). facts before us meet above criteria. Visibly there is error apparent on face of record. ITC reflected in returns has been shown as blocked credit and is not mistake in entry of figures. Yet, before us, Respondents determinedly defend their action. They continue to deny full credit, by further arguing that W.P.(C) 13151/2019 Page 27 of 32 mistake is because of human error and revision is time barred and should be treated as case of fresh-filing. This contention is wholly misplaced. TRAN-1 Form was filed within stipulated period and revision thereof , to correct error, will relate back to said date of filing. We do not see any convincing reason to hold that as on date, revision of said return, will be time-barred and treated to be fresh return. revised data can be easily verified and correlated with tax returns filed in erstwhile regime. In fact, Rule 120A of CGST Rules is enabling provision that can be resorted to, by taxpayers to revise Form GST TRAN-1 on common portal within time specified in rules or such further period as may be extended by Commissioner. In present case, mistake was clerical in nature. It is Respondents who have, for specious reasons, denied this opportunity to Petitioner. Therefore, revision cannot be treated as fresh filing , especially, keeping in view spirit of spirit of 32nd meeting of GST Council, referred above Non-disclosure of reasons for denying claim of Petitioner and arbitrariness in rejection. 27. There is yet another reason that entitles Petitioner to relief sought in present petition. Petitioner s case was considered and rejected by IT Grievance Redressal Committee, despite recommendation of Jurisdictional Commissionerate. It is also pertinent to note that Respondents had given undertaking before Bombay High Court in Writ Petition No. 712/2019 that grievance of Petitioner will be redressed and its case will not be thrown out only on ground that it was received beyond cut-off date. Armed with order of Court, when W.P.(C) 13151/2019 Page 28 of 32 Petitioner submitted fresh representation, Respondents, without giving any cogent reasoning, as is evident from letter dated 12 th July, 2019, reproduced in para 9 above, rejected same. said letter also exhibits complete non-application of mind. For last three years, Petitioner has made countless complaints and representations. Respondents have consistently denied Petitioner opportunity to revise return without disclosing reasons for arriving at this decision except for cryptic one- line rejection order. Petitioner has called upon Respondents time and again to intimate specific reasons for rejection of its case. It also filed RTI application in this regard. However, Respondents have resolutely held on to their stand. For some mysterious reason, grounds for rejection are being withheld, as if, same are some guarded secret. approach of Respondents is grossly unjust and disappointing and we disapprove same. Petitioner, as matter of right, should know specific reasons for rejection of his case so that it can assail same. Respondents had opportunity to disclose such reasons in counter affidavit, and we are surprised to note that despite that, they have chosen to remain silent on main issue. Instead, they have relied upon amendment to Section 140 to prevail upon us that we should not grant benefit to Petitioner in terms of our decision in Brand Equity (supra). 28. stand taken today runs counter to assurance given before Bombay High Court and is also not borne out, from record. It has been argued that discrepancy in figures has crept in because of human error and there is no provision in Act or rules that can be relied upon by Petitioner to reclaim shortfall. restriction that prevents W.P.(C) 13151/2019 Page 29 of 32 Petitioner from taking entire credit by revising return, based on footing of human error and not technical difficulty on common portal is thus wholly unreasonable, being irrational and arbitrary and therefore, violative of Article 14 of Constitution. One-line, non-speaking order relied upon to justify rejection cannot be countenanced. Viewed from another angle, one can construe Petitioner s difficulty as technical in nature, as short credit is reflected as blocked credit on portal, with no provision to rectify same electronically. In absence of any clause defining technical difficulty on common portal , as discussed above, Petitioner s case would even be covered by Rule 117 (1A) of CGST Rules. GST laws required taxpayers to embrace transformative new ways. use of technology can be daunting for many taxpayers who hitherto before, were largely dependent on conventional manual filings of returns. In order to overcome resistance to change and encourage transformation and remodeling of entire accounting structure at taxpayers end, electronic mode should be user friendly. Sadly, Respondents have not helped situation, despite all good intentions they may have. They have further compounded problems for taxpayers by being adamant about their stand and exhibited no flexibility in approach. exactness required in compliance of tax provisions should not be construed so rigidly that permissible flexibility is completely disregarded. In effect, ITC has been expropriated without any lawful sanction. ITC that was shown in returns under existing laws were taxes that stood paid to respective Governments for goods or services and were available for adjustment or utilization in accordance with law. Now, on account of clerical mistake said taxes paid are being appropriated, without cause, W.P.(C) 13151/2019 Page 30 of 32 putting Petitioner in serious jeopardy by subjecting it to further taxation under GST without benefit of ITC. case before us demonstrates how tax department has miserably fallen short of expectation. It is regrettable that Respondents have failed to address basic and fundamental problem faced by Petitioner that occurred while filing Form, seemingly on account of bona fide or inadvertent mistake. Instead of offering restitutive solution they have stonewalled all attempts made by Petitioner injustice and prejudice caused to Petitioner is profound and it s disillusionment and despair is evident. Therefore, we cannot uphold stand of respondent which is founded on some illogical understanding of Rules. We have time and again made adverse remarks on procedural working of GST system in several decisions. We may just add that we do not derive any pleasure when we make such observations, as comments of Court affect reputation of administration in country. Such remarks are made only when we are constrained to do so. case before us is one where there is complete lack of understanding and fairness on part of Tax Department.The fact that Respondents have done nothing to solve problem faced by Petitioner, fueled with adamant stand before us, contributes to skepticism of GST technical infrastructure, which we feel should and can be easily avoided. Only if Respondents were to engage with taxpayers with genuine intention to solve problems, confidence in system can be built up and such matters would not reach courts. 29. For aforegoing reasons, Petition deserves to be allowed. Petitioner is permitted to revise TRAN-1 Form on or before 30.06.2020 and W.P.(C) 13151/2019 Page 31 of 32 transition entire ITC, subject to verification by Respondents. We issue writ mandamus to Respondents to either open online portal so as to enable Petitioner to file revised declaration TRAN-1 electronically, or to accept same manually. Respondents shall thereafter process claims in accordance with law 30. petition is allowed in above terms. SANJEEV NARULA, J MANMOHAN, J JUNE 16, 2020 nk W.P.(C) 13151/2019 Page 32 of 32 SKH Sheet Metals Components v. Union of India & Or