Time Limit for filing Form Tran-1

  • Blog|GST & Customs|
  • 4 Min Read
  • By Taxmann
  • |
  • Last Updated on 23 March, 2021

1. Introduction

The Apex Court has recently dismissed the Special Leave Petition filed by the Union of India[2020] 115 taxmann.com 29 (SC) against the order of Punjab and Haryana HC in the case of Adfert Technologies [2019] 111 taxmann.com 27 (Punjab & Haryana)which permitted assessee to file Form Tran-1 after 27-12-2017.

The issue pertains to carry forward of credit from the erstwhile regime to the GST regime where Form TRAN-1 was:

  • either not filed with no evidence of an attempt to load TRAN 1 or
  • filed with incorrect details
  • within the time limits provided under Rule 117 of the CGST Rules.

On this issue, hundreds of companies have filed WRIT petitions before various High Courts seeking permission to carry forward Cenvat Credit of Excise/ST or Input Tax credit of VAT paid under the erstwhile tax statues which could not be carried forward due to non-filing or incorrect filing of TRAN-1 within the time limits prescribed by the law.


2.Background & Legal Provisions

Section 140 of the GST Act provides for transitional provisions for input tax credit. The relevant provisions of the said section are summarized below:

The registered person who is not opting for composition scheme under GST regime can carry forward credit of erstwhile regime in GST regime through Form TRAN-1.

The registered person shall not be allowed to take credit in few cases. For instance where the amount of credit is not admissible as ITC under GST or where he has not furnished all the returns for immediately preceding 6 months before the GST implementation date, i.e., 1-7-2017.

A registered person is also entitled to take credit of the unavailed CENVAT credit for capital goods which is not carried forward in a return furnished under the existing law.

A registered person who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services or falling under any specified category shall be entitled to take credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the certain prescribed conditions.

3. Judgment of Punjab & Haryana HC in case of Adfert Technologies (P.) Ltd.

The Apex Court has recently dismissed the SLP filed by GOI against the order of Hon’ble Punjab & Haryana HC in case of AdfertTechnologies (P.) Ltd. Now, it can be said that the order pronounced by the Punjab & Haryana HC may be referred to as a final interpretation of the law.

Punjab & Haryana HC has laid emphasis on the following:

Insertion of Rule 117(1A) & 120A indicates that the Govt has no intention to deny CF of credits

Introduction of Rule 117(1A) & Rule 120A and absence of any time period prescribed under Section 140 of the Act indicates that there is no intention of Govt. to deny carry forward of unutilized credit of duties/taxes already paid on the ground of time limit.

As per Rule 117(1A), the Commissioner has the power to extend the date for submitting the declaration electronically in Form TRAN-1 not beyond March 31, 2020 in respect of registered persons who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council has made a recommendation for such extension.

GST System is electronic-based and Form TRAN 1 contains various columns

GST is an electronic-based tax regime and most of the people of India are not well conversant with the electronic mechanism. Most of us are not able to load simple forms electronically whereas there were a number of steps and columns in Form TRAN-1 thus, the possibility of mistake cannot be ruled out.

Transitional Credit is a vested right

The High Court held that unutilized credit arising on account of duty tax paid under the erstwhile acts is a vested right that cannot be taken away on procedural or technical ground.

Denial would violate Article 14 & 300A of COI – Reliance place in case of SiddharthEnterprises (Gujrat HC)

The Hon’ble Punjab & Haryana Court heavily relied on the judgement of Hon’ble Gujrat HC in case of Siddharth Enterprises where it was held that denial of credit of tax under existing Acts would amount to violation of Article 14 & 300A of COI. Notably, Unutilized credit has been recognized as vested right and property in terms of Article 300A of the Constitution of India.

Para 42 of the said judgement of Gujarat HC is very important which is quoted below:

‘Article 300A provides that no person shall be deprived of property saved by authority of law. While right to the property is no longer a fundamental right but it is still a constitutional right. CENVAT credit earned under the erstwhile Central Excise Law is the property of the writapplicants and it cannot be appropriated for merely failing to file a declaration in the absence of Law in this respect. It could have been appropriated by the government by providing for the same in the CGST Act but it cannot be taken away by virtue of merely framing Rules in this regard.’

The above clause can be interpreted as where the CGST Act provides time limits/power to notify time limits for filing of TRAN-1 then only non-filing of same within such time would result into denial to carry forward of Cenvat Credit/ITC.

Amendment Proposed by Finance Bill 2020

Clause 126 of Finance Bill, 2020 has brought a retrospective amendment in Section 140 to prescribe the time limits for taking transitional credits. The amendment is proposed to have been made with effect from 1-7-2017. The amendment is obviously made to nullify the effect of the various judgments of Courts.

Our Comments:

If the amendment to Section 140 proposed by Finance Bill, 2020 is approved by both the Houses of Parliament, then the both the judgment of Punjab & Haryana High Court in the case of Adfert Technologies and Gujarat High Court in the case of Siddharth Enterprises will have no impact.

The courts in their order have held that the transitional credit is property under Article 300A of the Constitution and it is a vested right. Denying such credit would be a violation of Article 14 of the Constitution of India. It has been provided that the denial to carry forward such credit would be arbitrary and thus, violate Article 14 of the Constitution of India.The Constitution is the supreme law. The Parliament has the power to enact laws but such power should be exercised within the four boundaries of Constitution. In simple words, Parliament cannot override the constitution. Once it is concluded that denial of credit is a vested right and arbitrary under Article 14 of Constitution of India, the amendment as proposed vide Finance Bill, 2020 cannot be justified.

However, once the said amendment is made effective, it will again start another round of litigation on this issue

Also Read: Taxmann’s Highlights of the Finance Bill, 2021 (Indirect Tax Laws)

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