In a significant relief for businesses, the Delhi High Court has held that Input Tax Credit (ITC) cannot be denied merely because the assessee could not file TRAN-1 during the initial transition to the GST regime. The Court directed the authorities to credit ₹99.18 lakh to the assessee’s Electronic Credit Ledger (ECL), acknowledging that the issue arose due to technical constraints on the GST portal.
Background of the Case
The petitioner, Clyde Pumps Pvt. Ltd., approached the Court seeking reflection of eligible transitional ITC amounting to ₹99,18,972 on its GST portal. Despite the credit being clearly shown in the TRAN-1 form, the assessee was unable to submit the form within the prescribed time due to portal-related limitations affecting Input Service Distributors (ISDs) when GST was introduced on 1 July 2017.
Assessee’s Arguments
Counsel Prabhat Kumar argued that ISDs faced acknowledged technical difficulties during the transitional phase from March 2017 to June 2017. The GST system initially did not allow ISDs to file TRAN-1, making it impossible for the petitioner to comply within time. This, according to the assessee, was a system-related lapse and not a failure on its part.
Revenue’s Stand
The Department contended that the issue fell under the jurisdiction of the Delhi GST Department, not the Central GST authorities. However, this argument did not address the core grievance regarding portal limitations.
Court’s Observations
The bench examined Section 140(7) of the CGST Act, which permits ISDs to distribute credit related to services received before the appointed date. Crucially, the Court noted:
- No specific time limit has ever been prescribed for distributing such transitional credit.
- The inability to file TRAN-1 on time was due to portal malfunction, an issue widely experienced by taxpayers.
- Legitimate ITC cannot be withheld because of technical or procedural shortcomings not attributable to the assessee.
Court’s Directions
The High Court ruled that the assessee’s rightful credit must be allowed. It directed the Delhi GST Department to:
- Reflect the amount of ₹99,18,972 in the Electronic Credit Ledger of Clyde Pumps Pvt. Ltd.,
- Complete the process within three months.
Outcome
With these directions, the Court allowed the writ petition, ensuring that the taxpayer receives its eligible transitional credit.
Case Details
- Case Title: Clyde Pumps Pvt. Ltd. v. Union of India & Ors.
- Case Number: W.P.(C) 4400/2022
- Petitioner Counsel: Prabhat Kumar
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Respondent Counsel: Piyush Beriwal