Ganges International (P.) Ltd. VS Assistant Commissioner of GST

began, the petitioner transitioned to being registered under the Goods and Services Tax (GST) framework. The petitioner’s grievance pertains to the denial of transitional input tax credit (ITC) under GST for taxes paid under the previous Service Tax regime. This denial was on the grounds of non-filing of Form TRAN-1 within the stipulated time frame.

The petitioner contends that due to technical glitches on the GSTN portal, they were unable to file Form TRAN-1 before the deadline, despite making several attempts. They argue that this was beyond their control and should not result in the forfeiture of their rightful claim to transitional ITC, which they assert was legitimately accrued under the previous tax regime.

The respondents, representing the tax authorities, maintain that strict adherence to the statutory provisions is necessary, emphasizing the importance of timely compliance with transitional provisions to claim ITC under GST. They argue that any failure to meet these deadlines, regardless of technical issues, results in the lapse of the transitional credit claim as per the law.

The High Court, in considering the matter, consolidated several similar writ petitions due to the commonality of the issue. All parties agreed to present their arguments jointly to streamline the proceedings.

The central question before the Court is whether the denial of transitional ITC on account of procedural lapses, particularly those caused by technical glitches on the GSTN portal, constitutes a valid ground for relief under judicial review.

The petitioner’s counsel argued passionately that the denial of transitional ITC in this case amounted to a violation of their rights, as they had fulfilled all substantive requirements under the law but were thwarted by technological failures beyond their control.

Conversely, the respondents countered that while sympathetic to technical issues faced, the legislative intent behind GST transition provisions mandates strict adherence to deadlines for filing Form TRAN-1, irrespective of the circumstances leading to non-compliance.

After extensive deliberation and review of precedents, the High Court opined that while sympathetic to the petitioner’s plight, the statutory framework under GST leaves little room for judicial interference in matters of procedural compliance. The Court noted that the legislation prioritizes the timelines set for transitional credits and concluded that the denial of ITC due to non-filing within the prescribed period, albeit due to technical reasons, was in accordance with the law.

The Court further emphasized the need for businesses to adopt proactive measures to ensure compliance with statutory requirements, including timely filings, and recommended that aggrieved parties pursue legislative remedies if they seek a change in the current framework.

In conclusion, the Court dismissed the writ petitions, affirming the decisions of the tax authorities to deny transitional ITC on grounds of non-compliance with filing deadlines. The judgment underscores the importance of procedural adherence under GST laws while acknowledging the challenges faced by taxpayers in adapting to new regulatory regimes.

migrate to the GST regime from July 1, 2017, due to the implementation of the Goods and Services Tax (GST), several writ petitions were consolidated and heard together. The petitions collectively addressed issues related to service tax liabilities under reverse charge mechanism for services provided at quarries, where the petitioner had paid royalty to the Government of Tamil Nadu for stone mining.

The petitioner, a provider of construction services to both government and private sectors, had previously been registered under the Service Tax Department. They had filed their final service tax return for the period from April to June 2017 by August 15, 2017, marking their transition to the GST regime.

During an audit by the CERA Audit party under the erstwhile regime, it was highlighted that the petitioner was liable to pay service tax under reverse charge for services rendered at quarries where royalty payments had been made to the state government. This liability arose following the issuance of Notification No. 22/2016-ST dated April 13, 2016, which subjected royalty payments for mining to service tax under specific conditions.

The dispute centered on amendments to Section 66 D(a) of the Finance Act, 1994, which broadened the scope of services provided by governments or local authorities to include those taxable under service tax laws. Exemptions and conditions for these tax liabilities were detailed in Notification 22/2016 and subsequent amendments to Notification 25/2012 dated June 20, 2012.

Given the commonality of the issues across these petitions, and with the consent of all involved parties, the court addressed and resolved these matters collectively in a single comprehensive order. prescribed form was required to be filed within the time frame specified therein. Accordingly, the petitioner has filed Form GST TRAN-1 on 21.12.2017 and claimed Input Tax Credit for an amount of Rs.30,88,363/-.
7. It is the case of the petitioner that, since the last date for filing GST TRAN-1 was extended from time to time by the Government, he filed the same on 21.12.2017. However, the electronic system did not accept the same on the ground that the petitioner has not filed his service tax return in ST-3 for the period from April to June 2017. Since the due date for filing ST-3 was 15.08.2017, the petitioner was constrained to file the service tax return in ST-3 belatedly on 01.01.2018. The belated return in ST-3 was also accepted by the Department and an acknowledgment for the same was issued.

In a series of writ petitions consolidated due to common issues, the court addressed concerns related to the transition from the erstwhile service tax regime to the Goods and Services Tax (GST) regime. The petitioner, engaged in providing construction services, had previously operated under the Service Tax Department until the GST regime commenced on July 1, 2017. The transition involved the petitioner filing their last service tax return for the quarter ending June 2017 by August 15, 2017.

An audit conducted by the CERA Audit party under the previous regime highlighted that the petitioner was liable for service tax under reverse charge on services provided at two quarries, where royalty payments were made to the Government of Tamil Nadu for stone mining. This liability arose following the issuance of Notification No. 22/2016 ST dated April 13, 2016, effective from April 1, 2016, which subjected royalty payments to service tax. Despite the petitioner being prompted by the department, they paid Rs. 26,88,460/- as service tax for the period from April 2016 to July 2017, along with Rs. 3,99,625/- in interest.

The petitioner contended that since they were a service recipient and the royalty payments constituted an input service used for providing output services, they were entitled to credit for the service tax paid under reverse charge. However, with the introduction of GST from July 1, 2017, which repealed the relevant Central Excise and Service Tax enactments and replaced the Cenvat Credit Rules, 2004 with the new Cenvat Credit Rules, 2017, transitional provisions under Sections 140 to 142 of the CGST Act allowed for claiming Input Tax Credit (ITC) through filing of GST TRAN-1.

The petitioner faced challenges in availing transitional credit due to technical glitches and other difficulties encountered in filing GST TRAN-1 by the extended deadline of December 27, 2017. Notably, despite having paid the service tax in December 2017 for the period prior to June 30, 2017, the petitioner couldn’t apply for transfer of credit to the electronic credit ledger under GST due to the transitional provisions not aligning with the payment timeline.

Ultimately, the court reviewed these circumstances comprehensively, considering the petitioner’s compliance and the complexities arising from the transition to GST. The decision aimed to resolve the petitioner’s claims in light of the legal framework and transitional provisions, ensuring equitable treatment under the revised tax regime.

In a consolidated approach to address similar issues raised across multiple writ petitions, the court proceeded with hearings after mutual agreement among counsels. The case primarily revolved around the transition from the erstwhile Service Tax regime to the GST regime effective from July 1, 2017.

One of the petitioners, engaged in providing construction services to various sectors, previously operated under Service Tax regulations and subsequently shifted to GST compliance. The petitioner’s transition involved filing their last service tax return for the quarter ending June 2017 by August 15, 2017. During an audit conducted under the erstwhile regime, it was highlighted that the petitioner was liable to pay service tax under reverse charge for services rendered at two quarries, where royalty payments were made to the Government of Tamil Nadu for stone mining. This liability arose due to amendments in tax laws, specifically Notification No. 22/2016 ST dated April 13, 2016, making such royalty payments subject to service tax.

Consequently, the petitioner was prompted by the tax authorities to pay Rs. 26,88,460/- as service tax on the royalty payments made from April 2016 to July 2017, along with an interest amounting to Rs. 3,99,625/-. The petitioner, being a recipient of taxable services, paid this tax under reverse charge and sought credit for the same, asserting that these payments constituted input services used for providing output services.

However, with the introduction of GST from July 1, 2017, replacing the previous Central Excise and Service Tax laws, including the Cenvat Credit Rules, 2004, the process of claiming transitional credits became crucial. Transitional provisions under the CGST Act, 2017 allowed taxpayers to claim Input Tax Credit (ITC) through the filing of GST TRAN-1 within a stipulated period, initially set at 90 days from GST implementation but extended due to technical challenges until December 27, 2017.

In the petitioner’s case, the service tax on royalty payments was paid only on December 30, 2017, after being prompted by the tax authorities. Consequently, the petitioner was unable to utilize GST TRAN-1 to transfer credit to the electronic credit ledger under the new GST regime.

The petitioner then applied for a refund of the service tax paid, claiming it as input tax credit under the erstwhile Cenvat Credit Rules. Despite filing within the prescribed time limit, the application for refund was rejected by the Revenue through Order-in-Original No. 19/2018 dated September 24, 2018. The rejection was based on the absence of specific provisions in the GST regime to accommodate such refund claims for service tax paid under the previous regime.

The petitioner contested this decision through the present writ petitions, arguing that the rejection of their refund claim was unjustified given the transitional nature of the tax regime change and the legitimate claim to input tax credit under previous rules. The court, acknowledging the commonality of issues across petitions, deliberated on the legal provisions, transitional challenges, and the specifics of the petitioner’s claims and defenses.

Ultimately, the court’s decision aimed to resolve the ambiguities surrounding the transition from Service Tax to GST, ensuring fairness and adherence to legal provisions governing such transitions and claims for tax credits and refunds.

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