Shree Motors vs. Union of India

The petitioners, who are registered under the Central/State Goods and Services Tax Act, 2017, seek a directive under Article 226 of the Constitution of India. They want to be allowed to carry forward unutilized CENVAT credit of duty paid under the Central Excise Act, 1944, and Input Tax Credit (ITC) of VAT paid under the Punjab Value Added Tax (PVAT) Act, 2005, or Haryana Value Added Tax (HVAT) Act, 2003. The inability to carry forward these credits was due to the non-filing or incorrect filing of the statutory Form TRAN-1 by the stipulated deadline of December 27, 2017. The petitioners argue that their vested rights in the unutilized CENVAT/ITC should not be nullified due to technical or procedural lapses, as such an interpretation would violate Articles 14 and 300A of the Constitution of India and lead to double taxation, which is impermissible in any taxation regime. They had been duly registered under the erstwhile tax regimes and claim that the respondent department has complete records of their unutilized CENVAT/ITC, thus arguing that the department has no authority to deny the credit on technical grounds. Furthermore, they point out that the government extended the deadline to file TRAN-1 until March 31, 2019, for those who could show evidence of attempts to load TRAN-1 by December 27, 2017. They argue that similar leniency should be extended to those who filed incorrect TRAN-1 forms. Additionally, the petitioners assert that no section or rule of the CGST Act, 2017, stipulates that unutilized ITC would lapse if TRAN-1 is not filed by the due date. They suggest that in such cases, a refund in cash should be sanctioned per the proviso to Section 142(3) of the CGST Act, 2017. On the other hand, the counsel for the respondent maintains that the government had extended the period to load TRAN-1 multiple times and that the failure of the petitioners to load TRAN-1 by December 27, 2017, was their mistake. The government allowed those who attempted to load TRAN-1 by the deadline to file it by March 31, 2019. They argue that allowing the petitioners to file TRAN-1 now would set an endless precedent. They also point out that the Gujarat High Court, in Willowood Chemicals Pvt. Ltd. vs. Union of India (2018), upheld the validity of Rule 117 of the CGST Rules, 2017. Therefore, the petitioners, not challenging the vires of Rule 117, are not entitled to relief. Furthermore, on the issue of incorrect filing of TRAN-1, the counsel argues that the petitioners had been given an opportunity to revise TRAN-1 but failed to do so within the prescribed time under Rule 120A of the CGST Rules, 2017. Before dealing with the present controversy, it is useful to look at relevant provisions of the CGST Act, 2017, and the rules made thereunder. Section 140 of the CGST Act outlines transitional arrangements for input tax credit. This section stipulates that a registered person, except those opting to pay tax under Section 10, can carry forward CENVAT credit to their electronic credit ledger if the credit is admissible under the CGST Act. However, credit is not allowed if the person has not filed all returns for the six months preceding the appointed date or if the credit relates to goods cleared under certain exemption notifications. Additionally, registered persons can take credit of unavailed CENVAT credit for capital goods if the credit was admissible under both the existing law and the CGST Act. The section also covers scenarios for registered persons not liable under the existing law or those dealing with exempted goods/services, allowing them to take credit of eligible duties for inputs held in stock, subject to conditions like eligibility for ITC under the CGST Act and possession of invoices issued within twelve months before the appointed date. It also provides provisions for distributing ITC for services received before the appointed day by an Input Service Distributor, even if the invoices are received later. Considering the arguments and provisions, the court issued a notice and a stay petition, making the rule returnable in six weeks. Notices were directed to be given ‘Dasti’ to the counsel for the petitioner for service upon the respondents. In the meantime, the respondents were directed to provisionally entertain the GST TRAN-1 and other returns of the petitioner, either by reopening the portal or manually.

Download PDF:

For reference visit:

Read another case law: