The Hon’ble High Court of Madras vide its order dated 13th April 2022 in the matter of M/s Vetrivel Explosives Pvt. Ltd. Vs. Union of India, Goods and Service Tax Networks (GSTN), Goods and Service Tax Council, The commissioner of GST and Central Excise in Writ Petition (MD) No.8250 of 2021 And W.M.P.(MD)No.6231 of 2021, held that the benefit of unutilized ITC lying in the account cannot be denied, when it could not be transferred to GST regime through filing of Tran-1, due to fire accident in the factory.
The Petitioner preferred the Writ Petition before the Hon’ble High Court challenging the impugned communication dated 19.11.2020 which states that ‘You have neither attempted to file Tran-1 return nor come across any technical glitches at the time of filing TRAN-1 return at GSTN common portal. Hence, it is informed that as per the minutes of the 32nd Council Meeting regarding TRAN-1 Credit, your request for enabling of filing of GST TRAN-1 does not merit consideration.”
- That there was a huge fire accident in the factory of the Petitioner, who is engaged in manufacture of explosives, which resulted in death of few workers.
- That for about two years the factory was closed and after several round of litigation it was opened again in August, 2018 after the change of regime from Central Excise to CGST Act, 2017. The Factory was under lock and seal up till August, 2018.
- That due to aforesaid reasons the Petitioner could not file the GST Tran-1, for carrying forward the credit balance available, as required under Section 140 and Rule 117 of CGST.
- The Petitioner thereafter, made a request to the respondents to allow it to file GST TRAN-1 and the same was rejected.
Petitioner’s Submissions :-
- It was submitted on the behalf of the petitioner that the relief was given to those assesses, vide Notification No. 48/2018 – Central Tax dated 10.09.2018, who could not file the Tran-1 due to technical problems and the application filed by the petitioner has been rejected stating that the petitioner is not entitled to avail the facility under sub-rule (1A) of Rule 117 of the CGST rules.
- Further, reliance was placed on the decisions of Preetha vs. The Goods and Service Tax Council (GST Council), The Commissioner of Central Tax, The Assistant Commissioner Central Tax (GST), M/s.Avatar Petro Chemicals Private Limited, Rep. by its Director K.Satheesh Raja vs. Goods and Service Tax Council, Rep. by its Chairman, Department of Finance, New Delhi and others [W.P.(MD)No. 7093 of 2020, dated 04.03.2022], M/s.Suriya Engineering Works, Rep. by its Managing Partner, Thiru.Ravichelvam vs. The Office of the Superintendent of Control GST and Central Excise (Thiruverumbur Range), Tiruchirappalli [W.P. (MD)No.7377 of 2020, dated 04.03.2022]
Respondents Submissions: –
- It was submitted on the behalf of the respondents that the impugned communication is well reasoned and requires no interference as rule 117 is applicable to the persons, who filed GST Tran -1, not to the persons like petitioner.
- That in absence of any enabling provision in the Rules and Act, the benefit of transitional credit cannot be allowed to the petitioner in the year 2020, when the Tran-1 was required to be filed on or before 27.12.2017.
- It was further submitted referring to the judgment of Delhi High Court in the matter of M/s.Brand Equity Treaties Limited vs. Union of India [W.P.(C)No.11040/2018 and C.M.No. 42982/2018], wherein it was held that ‘period of 90 days for claiming input tax credit in TRAN-1 is directory and therefore, the period of limitation of three years under the Limitations Act would apply’, that the said judgment is not a good law as the same has been challenged before the Hon’ble Supreme Court. Therefore, the petitioner cannot be allowed to avail input tax credit in Tran-1.
- The Hon’ble High Court after considering the submissions from the both sides and law applicable on the issue, observed that in the all decisions cited above, the writ petitions have been allowed granting benefit to the assessee.
- Further, the Hon’ble High Court observing that since the input tax credit is equivalent to cash and meant for discharging the tax liability, held that the transition of input tax credit cannot be denied due to a reason that the respondents are unable to permit the belated filing of Tran-1.
- It was further held that the respondents have to credit a corresponding amount in the electronic cash ledger of the petitioner as it was lying unutilized on the cut-off date.
The Hon’ble High Court with the above findings disposed of the Writ petition with a direction to the respondents to verify the availability of input tax credit on the date of accident i.e., 01.12.2016 and also verify the same from the returns filed for the month of October and November 2016. Further, it was directed to allow such credit which remained unutilized on the day of accident, after verification, either by crediting the same in electronic cash ledger or by way of cash refund to the petitioner.