Held by Hon’ble High Court of Madras
In the matter of Commissioner of GST and Central Excise and Ors. v. M/s. Bharat Electronics Ltd. [W.A. No.2203 of 2021 dated November 18, 2021]
M/s Bharat Electronics Limited (“BEL”) was having accumulated ITC in pre-GST regime. The BEL filed TRAN-01 within the time limit permitted under GST Law. However, while filing GST TRAN-01, a very less amount was disclosed in column No. 6-” Cenvat admissible as Input Tax Credit” as compared to actual ITC due to clerical mistake. The BEL filed revised TRAN-01 but failed to rectify this error. The Revenue viewed that the BEL is not entitled to the complete amount of ITC due to such clerical mistake. The Revenue did not allow revision of TRAN-01 once again in accordance with Rule 120A of CGST Rules. Therefore, BEL filed writ petition before Hon’ble High Court of Madras (Singh Judge Bench) and Hon’ble Court permitted revision of TRAN-01 and directed the revenue authority to open the GST portal for such revision. Aggrieved by order, The revenue authority filed an intra court appeal.
In this case, Hon’ble High Court held that The BEL filed the TRAN-01 within time. Only a clerical error was made in Column 6 of TRAN-01. The BEL has substantially complied with Section 140 of CGST Act by filing TRAN-01 in time and ITC was also legitimately earned during pre-GST regime. Therefore, reliance was placed on precedence of Apex court wherein it was held that Some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A clear distinction must be made between provisions of substantive character, i.e., which are built in with certain specific objectives of policy and provisions which are merely procedural and technical in nature. Contention of the Revenue Authority that inadvertent mistake in filling incorrect amount in Column 6 of Form TRAN-1 is an objection which is technical in nature. This could frustrate the very objective of extending the benefit of transition of Input Tax Credit from the erstwhile regime of GST. Also, there has been a consistent view that if there is substantial compliance, denial of benefit of ITC ought not to be frustrated on the ground of technicalities. Thus, Hon’ble High Court affirmed the order of the learned Single Judge.
1. Brief Facts of the Case
- M/s Bharat Electronics Limited (“BEL”) had accumulated Input Tax Credit under pre-GST regime of INR 14,97,28,201/-.
- BEL claimed the ITC by filing Form GST TRAN-01 on 30.10.2017, i.e., within the permitted time period under GST law.
- While filing TRAN-01, BEL disclosed following amounts:
- Column 5(b)-Balance Cenvat Credit- INR 14,97,28,201/-.
- Column 6- Cenvat admissible as Input Tax Credit- INR 80,98,936/- (Mistakenly entered instead of entering complete amount of INR 14,97,28,201/-)
- The Revenue viewed that the BEL is not entitled to Cenvat Credit as filing the wrong figure in Column 6 of form TRAN-1 is fatal to the claim the ITC earned in pre-GST regime.
- As per Rule 120A of CGST Rules, The BEL filed revised Form TRAN-1 on 27.12.2017 but failed to rectify the above mentioned error as the BEL was not aware of such error.
- Therefore, the Revenue believed that amounts given in Column No. 5 and 6 of GST TRAN-01 were correct.
- The Revenue did not allow BEL to revise the GST TRAN-01 once again and therefore, deprived it from availing ITC. Aggrieved by the action of Revenue authority, BEL filed a writ petition before Hon’ble High Court of Madras (Single Judge Bench).
- Hon’ble High Court directed the revenue authority to open the portal for BEL to enableit to file revised TRAN-01.
- Aggrieved by order of Ld. Single Judge Bench, Revenue Authority filed intra court appeal with Madars High Court.
2. Relevant Legal Extracts
Relevant extracts of the statute is reproduced below for ready reference:
- Rule 117 prescribed the manner of transmission of ITC accumulated during pre-GST regime.
“Rule 117: Tax or Duty Credit Carried Forward under any Existing Law or on Goods Held in Stock on the Appointed Day (Chapter-XIV: Transitional Provisions)
(1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in Form GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit to which he is entitled under the provisions of the said section:
3. Contention of the Revenue Authority
The Revenue Authority contended the following points:
- As per Rule 120A of CGST Rules, 2017, form TRAN-01 can be revised only once and that too by 27.12.2017. In the given case, the BEL has already carried out a rectification. Therefore, it was not permissible to carry out one more correction.
- The Revenue Authority also placed his reliance on precedence of:
- Hon’ble Supreme Court in the matter of “ALD Automotive Private Limited v. Commercial Tax Officer, (2019) 13 SCC 225 (ALD Automotive)” and
- Division Bench of Hon’ble High Court of Bombay in the matter of Nelco Limited v. Union of India [2020 SCC Online Bom 437] (Nelco).
- Hon’ble High Court of Allahabad in the case of M/s.Ingersoll-Rand Technologies & Services Pvt.Ltd. Vs. Union of India & 3 others reported in 2019-TIOL-2740-HCALL-GST.
4. Analysis by Hon’ble High Court
Hon’ble High Court of Madras made following analysis:
- Input Tax Credit was available under prior indirect tax laws such as VAT, Entry Tax, Central Excise etc.
- With an objective to transmit the legitimately earned ITC under pre-GST regime, GST law permitted the transition of credit lying unutilised on date of implementation of GST.
- Provisions for transition of ITC were given under Section 140 of CGST Act. This section also provided for certain limitations and exclusions. Further, as per Section 140 of CGST Act, transition should be carried out in the manner provided in Rule 117 of CGST Rules, 2017.
- As per Rule 117, Form TRAN-01 must be filed within 90 days from date of implementation of GST. However, period of such 90 days may be extended by further period not exceeding 90 days.
- In the given case, the revenue viewed that the BEL is not entitled to claim ITC due to filing an incorrect amount in Column No. 6 of Form.
- In the matter of ALD Automotive and Nelco, it was held that ITC is in the nature of concession and any condition attached to it should be strictly construed including limitations, if any. Therefore, time limit given for filing TRAN-01 is mandatory.
- In the given case, the BEL has filed the Form TRAN-01 within time, Therefore, these judgements do not advance the case of the revenue authority.
- Further, in the case of Ingersoll, the assessee was claiming transition of higher amount of credit for the first time after the expiry of the period prescribed through their rectification of form TRAN-1. However, facts in the given case are different.
- Hon’ble High Court concur with the order of single judge directing the revenue Authority to enable BEL filing of revised Form GST TRAN-01 by opening the portal for the following reasons:
- The BEL has filed form GST TRAN-01 within time and the correct amount was entered in Column 5(b). The clerical error was made in Column 6 of GST TRAN-01.
- The BEL has substantially complied with Section 140 of CGST Act by filing TRAN-01 in time and ITC was also legitimately earned during pre-GST regime.
- Also, Reliance can be placed on judgement of Hon’ble Supreme Court in the case Commissioner of Customs vs. Dilipkumar and Co. (2018) 9 SCC 1: 2018 SCC Online SC 747, wherein Hon’ble Apex Court held:
- Doctrine of Substantial compliance was held to be applicable even while considering a claim of exemption.
- Some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A clear distinction must be made between provisions of substantive character, i.e., which are built in with certain specific objectives of policy and provisions which are merely procedural and technical in nature.
- The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the “essence” or the “substance” of the requirements.
- Contention of the Revenue Authority that inadvertent mistake in filling incorrect amount in Column 6 of Form TRAN-1 would prove fatal to the BEL’s claim of ITC, even if they are otherwise entitled to, appears to be an objection which is technical.
- Further, more importantly, this could frustrate the very objective of extending the benefit of transition of Input Tax Credit from the erstwhile regime of GST.
- Hon’ble High Court also held that there is no doubt that ITC is a concession and conditions attached thereto ought to be strictly complied. However, it is equally true that ITC is a beneficial scheme which is framed in larger public interest to bring down the cascading effect of multiple taxes / multipoint taxes.
- Keeping the above objective in mind and the fact that GST was a new law and there were a number of initial hiccups which was taken cognizance of, by the Legislature and Executive and remedial actions were duly taken, including extending timelines for statutory compliance to ameliorate the difficulties faced by the trade.
- Thus, denial to transition of credit for a clerical mistake may not be warranted.
- Also, there has been a consistent view that if there is substantial compliance, denial of benefit of ITC ought not to be frustrated on the ground of technicalities.
- In view of the above, we are inclined to affirm the order of the learned Single Judge.
5. Decision of Hon’ble High Court
Hon’ble High Court of Madras affirmed the order of Ld. Single Judge in directing the Revenue Authority to enable the BEL herein to file a revised Form TRAN-1, by the opening of the portal and that such exercise is to be completed within a period of 8 weeks from the date of an issue this order.