Facts of the Case: M/s Malnad Projects Private Ltd., a company engaged in works contract activities, had approached the Karnataka High Court in W.P.No.10932/2021 seeking a direction to permit it to file or revise Form GST TRAN-1 so as to carry forward unutilised CENVAT credit of duty paid under the Central Excise Act, 1944 and Input Tax Credit under the earlier VAT regime into the GST framework. By judgment dated 25.08.2021, the learned Single Judge allowed the writ petition and permitted the assessee to file/revise TRAN-1 either electronically or manually within thirty days, reserving liberty to the revenue to verify the genuineness of the claim. Aggrieved, the Union of India, the Central Board of Indirect Taxes and Customs, the GST Council and the jurisdictional Central Tax authorities preferred this intra-court Writ Appeal under Section 4 of the Karnataka High Court Act before a Division Bench, seeking to set aside the Single Judge's order.

Issues Involved

  1. Whether the Single Judge was justified in directing the department to permit the assessee to file/revise Form GST TRAN-1 beyond the statutorily prescribed timeline under Rule 117 of the CGST Rules, 2017.
  2. Whether the appeal was covered by, and required a departure from, the Co-ordinate Bench's earlier ruling in W.A.No.18/2020 and connected matters.

Petitioner's (Department's) Arguments

  • The department contended that the timeline for filing/revising TRAN-1 under Rule 117 had statutorily lapsed after successive extensions, and no further indulgence could be granted absent proof of a technical glitch on the common portal.
  • It was submitted that the facts of connected Writ Appeal No.56 of 2020 (relied on in the earlier batch) showed timely filing without availing CENVAT credit, which the department argued should not be treated alike.

Respondent's (Assessee's) Arguments

  • The assessee relied on the Co-ordinate Bench's detailed reasoning in W.A.No.18/2020, which in turn followed the Punjab and Haryana High Court's rulings in Adfert Technologies and Willowood Chemicals, holding that transitional credit is a vested right that cannot be defeated by a procedural time-bar.
  • It was submitted that the Single Judge's order merely restored an opportunity to file/revise TRAN-1, subject to the revenue's liberty to verify the genuineness of the claim on merits.

Court Order / Findings

  • The Division Bench held that the issue was "no more res integra," being squarely covered by the Co-ordinate Bench's judgment in W.A.No.18/2020 and connected appeals, which had itself been followed in W.A.No.461/2020.
  • Extracting paragraphs 49 to 56 of the earlier order, the Bench reiterated that transitional credit under Section 140 of the CGST Act, 2017 is a vested right, and successive amendments to Rule 117 (including insertion of sub-rule (1A) and extensions under Section 172) reflected the legislative intent to accommodate genuine claimants rather than extinguish credit on technical grounds.
  • Finding no reason to interfere with the Single Judge's order, which followed W.A.No.461/2020, the Court held that the department's appeal must fail, and the assessee's liberty to file/revise TRAN-1 stands, subject to the revenue verifying the genuineness of the claim in accordance with law.
  • The Writ Appeal was accordingly dismissed.

Important Clarification

  • Denial of transitional credit purely on the ground of belated or non-filing of TRAN-1, without a finding of ineligibility on merits, does not survive judicial scrutiny where the assessee's claim is otherwise bona fide.
  • Courts have consistently permitted electronic or manual filing/revision of TRAN-1 as a facilitative measure, while preserving the department's right to verify the genuineness of the credit claimed.
  • An intra-court appeal challenging such relief, once the issue is already settled by a Co-ordinate Bench, is unlikely to succeed absent materially distinguishable facts.

Sections Involved

  • Section 140, CGST Act, 2017 — transitional arrangements for carrying forward input tax credit from the erstwhile indirect tax regime.
  • Rule 117, CGST Rules, 2017 — procedure and timelines for filing the declaration in Form GST TRAN-1.
  • Section 172, CGST Act, 2017 — removal of difficulties, under which successive extensions to Rule 117 were issued.
  • Section 4, Karnataka High Court Act — provision under which the intra-court writ appeal was filed.

Decision – In Favour of

In favour of the Assessee. The Division Bench dismissed the department's writ appeal and upheld the Single Judge's order permitting M/s Malnad Projects Private Ltd. to file/revise Form GST TRAN-1, subject to the revenue's liberty to verify the genuineness of the claim.

Related Case Laws

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: W.A.No.1249/2021 (T-RES)
  • CNR: Not indicated on the order
  • Coram: Hon'ble Mrs. Justice S. Sujatha and Hon'ble Mr. Justice Shivashankar Amarannavar
  • Date of Order: 02.03.2022

Link to Download the Order

https://mytaxexpert.co.in/uploads/1787076587_4629compressed.pdf

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