The Madurai Bench of the Madras High Court, in W.P.(MD) No. 7252 of 2020, dealt with a recurring transitional-credit grievance — a manufacturer who filled the wrong part of FORM GST TRAN-1 and could not transition input tax credit on stock held on the eve of the GST rollout into its electronic credit/cash ledger.

Facts of the Case

The Petitioner, M/s Sri Desikanathar Textiles Private Limited, Dindigul District, a manufacturer of Grey Woven Fabric, had sufficient stock of raw materials and work-in-progress on the eve of GST implementation and attempted to transition proportionate input tax credit by filing FORM GST TRAN-1 under Section 140 of the TNGST/CGST Act, 2017 read with Rules 117(1), 118, 119 and 120 of the CGST Rules, 2017. Being new to the GST regime, the Petitioner mistakenly filled the credit details in Part 7(d) instead of Part C of TRAN-1, so the credit could not be transitioned to its electronic ledger. Despite repeated correspondence with the GST Help Desk between 2018 and 2020, the issue remained unresolved, and the Petitioner filed a manual rectified TRAN-1 along with a representation dated 18.06.2020 seeking credit of Rs.11,83,309/-. Having received no favourable response, the Petitioner approached the High Court seeking a mandamus directing the Respondents to consider the rectified manual TRAN-1.

Issues Involved

  1. Whether a bona fide clerical error in selecting the wrong part of FORM GST TRAN-1 can be rectified beyond the extended deadlines for revision.
  2. Whether legitimately available credit under the pre-GST regime can be denied for a purely technical/procedural lapse under Section 140.
  3. Whether the Petitioner's belated approach, given continuous correspondence with the Department, disentitles it to relief.

Petitioner's Arguments

  • The error in filling Part 7(d) instead of Part C of TRAN-1 was a bona fide mistake by a taxpayer new to the GST regime.
  • The Petitioner had been in continuous correspondence with the Department and the GST portal Help Desk since 2018, and filed the rectified manual TRAN-1 promptly after the Department's final response dated 09.06.2020.
  • Denial of legitimately accrued transitional credit for a technical/clerical lapse defeats the object of Section 140.

Respondent's Arguments

  • If any mistake was committed, the Petitioner ought to have filed an application under Rule 120A of the CGST Rules, 2017 within the extended windows notified by the Government (Orders dated 18.09.2017, 28.10.2017 and 15.11.2017, extending the revision deadline to 31.10.2017).
  • The Petitioner approached the Department only on 18.06.2020 — long after the period of limitation — so the writ petition had no merit.

Court Order / Findings

  • The Court found the Petitioner had been regularly following up with the Department and the GST portal Help Desk since 2018, culminating in the Department's own communication dated 09.06.2020 acknowledging TRAN-1 had been filed under the wrong part.
  • Referring to its own decisions in M/s.Ram Auto v. Commissioner of Central Taxes and Central Excise, Madurai and Commissioner of GST and Central Excise v. M/s.Bharat Electronics Limited, and the Delhi High Court's M/s.Blue Bird Pure Pvt. Ltd. v. Union of India, the Court held that denial of Input Tax Credit, a beneficial scheme, ought not to be frustrated on technicalities where there is substantial compliance.
  • The Court also relied on the Supreme Court's ruling in Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd., holding that credit legitimately availed under the erstwhile regime is indefeasible.
  • The writ petition was allowed subject to the credit sought to be transitioned containing correct details; the jurisdictional officer was directed to scrutinise and verify the claim and, if genuine, allow the Petitioner to file a revised TRAN-1 or directly credit the amount to its electronic ledger, to be completed within 3 months.

Important Clarification

  • The GST Act does not provide for lapsing of legitimately accrued transitional credit merely because it could not be transitioned due to a technical error in FORM TRAN-1.
  • Where an assessee shows substantial compliance and continuous bona fide efforts to correct a TRAN-1 error, courts will direct verification and restoration of credit rather than deny it outright on limitation or technical grounds.
  • Relief is conditional — the Department retains the right to verify correctness and genuineness of the claimed credit before crediting it.

Sections Involved

  • Section 140, CGST Act, 2017 — transitional arrangements for input tax credit carried forward from the pre-GST regime.
  • Rules 117, 118, 119 and 120, CGST Rules, 2017 — procedure and forms (TRAN-1) for claiming transitional credit.
  • Rule 120A, CGST Rules, 2017 — revision of declaration in FORM GST TRAN-1.

Decision – In Favour of

In favour of the Assessee. The writ petition was allowed, with the Department directed to verify and, if the claim is found genuine, credit the transitional input tax credit of Rs.11,83,309/- to the Petitioner's electronic ledger.

Related Case Laws

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: W.P.(MD) No. 7252 of 2020 with W.M.P.(MD) No. 6687 of 2020
  • Coram: Justice C. Saravanan
  • Date of Order: 24.02.2022

Link to Download the Order

https://mytaxexpert.co.in/uploads/1787078713_4656compressed.pdf

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