The Central Board of Indirect Taxes & Custom (CBIC) has prepared uniform response on transitional credit for multiple law suits filed in various High Courts. This move has been initiated even after the Supreme Court staying the May 5 order of the Delhi High court which asked the GST Administration to allow all eligible assessees to file claim for transitional credit by June 30.

Transitional credit or Cenvat credit refers to the use of tax credit accumulated up to June 30, 2017, the last day of the erstwhile Central excise and service tax regime. After many changes, the government permitted submission of the declaration electronically in Form GST TRAN-1, but not beyond March 31, 2020. TRAN-1 is for registered person under GST who may be registered or unregistered under old regime.

However, many assessees alleged that technical glitches at the Tax Department end prevented them from claiming the transitional credit, and approached courts. Among rulings by various High Courts, the one by the Delhi High Court dated May 5 was the most important as it allowed not just the petitioner but all other affected assessees to file claim by June 30.

CBIC, in a note to all the Principal Chief Commissioner and Chief Commissioner of Central Tax, said that issues raised in all law suits are similar in nature. Keeping that in mind a list of policy issues/questions, challenged in various petitions have been prepared along with comments of the Policy Wing of the indirect tax board. The board hopes that there will not be separate reference, barring a new question, to be made by filed formation.

One common argument in various petitions has been Cenvat/ITC is an absolute right and no time frame should be fixed. The response here says: “Cenvat Credits/ITC are not absolute or vested rights over and above statute and are subject to statutory provisions and rule under which they exist.” Here it has also been said that Rule 117 (Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day) or 120A (Revision of declaration in FORM GST TRAN-1) are within the rule making powers of the Central government under the CGST Act 2017. Further, time limit prescribed under rule 117 / 120A of CGST Act, 2017 is rational and mandatory.

“Government cannot be held responsible for negligence and dereliction of duty by a responsible taxpayer,” the note said by adding that any relaxation in norms would jeopardise the government revenue on account of similar demands from other taxpayers who could not file / revise in time due to negligence and it would be difficult for the government to verify bona fides of such claims. Further, if the same ratio is accepted then any time limit provided in fiscal statutes like filing of statutory appeals, claim for refunds, issue of demand notices etc. would be necessarily challenged thereby setting a chaos in the system, the note mentioned.

Another important issue in writ petition is related with challenging Section 28 of CGST Act and a circular dated Jan 2, 2019 retrospectively disallows the transition and carry forward of credit of Education Cess (EC) and Secondary Higher Education Cess (SHEC). The note said that both of these are legal and within the ‘four corners of the statute.’

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