Circulars issued by Tax Department can’t override, dilute statute, says Chhattisgarh HC

In a significant ruling, Chhattisgarh High Court has said circulars and instructions issued by tax department cannot override statutory provisions. Accordingly, it allowed one time revision in Form TRAN-1 (form to avail Transitional Credit under GST) but within the timeframe as approved by the Supreme Court.

“All circulars and instructions issued by the respondents can be only of clarificatory in nature and it cannot had been diluting the statutory provision or for that matter making the statutory provision redundant,” the Court said while disposing petition filed by Bastar (Chhattisgarh) based Jagdalpur Motors recently.

Earlier, in the matter of Union of India Vs. Filco Trade Centre, the Supreme Court had directed the Government to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months. This was implemented by the Central Board of Indirect Taxes & Custom (CBIC)..

Taking benefit of the ruling, the petitioner did submit their form for transitional credit on the portal, however inadvertently when the said forms was filled in the column showing total outstanding credit inputs, the petitioner’s consultant inadvertently filled it as NIL and immediately the form got frozen. Thereafter, the petitioner tried his best for resetting and revising the same but under the system it was not permissible, nor was it provided and therefore the petitioner has not filed the forms. 4. The petitioner moved an application seeking permission to revise before the authorities concerned. However when nothing happened, he moved to the High Court.

Transitional credit claim

Rule 117 to 120A deals with transitional credit. Post introduction of Goods & Services Tax (GST), special provision was made for credit accumulated under VAT, Excise Duty or Service Tax to be transited to GST. Barring registered dealer opting for composition scheme, all other assessees were given opportunity to avail the transitional credit through filing a return. There is also provision to revise the return once, if filed within specified time period which is November 30 in this case.

The petitioner submitted that when the statute provides for a provision for revising, such a provision could not had been taken away by issuance of a circular. Also, the Supreme Court while directing acceptance of returns till November 30, did not says that one time revision facility will not be available. The High Court accepted the argument and directed the government to allow one time revision but without extending the time period.

Rajat Mohan, Senior Partner with AMRG said that the High Court has rightly affirmed that transitional credit is an established right. However, it needs to be ring fenced to the time limits established by the Apex court, and extending it beyond Nov 30 is not an option. “This ruling would not be good news for many taxpayers who could not file a claim for transitional credit by Nov 30, 2022 due to technical glitches, inadvertent human errors, or cancellation of registration in the past. Besides this, businesses facing operational/legal difficulties under other laws like IBC, corporate laws, and SEBI regulations would have missed this opportunity to claim the tax credit,” he said.

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