Supreme Court stays Delhi HC’s order on more time to file Cenvat credit

Shishir Sinha | Updated on June 19, 2020

Final hearing on the AGR issue will be in the SC on Tuesday

High Court had asked Tax Dept to allow filing claim till June 30

The Supreme Court on Wednesday stayed 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.

It is a big setback to businesses which were expecting some relief by availing themsleves of accumulated credit as on June 30, 2017.

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.

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. This order was challenged by the GST Administration in the Supreme Court.

Main argument of the Tax Department before the apex was court was that the time limit prescribed for availing transitional credit is ‘mandatory’, ‘rational’ and ‘reasonable’. It stated that Cenvat credit or ITC credits are not absolute/vested rights over and above the statute but subject to the statutory provisions and rules under which they exist.

It also highlighted that limitations for filing return is required for effective administration and smooth functioning of administrative machinery. Further it pointed out that Limitation Act, 1963 cannot override limitations prescribed in a special statute and that the assessee’s case was not attributable to ‘technical difficulties on common portal.’

After the May 5 ruling, the Finance Ministry notified a retrospective amendment in the Central Goods and Services Act (CGST Act 2017) on May 17. Accordingly, it has formally been made effective to prescribe the time limit and the manner for availing ITC against certain unavailed credit under the existing law. The fine print of the amendment makes it clear that the power to prescribe a timeline now emanates from a law enacted by Parliament and not from the sub-ordinate legislation, that is rule. The Delhi High Court’s order was based on rule.

Interestingly, after the amendment notification, the Delhi High Court gave ruling in two similar matters this week. In the first one, it said: “In spite of the amendment, we can say without hesitation that the said decision is not entirely resting on the fact that statute [CGST Act] did not prescribe for any time limit for availing the transition of the input tax credit.

“There are several other grounds and reasons enumerated in the said decision (May 5) and discussed hereinafter, that continue to apply with full rigour even today, regardless of amendment to Section 140 of the CGST Act.”

Then in the second ruling, it asked the Tax Department to open the portal for submission of transitional credit claims, and report compliance by June 19.

Meanwhile, the Punjab and Haryana High Court ordered the GST Administration to permit all eligible assessees to file claim by June 30 and in case the facility is not provided, then the assessee can use accumulated transitional credit in settling GST (Goods & Services Tax) liability in July.

Now, it is expected that there will be no execution of all these orders.

Published on June 19, 2020

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