The Delhi High Court on Tuesday made it clear that retrospective amendment to the Central Goods & Services Taxes (CGST) Act will not stop various assessees from availing the transitional arrangement of input tax credit (ITC), better known as accumulated transitional credit.

This means the court’s decision dated May 5 allowing all GST assessees to claim the accumulated dues by June 30 will be applied with full rigour.

Transitional credit refers to the use of tax credit accumulated up to June 30, 2017, that is the last day of the erstwhile central excise and service tax regime. After many changes, the government permitted electronic submission of declaration in Form GST TRAN-1 but not beyond December 31, 2019. However, many assessees alleged that technical glitches at the tax department’s end stopped them from claiming the transitional credit. Many of them approached the court and one such matter was disposed of by the Delhi High Court on Monday.

“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 any time limit for availing the transition of the input tax credit. There are several other grounds and reasons enumerated in the said decision and discussed hereinafter that continue to apply with full rigour even today, regardless of amendment to Section 140 of the CGST Act,” a two-judge Bench said in a matter that had SKH Sheet Metals Components as the petitioner.

Post the May 5 decision, the Finance Ministry notified amendments on May 16. Accordingly, the power to prescribe a time limit for filing TRAN-1 has been provided by the insertion of words ‘within such time´ in Section 140 with retrospective effect from July 1, 2017. It has been argued that now that the amendment specifically provides for prescribing a time limit for filing TRAN-1 Form, the period so provided under Rule 117 would have legal sanctity, and therefore, the factor which weighed with the court to hold (in its May 5 decision) that the limitation period provided under Rule 117 for filing TRAN-1 is merely directory and not mandatory, no longer holds good.

Tax dept gets the stick

While rejecting this argument, the Bench came down heavily on the tax department saying “the case before us demonstrates how the tax department has miserably fallen short of the expectation.”

“It is regrettable that respondents (tax department) have failed to address the basic and fundamental problem faced by the petitioner that occurred while filing a form, seemingly on account of a bona fide or inadvertent mistake. Instead of offering a restitutive solution, they have stonewalled all the attempts made by the petitioner The injustice and prejudice caused to the petitioner is profound and its disillusionment and despair is evident. Therefore, we cannot uphold the stand of the respondent which is founded on some illogical understanding of the rules,” it further said.

According to the Bench, only if respondents were to engage with the taxpayers with a genuine intention to solve the problems, confidence in the system can be built and such matters would not reach courts. The Bench permitted the petitioner to revise the TRAN-1 Form on or before June 30 and transition the entire ITC, subject to verification by the respondents.