R.R. Distributors PVT. LTD. vs. Commissioner Of Central Tax, GST Delhi North & Anr.

Facts

The Petitioner, R.R. Distributors Pvt. Ltd., migrated to the GST regime and sought to claim transitional input tax credit (ITC) on closing stock of finished goods valued at Rs. 7,44,41,433/-. The Petitioner filed TRAN-1 Form on November 22, 2017, and an additional claim on December 27, 2017. Subsequently, on January 4, 2018, the Petitioner attempted to file TRAN-2 Form to claim ITC of Rs. 17,35,293/- on the stock, as per the proviso to Section 140(3) of the CGST Act, 2017, read with Rule 117(4) of the CGST Rules, 2017. However, the filing was rejected by the system due to the Petitioner not declaring available stock in specific parts of TRAN-1 Form. The Petitioner's attempts to rectify TRAN-1 were blocked as the portal locked after filing, and the GSTN did not respond to their queries.

Held

The Court held that the Petitioner is entitled to claim transitional input tax credit. The Court found that the Petitioner's failure to declare relevant details in TRAN-1 Form was a procedural lapse, not an impediment to their right to claim transitional ITC, especially given the difficulties faced by taxpayers during the initial implementation phase of the GST system. The Court noted that the system did not enable the Petitioner to revise TRAN-1 Form after filing, and the facility for revision, when available, was impractical. The Court also found merit in the submission that taxpayers were not provided sufficient time to upload TRAN-2 Form, as no mandatory time period was specified when the Petitioner attempted to file it. Relying on its previous judgments, including Blue Bird Pure Pvt. Ltd. v. Union of India and Ors., the Court directed the Respondents to either open the online portal for the Petitioner to file a rectified TRAN-1 Form electronically or accept it manually, and thereafter permit the Petitioner to file the TRAN-2 Form, either electronically or manually.

Key Issues

1. Whether the Petitioner is entitled to claim transitional input tax credit under Section 140(3) of the CGST Act, 2017, despite alleged procedural lapses in filing TRAN-1 Form, particularly concerning the declaration of available stock in Part 7B of Table 7(a) and Table 7(d)? - Petitioner's argument: The Petitioner contends that the inability to correctly declare stock in TRAN-1 was an inadvertent error, compounded by the GST portal not being fully functional or allowing revisions after filing. They argue that the system's limitations and the lack of a specified time period for filing TRAN-2 Form initially prevented them from claiming their legitimate transitional credit. They rely on judicial pronouncements from the Calcutta High Court in M/s Subhas & Company v. Commissioner of CGST and CX, Kolkata North Commissionerate & Ors., and various Delhi High Court judgments including Blue Bird Pure Pvt. Ltd. v. Union of India and Ors. - Revenue's argument: The Respondents argued that the mistake committed by the Petitioner in filing TRAN-1 Form with incorrect particulars cannot be remedied, and therefore, the Petitioner should not be permitted to file TRAN-2 Form online.