M/S Fci Oen Connectors LTD vs. The State Of Karnataka
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Cause title — parties, addresses and appearances
ORAL ORDER
In this petition, petitioner seeks for the following reliefs:-
“ a) Issue a writ of Certiorari or a writ in the nature of Certiorari or any other appropriate Writ or order or direction under Article 226 of the Constitution of India ordering to quash the Show Cause Notice bearing No. DCCT(A).4.10/DGSTO-04/2023-24 dated: 17.07.2023 issued to the petitioner and any further proceedings arising out of the said issue vide Annexure-‘A’.
b) Issue a writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ or order or direction under Article 226 of the Constitution of India ordering and directing the Respondents themselves, their officers and subordinates, their officers and subordinates to confirm the transitional credit as availed by the petitioner in Form GSTR-3B as proper; vide Annexure-D.
c) for such further and other reliefs as the nature and circumstances of the case may require.”
Heard learned counsel for the petitioner and learned AGA for the respondents and perused the material on record.
A perusal of the material on record will indicate that the petitioner – company has been engaged in the business of manufacture of cable assembly and connectors for use by the HC-KAR NC: 2025:KHC:45477 telecom industries prior to implementation of the GST regime which came into force on 01.07.2017. On 25.08.2017, the petitioner filed Form GST TRAN-1 to carry forward its CENVAT credit of Rs.4,81,83,072/- and received an acknowledgment for having filed the same. However, the said credit did not reflect in the portal of the respondents and the status of Form GST TRAN-1 stated “processed with error”. Accordingly, the petitioner filed Form GSTR-3B and availed transitional credit of the aforesaid sum on 25.08.2017 and utilise the same towards payment of tax.
On 05.09.2017, petitioner attempted to revise Form TRAN-1 to include CENVAT credit in a sum of Rs.7,00,642/- which it had not availed earlier but the said attempt of the petitioner was unsuccessful.
Further, petitioner reversed the credit of Rs.8,28,249/- which was inadvertently availed in Form GSTR-3B in the month of July, 2017 while filing GSTR-3B for December, 2017. 5. After a period of more than 5 years, the 2nd respondent issued notice dated 02.02.2023 purporting to initiate audit proceedings against the petitioner, who submitted a reply dated 15.02.2023, in pursuance of which, the 2nd respondent issued audit objections dated 21.03.2023 under Section 65(6) of the KGST Act HC-KAR NC: 2025:KHC:45477 contending that the petitioner had availed ITC in excess of Form GSTR-3B when compared to the ITC available in Form GSTR-2A. The petitioner filed its reply dated 27.03.2023 interalia contending that the mismatch was on account of transitional credit being availed by the petitioner directly in Form GSTR-3B of July, 2017 along with a reconciliation summary between Form GSTR-3B and Form GSTR-2A. During the course of personal hearing on 24.04.2023, the authorised representative of the petitioner reiterated its contentions and intimated the respondents that though the petitioner had duly submitted TRAN-1 within the prescribed period, owing to technical glitches in the website / portal of the respondents, the same was not reflected immediately and due to excess cash outflow, the transitional credit was utilised in Form GSTR-3B for the month of July, 2017 and that the petitioner had rightly availed transitional credit in terms of the transitional provisions contained Section 140 of the KGST Act, despite which, an audit report was passed by the respondents on 27.04.2023 directing the petitioner to discharge liability of Rs.9,65,59,728/- on the ground that there was no evidence of technical glitches when the petitioner filed Form GST TRAN-1 upon coming into force of HC-KAR NC: 2025:KHC:45477 the GST regime. Thereafter, the 2nd respondent issued an intimation under Section 73(5) of the KGST Act to which the petitioner submitted a reply, in pursuance of which, the 2nd respondent issued the impugned show cause notice dated 17.07.2023 under Section 73(1) of the KGST Act, proposing to levy a sum of Rs.10,26,96,393/- towards tax, interest and penalty upon the petitioner, who is before this Court by way of the present petition.
A perusal of the material on record will indicate that though the petitioner had correctly filed Form GST TRAN-1 on 25.08.2017, which was well within the due date which was to expire on 27.12.2017 and the petitioner having received an acknowledgment for having filed the same, the said credit did not reflect in the website / portal of the respondents on account of technical glitches / errors which are clearly not attributable to the petitioner, who was neither responsible nor liable for the same, which were attributable to the respondents who had received the said Form TRAN-1 and were duty bound to show / reflect the same on their website / portal; so also, the petitioner had duly complied with the procedural aspects as contemplated under Section 117 of HC-KAR NC: 2025:KHC:45477 the KGST Act to file Form GST TRAN-1 and had thereafter, utilised the credit in terms of Section 140 of the KGST Act as well as the Notifications No.21/2007-CT dated 08.08.2017, No.23/2017-CT dated 17.08.2017 and No.24/2017-CT dated 21.08.2017; it is needless to state that if the petitioner had not filed Form GST TRAN-1 and the same had not been received by the respondents, it was not possible for the petitioner to avail the unutilized credit which he did subsequently by filing Form GSTR-3B as borne out from the material on record. In this context, it is relevant to state that the mechanism of availing transitional credit in Form GSTR-3B has been considered by various High Courts including the following judgments:- (i) Siliguri Auto Works Pvt. Ltd. Vs. GST Council; [2023] 108 GSTR 418 (Cal) (ii) Nodal Officer vs. Das Auto Centre; 2022 (56) G.S.T.L. 257 (Cal.) (iii) Principal Commissioner of CGST & Cx, Howrah Commissionerate vs. M/s. Bengal Hammer Industries (P) Ltd. & Ors.; 2022 (5) TMI 66 – Calcutta High Court (iv) Chep India Private Limited vs. Union of India & Ors.; 2022 (67) G.S.T.L. 172 (Bom.) (v) Haldia Petrochemicals Ltd. Vs. Commissioner of State Taxes; 2022 (65) G.S.T.L. 348 (Cal.) HC-KAR NC: 2025:KHC:45477
In the instant case, as stated supra, along with its reply to the audit objections, petitioner filed a reconciliation statement which is permissible as per Circular dated 14.03.2018 issued by the respondents, which states that the veracity of transitional credit can be checked even in the event the Form TRAN-1 was not filed but GSTR-3B was filed, since the same was only a procedural irregularity and so long as the statement of reconciliation submitted by the petitioner indicated that there was no double credit taken by the petitioner, merely because TRAN-1 was available in the portal / website of the respondents or that the same was not filed, the said circumstance could not have been made the basis by the respondents to come to the conclusion and alleged that the petitioner was not entitled to avail / utilise CENVAT credit accumulated by him during the pre-GST regime in terms of Sections 117 and 140 of the KGST Act. In other words, having regard to the fact that though the petitioner had filed Form GST TRAN-1 on 25.08.2017 before the due date and the same having been acknowledged by the respondents, the technical glitches / errors in the GST portal / website could not have been relied upon by the respondents to deny the benefit of CENVAT credit to the HC-KAR NC: 2025:KHC:45477 petitioner, who was otherwise entitled to the same and the said error on the website / portal not being attributable to the petitioner coupled with the fact that there was no material to establish that the petitioner had availed double credit, I am of the view that the impugned show cause notice, in the facts and circumstances of the instant case, did not contain or established any juri ictional fact warranting invocation of proceedings under Section 73 of the KGST Act, which are clearly illegal, arbitrary and contrary to law and facts and the provisions of the KGST Act and the same deserves to be quashed.
In the result, I pass the following:- ORDER
(i) Petition is hereby allowed.
(ii) The impugned show cause notice at Annexure-A dated 17.07.2023 issued by the 2nd respondent is hereby quashed. (S.R.KRISHNA KUMAR) JUDGE
SV/SRL List No.: 2 Sl No.: 26
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.