M/S. Bmw INDIA Financial Services PVT. LTD. vs. The Union Of INDIA And 5 Others
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Cause title — parties, addresses and appearances
The Couft made the following: ORDER -I
THE HON'BLE SRI ]USTICE M.S,RAMACHANDRA RAO AND THE HON'BLE SRI JUSTICE T.VINOD KUMAR WRIT PETITION No.g166 of 2020 OR ER | (per Honb/e Sri lustice T.Vlnod Kumar) in this writ petition, the petitioner is challenging the action of the respondents, in non-tra nsition ing the credit of value addecj tax r-rard into petitioner's electronic credit ledler in Form GST Piv!T-2, on the basis oi declaration in Form GST TRAN-1 ftied an 27.12.2017 throuqh GST portall not allowing the petitioner to avail the credit of the amount in Fornr GSTR- 38; and utilize the same in discharge of its tax liability under the Central Gor.:ds And Service Tax Act, 2AL7 (for short 'CGST Act') and Telangana State GooCs and Service Tax Act, 2017 (for short'SGST Act'). ?. The petitionui- contends that, it is into the business of non-bankinij financial company engaged in financing automobiles in the form of loans arrd financial ieases to its customer and has operations in 14 States across InCia. inciuding iit the State of Telanqana, For the purposes 0f carr,,lnc on business jn the State of Telangana, the petitioner obtained regist!.aiior *noer tne provisiorrs cf the Telangana State Vaiue AdCed Tax Act. 200i: (for short,'the TVAT Act'), as weli as unrJer the provisions of the Finance Act, 1994, for the purpose of service tax payable on leasing activity. 3" It is the contention of the petitioner that upon introduction cf Goods and Service Tax Act,2017 (for short'GST Act'), w"e.f .01.07.2017, the petitioner gct itself registerecl under the CGST Act and SGST Rit, tn the State of Telangana and has been filing returns and paying applicabie I
\ ) GST both under CGST and SGST on its tran5actions witiout any adverse remarks.
It is the further contention of , the petitioner that with the rntroduction of GSl, with effect from 01.07.20 17, ai in terms of provisions of section 142(11xc) of the GGST Act reird with section 1a2(10)(c) of the TGST Act, the petitioner became entitlod to take credit of Value Added rax or service Tax paid under the existing raw, namery, the TVAT Act, or the Finance Act, 1994, proportionate t:o the extent of supplies made after the appointed day and such credit is to be calculated in the manner to be prescribed.
It rs arso contended that as per Rure 118 of the certrar Goods and services Tax Rures, 2017 (for short,'the cGST Rures') reaJ with Rure 118 of the Telangana Goods and Services Tax Rules, 2017 (tor short, ,the SGST Rules') every person tc whom Sectjon 142(i1) of CGST Act, appiies, shali within the period specified in Rure 117 of the CGrir A.ct or such further period as extended by the Commissioner, is required to submit a declaration electronicaily in Form GST TRAN-1 furnishing the proportion of supply on which the Varue Added rax or service Tox has been paid before the appointed day, but the supply is to be nade after the appointed day and the input tax credit admissible thereon.
It is the craim of the petitioner, that it had paid the service tax on 10% interest portion oF reasing contracts under the provrsi:ns of Finance Act, 1994, which were entered into before the introducticn oF GST Act, 2017. similarly, it is also claimed that 100% oFvATon the entire value of lease rentals receivabre, is paid upfront in the first month of entering into contract itself under the relevant provisions of the TVAT Act, even though
// 3 W.P.No.9166 oI2A2O .it the tenure/ term of lease / rental contracts is spread over a period of 7, Thus, the petitioner claims that with the introduction of CGST and SGST Act, 20t7, having regard to the provisions of the CGST Act and the SGST Act and the Rules made thereunder, the petitioner became entitled to avail the transitional VAT credit in a sum of Rs.21,07,574l_, in respect of lease / rental contracts / agreements, where the tenure / term is continurng post jntroduction GST w.e,f. Ot.Ol.ZO!7, as the petitioner is now required to discharge liability under the GST Act,2OU.
The petitioner contends that it had, in terms of the provisions of the CGST Act and the SGST Act read with the Rules made thereunder, declared an amount of Rs. 2I,07 ,574l- as transitional credit in Form GST TRAN-I, by uploading the same electronically on GST portal through GSTN Netrruork, as mandated under the Act and the Rules, on 27 .12.2017 , being the last date notified under Rule 117 of CGST Rules. time.
It is the contention of the petitioner that though it had encountered certain technical difficu lties/g litches on the GSTN portal, even while uploading the above lnformation, however, by making efforts, the petitioner could upload the information in Form GST TRAN-1 on 27.12.2017 at 11.13 AM; that upon uploading the Form GST TRAN_1 electronicalJy, the petitioner received acknowledgment of successful filing of the said form electronically and received an Application Reference Number CARN) 443611I720377tH; and that in addjtion to receiving the ARN number, the petitioner also received the confirmation mail from an email ID of the respondents '.donotreplv@qst.qov.in,, confirming the ;1. e/e,
successful filing of the transition form by the petition,lr and the ARN number provided to the petitioner for the above said filinc made.
Petitioner contends that despite the petitiorler successfully uploadlng the inFormation and submission of Form (iST TRAN-I for transition oF credit of Rs.21,07,574l-, as claimed in colunln 11 of the said form, the same was not reflected in the online electroni(: credit ledger of the petitioner maintained by the respondents. The petiti,)rler would thus, contend that non-reflection of the transitional credit in the online electronic credit ledger of the petitioner, despite the petit oner having filed the same in tinre as prescribed in Rule 117 of the CGST and the SGST Rules, is due to the technical glitches that have been ercountered in the GSTN network and was not due to any fault on the part of the petitioner. 11^ As a result of the transitional credit not getting reflected in the electronic credit ledger of the petitioner maintained ln Form GST PMT-2 on the common portal of the respondents, which is showing credit as 'NIL', the petitioner is unable to utilize the accrued credits for discharge of its liability under both the CGST as well as the SGST Act causing flnancial hardship. L2. The petitioner would fufther contend that on rroticing that the credit was not being reflected in the electronic ledger on the common potal, the petitioner immediately raised a query or this aspect of technical error on the paft of GSTN on 02.01.2018 and a so followed it up by addressing a letter to the CEO of the GSTN, New Delh, on 19.03.2018, requesting them to look into the issue and provide a so ution for getting the credit transitioned. The petitioner would further contend that the petitioner also addressed letters subsequent thereto, to all the concerned, I
J incruding meeting the concerned authorities or GST in the Terangana commissionerate at Hyderabad as wel as the GST authorities of the State.
Despite the petitioner making its best effofts. in explaining to the authorities concerned about the petitioner uploading the Form GST TRAN- 1 on 27.01.2017 successfully seeking transitjonal credit of Rs.21,07,5741-, there was no response, nor the grievance of the petitloner raras rcsolved. As the petitioner was not gelting any response, nor the issue getting resolved, whereby the credit is reflected in electronic ledger of the petitioner on common portal, the petitioner addressed an email on 18 03.2019, wherein it has brought to the notice of the GST authorities, that when a simirar issue arose in respect of petitioner's branches at Derhi and Haryana, the concerned authorities in the respective States, reopened the portal for filing of IRAN-I and sought for similar resolution even in the State of Telangana, as the last date for making corrections in Form GST TRAN-1 was notified as 31.03.2019. However, it is craimed that the said request of the petitioner did not elicit any response from the 4th respondent. L4. As no response was forthcoming from the respondents, nor the transitional credit claimed is gening refrected in its erectronic redger, the petitioner once again on 13.05.2020, addressed a letter to the GST Telangana Commissionerate and requested the said authority to consider the issue and refer the matter to the 2'd respondent for redressar. An e- mail dt. 15.05,2020 was sent to the 2nc respondent, requesting for resolving the issue of transitional credit at the earriest, so that the petitioner company can overcome the issue of outflow of cash flow during Covid-:i9 period. !-------___ l--
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The petitioner contends that the said e-mail r:ommunication is wholly improper, a non-speaking and arbitrary, for the reason that it did not consider the evidence submitted by the petitlor er by its earlier communication and that no opportunity of hearing war; accorded to the petitioner before deciding to reject the petitioner,S p|e.l to look into the lssue of technical glitches on the GSTN. LT,Thepetitionercontendsthattheclaimfortransiticnalcreditasfiled on2T.02.20lTcannotbedeniedbytherespondentsbyobservingthat''no technical issues were noticed in their log", since, it is ct>mmon knowledge that the GSTN network through which implementation of GST and transition from the existing regime of VAT/Central Exci:ie/Service Tax was undertaken, had faced technical glitches' The fact rlf the GST poftal havingtechnicalglitcheshasalsobeentakennotebytlreCentralBoardof Indirect Taxes and Customs, which had issued Circular bearing No.39/13/2018-GSTdt.03.04.20lBontheissueofaddressalofgrievances of taxpayers due to technical glitches on the GST portal, wherein in para B. 1 , it has been stated that, 'l'4 large number of t'txpayers could not clmplete the process of TRAN-I filing either at the :;tage of orlginal or revisedfilingastheycouldnotdigitaltyauthenticatetheTRAN.l ueto IT related glitches.". 15, Upon the petitioner adressing the lettir dt' 13 05 2020 and e-mail dt.15.05.2020, the petitioner received an email communication dt.05.06.2020 from the Assistant Commissioner of the State GST i'e'' 3rd respondent, informing the petitioner that the case of the petitioner was sent to ITGRC through GSTN, but the same was nct considered for reopening for filing Form GsT TRAN-I, "as no technical issues were notlced in their log'"
The petitioner would further contend that when a similar issue ar.se in petitioner,s own case in the State of Maharashtra, the petitioner approached the Hon,ble High Cout of Bombay by way of a writ petition, being WP-LD-VC-85 of 2020, and the Hon,ble High Court was pleased to allow the writ petition and directed the respondents to allow the transitioning of credit of the amount into petitioner,s electronic credit ledger within a period of four weeks from the date of the sard order. The Petitioner seeks for grant of simirar rerief even in the present writ petition,
Opposing the reljef sought for by the petitioner, a ,roluminous cou nter-affidavit is filed on behalf of respondents 1 and 6. 20, The respondents, by the cou nter-affidavit fired, have contended that there are absorutery no merits in the writ petition and that though the iransitional provision permilting to carry forward of cENVAT creciit oi eligible duties, no legitimate right can be claimed for allowinq such credit.
No cou nter-affrdavit has been flled on behalf of respondents 2 to 5
Heard Sri Keerthi Karan Kota, learned counsel for the petitioner; sri Namavarapu Rajeshwar Rao, rearned Assistant soricitor appearing for the respondents.
Firstly, it is to be noted that though a counter-afFidavit, which is no short of an exposition on GST law is filed by respondents 1 and 6, the same does not answer the specific grievance of the petitioner anywhere, Secondly, by the counter-affidavit, the respondents in one brearhe craim that the network has been working seamlessly and without failure, as a result of which, large number of peopre have fired Form GST TRAN_ 1 returns correctly within the prescribed time and it is only handful of General, 7 ,|. ;,.\.:.; ':l ] : I
: : :. :.: -. .' persons, like the petitioner, who did not do so. Howevr:r, by the same counter affidavit, the respondents on the other hand state that as large taxpayers have faced IT glitches on GSTN nelwork, on the recommendation of GST Council in its 26th meeting held on i0.03.2018, an IT Grievance Redressal Mechanism (ITGRM) was pL t tn place, vide CBIC Circula!- No.39/i3/20i8-GST dt.03.04.2018, wherein cases pertaining to non-filinq of Form GST TRAN-I due to 1T glitches was sought to be addressed and also the perlod for submittinq declaraticns electronicaliy was extended, The said stand of the respondents is self-contradlctory, to say the least. 24, Further, judicial notice can be taken of the fact that transition to GST with effect from 0t.07.2017 was not a smooth affair and in fact had resulted in a chaotic situation across the country, due tc failure of GSTN network. Having regard to the said fact, various HiSh Coufts, have allowed the writ petitions filed by the affected parties before the respective High Courts and directed the respondents to accept the Form GST TRAN-1 manually. If the assertion of respondents that there were no technical glitches in the GSTN network and the transiti{)n to GSTN was smooth, is to be accepted, there was no necessity either for the GST Council to recommend for a redressal mechanism at its 26th council meeting or ior the CBIC to extend tinte for filing Form CST TRAN-1 from time to time rill 27.A72.2017. Thus, the claim of the respondents that there were no technical glitches in GSTN network and it is only a handful of people, like the petltioner, who could not file the transition claim form electronically, are seeking to make such allegation, is without any substance or basis and lacks bonafides, as the said claim s contrary to the t' 8
q :. ).., ) ) . . , . . : , , t. .- actual situation that prevaired at the rerevant time, apaft from being a self serving statement. 25' Further, the craim of the respondents that the Government cannot be held responsible for negligence and dereliction of duty by a responsible taxpayer and if the contention of the petitioner were to be accepted by providing facility of filing/revision oF Form GST TRAN_1, it would jeopardize the Government revenue on account of simirar demands from other taxpayers who could not file/revise in time due to negligence and it would be difficurt for the Government to verifu bona fides of such craim, is also without any merit for the reason that the factum of petitioner filing the declaration in Form GSTTRAN-1 on27.12.2017 at 11.13 Arir is not i, dispute. It is also to be seen that upon such filing of TRAN-1 form, the petitioner is in receipt of ARN number generated from the respondents system and also an email acknowledging the said submission of form electronically, from the respondents e-mail id. Thus, it would L:e wholly inappropriate to allege negligence on the part of the taxpayer, like the petitioner, who despite the Network put in place by the respondents having technical glitches, by spending substantial time had uploaded the Form GSTTRAN-I before the due date, i.e. by 27.12.2017. 26. The respondents, being fully aware of the situation that prevailed with regard to the working of the network, instead of being sensitive to the issue, and taking steps proactively to resolve the grievance of the petitioner, chose to make allegation of negligence on the part of the petitioner without any basis. If only the petitioner acted in a negligent manneri the petitioner wouid not have uploaded the form on 27.12.20i7 at 11.13 AM from its system by logging into the GSTN network maintarned by the respondents. The petitioner can have control onry on its svstem
i0 W.P.No.9166 of 2020 and but not on the working ofthe GSTN network. Once, the petitioner has uploaded the required information by submitting the Form GST TRAN-1 electronically on the potal by using its system, the duty cast on a responsible taxpayer gets complete and it iS for the autlrorities to ensure that their systems capture the information fed in l)y the taxpayer correctly, and no hardship is caused to the taxpayer
It is also to be seen that though the respondentl; filed a lengthy counter-affidavit, it neither denied or disputed the ARN number generated from their systems and the email received by the petitior er of successful filing of GST TRAN-1 Form. In the absence of any denial to the ARN number or email sent to the petitioner, it is not open for :he respondents
In the facts of the present case, even though the petitioner is in receipt of an acknowledgment number and also an ,lmail confirming successful submission of the Form GST TRAN-1 electronically, the information furnished thereunder is not transitioned into online electronic credit ledger of the petitioner maintained on the portal, ,,vhich admittedly is in the control of the respondents, The respondents instead of taking steps to set-right their house in order, are alleging negligence on the part of the petitioner. The said action of the respondents is a highly reprehensible and only goes to show the high-handr:d attitude and approach of the respondents in dealing with the taxpayer.s, forgetting the fact that no tax can be collected without authority of lar,v, which implies that the respondents grant the benefit / concession to which a tax payer is entitled to otherwise. By denying the transitional ,:redit as in the present casei the respondents are compelling the tax payer like petitioner to pay tax in full without availing the benefit of adjustment / debit from its credit ledger.
11 29, Since, the counter-affldavit does not deal with the said specific contention of the petitioner, it is to be construed that the respondents do not dispute the fact oF petitioner filing form GST TRAN-I electronicaily on 27.12.2077 claiming a transitional credit of Rs.21,07,574/_. As the factum of the petitioner filing the form GST TRAN-1 within the time prescribed stands conflrmed, the natural corollary is that the amount claimed as transitional credit available to it, has to be reflected automatically in the online electronic credit redger. The entitrement of the petitioner to the said credit is another aspect, which needs to be gone into by the concerned authcrity by examining the claim by cailing for such informatron from the petitioner after putting the petitioner on notice, but the same cannot be denied to be transitioned at the initial stage itseif.
In an identical situation, in petitioner,s own case, the Bombay High cout in wP-LD-vc-85 of zo2o considering a simirar issue of transitional credit of Rs.17,07,6731- claimed through TRAN-I filed on 27.t2.20t7 not being transitioned into the petitioner's erectronic credit redger despite successful filing, by its judgement dt.29.10.2020 whire observing that the action of the respondents is unfair and unjust, held as under:
"
At the outset we must say that it is not disputed that Petitionerb Form GST TRAN-I filing on ZVh [)ecember, 20lZ was successful. The only issue is that the credit of Rs.j7,02,673/- has not been transitioned /n the petitioner,s e/ectronic credlt ledger despite the successful fillng. It is not a/so in dispute that after fi/ing TRAN l, ffi,fh nting was successfu/, the credit of Rs.lZ,0Z6Z3,/- is not appearing in the petitioner! e/ectronic credit ledger/reglster and n.w to turn around and ailege the petitioner to be a non-firer. Further, no explanation is offered by the respondents as to which transaction the ARN number referred to by the petitioner is relatable to, rf under the said ARN number, the petitioner has not filed Form GST TRAN -t on 27.72.2017. despite making grlevance to the authorities, as discussed earlier, Petitioner did not receive any positive response. We ar,z unable to comprehend that even though, admlttedly, the frling was successfttl, the credit is not being reflected in the Petitionerb ledger and merely on the ground that no technical error has been found ott the GSTN, the grievance of the Petitioner has not been addressed. t9 20 ..
In this case, we are not examlning the issue, whether the Petitioner is entitled to VAT tax credit as claimed by the Petitioner which will be examined by the authorities. What we are concerned with is that despite the admitted successful filing of Forn, TRAN-1 by the Petitioner on 27 December 2012 the request of tl'e Petitioner for transitioning of credit has not been approved by the ITGRC merely on the basis that there were no technical glitches on the GSTN side. There is no further exp/anation or clarification or evidence on the issue by the Respondents. Even the learned Sr. Counsel for the Respondents has on/y relterated this stand during hls submlssion.
The who/e objective of digitallzatlon is to convenle'nce the tax payers and not to harass them. We are conscious that the GST system ls still evolvlng in its implementatlon. We are of ttle vlew that merely because there were no technical glitches tn the GSTN wlth respect to the Petttionerb TRAN'1 whlch was admittedly t7/ed in tine, the dalm of the Petltloner, lf it was other'4ise eligib/e tn /aw, cannot be rqected for no apparent fault on the part of the Pelitloner. This cannot be the objective of the GST system or dtgitization. Such a situation cannot be countenanced as it would be who//1, unfair and unjust.
We are, therefore, of the view that this is a fit case for invocation of our writ juri iction."
By holding as above, the Bombay High Cout ellowed the writ petition and directed the respondents to take such aciion as may be necessary for transitioning the credit of such amount lnto petitioner's credit ledger/electronic credit ledger within four weeks f'om the date of the order. VI.P.No.9166 of 2020 l2
w.P.No.9 t 5t of 2o2a 32' In the facts of the present case/ we see no reason to take a different view from the one as expressed by the Bombay High Court, merely because the respondents chose to fire a counter in the present writ petition alleging negligence on the part of the petitioner, r"vhich in our concerned vrew, as detailed herein above is without any basis, unsubstantiated apart from being reprehensible. 33, Further, as the various activities under GST are technology driven, and given the fact that there exists no seamress connectivity between a tax payer and the respondent network, and a tax payer is required to go through various intermediate service provides, more so in the initiar stage of implementation by migrating from existing system or indirect taxation, it would be highly improbable to expect the transition to be smooth and without glitches as being claimed by the respondents.
For the reasons indicated above and also for the reason that we are jn concurrence wlth the views expressed by the Bombay Hiqh Cout on the same issue, in the petitioner,s own case, the petitioner is liable to succeecj even in the present writ petition. 35' Accordrngly, the writ petition is ailowed. The respondents are directed to transjtion the credit of amount of Rs.2L,07,5747- claimed by the petitioner, into petitioner,s electronic credit ledger in Form GST pMT,2 maintained on the portar, within a period of four weeks From the date of the order.
However, it is made clear that we have not examined the merits of the claim of the petitioner with regard to the erigibirity or otherwise of the said amount claimed as VAT credit available on the notifled date. I I I I I I i 13
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Pending miscellaneous petitions, if any, shall stan(l closed in the light of this flnal order, No order as to costs. //// .T.TIRUMALA DEVI ,ASTiISTANT EGISTRAR SECTIO FFICER To, The Secretary, lvlinistry of Finance Department of Revenue' Union of lndia' Notlh Block, New Delhi - 110001 iil. i.i.i,iii.i"ner, state of Telangana, Commercial Taxes Dep^artment' . iil; A;;i;i;;t-commisstoner of c"ommercial Tax, Khairtebad circle, Punjagutta Division. Hvderabad . ;h;6iii''i;ilndunu commissionerttg.-Egja Reddv Mars, Gun Foundry' Bjsheer Bagh, Hyiderabad, Telangana 500001 fi; G;;;"Jno'services'riiN'etwort< (GSTN), East \vins' 4th Floor' world Mark, 1 AerocitY New Delhi, 110037 . in"L' ir"-tr.v.''coods and bervices Tax councit (GS] council), 5th Floor, Tower ri. ieLvin enirti BuitOing Janpatn Road, Connlulht Place New Delhi - 1 10001. . One CC to Sri Keerthi Kiran Kota, Advocate IOPUUI . One CC to Sri NamavarupJ nij"in*r, Rao,'Assistdnt Solicitor,General (OPUC) . 6;; ca io sti l. Anlt rumar, s.c. for commercial Taxes (oPUC) 1. 2 a 4 5 b 7 BI 10,Two CD CoPies. 1 1 . One Spare CoPY. Y F-t" \
HIGH COURT DATED:1810812021 ORDER WP.No.9166 of 2020 't 1HE SIAr€ ( o z .\ 021 O 6 SEP2 Joo * I P TC ALLOWING THE WRIT PETITION WITHOUT COSTS \i
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.