Samir Tech-Chem PVT. LTD. vs. Union Of INDIA

Held

The Court held that the petitioners had made a bona fide attempt to comply with the law by filing their ER-3 return for January-March 2017 electronically. The Court found that the failure to upload the return was due to technical glitches and not a deliberate omission by the petitioners. The petitioners had promptly informed the authorities about the issue and followed the prescribed procedure by emailing the helpdesk. The Court noted that Section 140(1)(ii) of the CGST Act, 2017, requires furnishing returns under the existing law, and the law does not exclusively mandate electronic filing. Since the petitioners had filed the return, albeit with technical difficulties, and had informed the authorities, they had substantially complied with the requirement. The Court concluded that the respondents failed to consider the aspect of technical glitches and wrongly rejected the petitioners' claim. Therefore, the impugned order was quashed and set aside, and the respondents were directed to grant the carry forward of CENVAT Credit of Rs. 26,52,278/- as transitional credit under Section 140 of the CGST Act, 2017. The ratio decidendi is that substantial compliance with procedural requirements, especially in the face of technical difficulties and prompt notification to authorities, should be considered sufficient for availing transitional credit.

Facts

The petitioners, Samir Tech-Chem Pvt. Ltd., were engaged in chemical manufacturing and held Central Excise registration. They attempted to upload their ER-3 return for January 2017 to March 2017 electronically on April 8, 2017, but encountered technical glitches. Despite repeated attempts, the system displayed an error. The petitioners informed the Superintendent of Central Excise on May 12, 2017, about the issue and submitted supporting documents. This communication was acknowledged, and they were advised to email the helpdesk. The petitioners complied by emailing the helpdesk on July 7, 2017. They believed they had fulfilled their obligations. Following the introduction of the CGST Act, 2017, effective July 1, 2017, the petitioners applied for GST registration and complied with the new law. They sought to carry forward their unutilized CENVAT credit under Section 140 of the CGST Act, 2017, by filing FORM GST TRAN-1 on July 7, 2017. However, an audit objection was raised regarding the non-filing of ER-3 returns electronically for the period January-March 2017, leading to a show cause notice and an impugned order dated February 12, 2021, demanding recovery of CENVAT credit of Rs. 26,52,278/-.

Key Issues

1. Whether the petitioners are entitled to avail transitional credit under Section 140 of the CGST Act, 2017, despite not uploading their ER-3 return for January-March 2017 electronically due to technical glitches, thereby fulfilling the condition under Section 140(1)(ii) of the CGST Act, 2017, which requires furnishing all returns under the existing law for the six months preceding the appointed date? Petitioner's Arguments: The petitioners argued that they had complied with the procedural requirements by attempting to upload the return and promptly informing the authorities about the technical difficulties. They contended that the law does not mandate electronic filing exclusively and that their actions constituted compliance. They relied on Section 140 of the CGST Act, 2017, and the principle that vested rights accrued under the previous law should be protected during the transition. They also pointed out that their ER-3 return for the subsequent quarter was filed electronically without issue. Revenue's Arguments: The revenue contended that the petitioners had not furnished all the returns required under the existing law for the six months immediately preceding the appointed date, specifically the ER-3 return for January-March 2017, as it was not uploaded electronically. This failure, according to the revenue, disentitled the petitioners from carrying forward their CENVAT credit under Section 140(1)(ii) of the CGST Act, 2017.