M/S Siddharth Enterprises Through Partner Mahesh Liladhar Tibdewal vs. The Nodal Officer

Held

The Court held that the due date contemplated under Rule 117 of the CGST Rules for claiming transitional credit is procedural in nature and therefore directory, not mandatory. The Court found that the petitioners' inability to file the forms was due to technical difficulties on the common portal. The Court reasoned that denying the carry-forward of CENVAT credit for failure to file the declaration within the due date, especially when such failure is attributable to technical glitches, would lead to double taxation on the same subject matter, making the action arbitrary and irrational. This would also severely impact the writ-applicants' working capital and ability to continue their business, violating Article 19(1)(g) of the Constitution. The Court referred to the *Indsur Global Ltd. v. Union of India* case, stating that such a restriction is harsh, unreasonable, and arbitrary. The Court also noted that CENVAT credit earned under the erstwhile law is property under Article 300A and cannot be appropriated without authority of law. The Court allowed the writ-applications, directing the respondents to permit the petitioners to file Form GST TRAN-1 and GST TRAN-2 to claim transitional credit.

Facts

The petitioners, M/s Siddharth Enterprises, a partnership firm, filed multiple Special Civil Applications challenging the denial of their claim for transitional credit under the Goods and Services Tax (GST) regime. They sought to file declarations in Form GST TRAN-1 and GST TRAN-2 to claim credit for eligible duties on inputs held in stock as of July 1, 2017, as per Section 140(3) of the CGST Act, 2017. The petitioners contended that they were unable to file these forms by the prescribed due date (initially December 27, 2017, and later extended) due to technical glitches on the common GST portal. They also argued that the due date under Rule 117 of the CGST Rules, 2017, should be considered procedural and directory, not mandatory. The Nodal Officer rejected their claim, citing system logs indicating no attempt to save or submit the forms, which the petitioners argued violated natural justice.

Key Issues

1. Whether the due date contemplated under Rule 117 of the CGST Rules, 2017, for claiming transitional credit is procedural and directory, or mandatory? (Question of law) 2. Whether the petitioners are entitled to be permitted to file Form GST TRAN-1 and GST TRAN-2 to claim transitional credit, despite missing the prescribed due dates, due to alleged technical difficulties on the common portal? (Question of mixed law and fact) Petitioner's Arguments: - The petitioners argued that the intention of the government was not to collect tax twice on the same goods, hence allowing carry forward of CENVAT credit on duty-paid stock was essential. They claimed inability to file TRAN-1 due to technical glitches, poor connectivity, and other difficulties. They relied on Circular No. 39/13/2018-GST and Notification No. 48/2018-C.T. read with Order No. 01/2019-GST, which extended the period for submitting TRAN-1 due to technical difficulties. They also contended that the denial of credit without an opportunity of hearing violated principles of natural justice. Furthermore, they argued that denying credit would severely impact their working capital, violating Article 19(1)(g) of the Constitution, and lead to double taxation, making it arbitrary and irrational. They cited the Gujarat High Court's decision in *Indsur Global Ltd. v. Union of India* and the principle that CENVAT credit is property under Article 300A. Revenue's Arguments: - The respondent's stance, as reflected in the affidavit-in-reply, was that the GST system logs showed no attempt by the taxpayer to save, submit, or file Form GST TRAN-1, thus denying their claim.