M/S Willowood Chemicals PVT LTD vs. Nodal Officer (GST) Through The Joint State Tax Commissioner

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 reasoned that denying the carry forward of CENVAT credit due to the inability to file Form GST Tran-1 within the due date, especially when caused by technical glitches, would lead to double taxation on the same subject matter, which is arbitrary and irrational. The Court found that such action violates the mandate of Article 19(1)(g) of the Constitution of India, as it severely impacts the writ-applicants' working capital and ability to continue their business. The Court also noted that CENVAT credit earned under the erstwhile Central Excise Law is the property of the writ-applicants and cannot be appropriated without authority of law. The Court allowed the writ applications, directing the respondents to permit the writ-applicants to file declarations in Form GST Tran-1 and GST Tran-2 to claim transitional credit.

Facts

The petitioners, M/s Siddharth Enterprises, a partnership firm, filed writ applications seeking permission to file declarations in Form GST Tran-1 and GST Tran-2 to claim transitional credit of eligible duties on inputs held in stock as of July 1, 2017. They contended that they could not file these forms by the due date (December 27, 2017) due to technical glitches on the common GST portal. The petitioners also argued that the due date under Rule 117 of the CGST Rules for claiming transitional credit should be considered procedural and directory, not mandatory. The respondents, including the Nodal Officer, argued that system logs indicated the petitioners had not attempted to save, submit, or file the forms, thus denying their claim. The petitioners asserted this conclusion was reached without a hearing, violating principles of natural justice.

Key Issues

1. Whether the due date contemplated under Rule 117 of the CGST Rules for claiming transitional credit is procedural and directory, or mandatory? This issue turns on the interpretation of Rule 117 of the CGST Rules, 2017, in conjunction with Section 140(3) of the CGST Act, 2017. The petitioners argued that the due date is procedural and directory, citing technical difficulties as a reason for non-compliance. They contended that the intention of the government was not to collect tax twice on the same goods and that the credit of duty paid earlier should be admissible. The respondents argued, based on system logs, that the petitioners had not attempted to file the forms, implying a lack of genuine effort and thus adherence to the mandatory due date. The petitioners also raised a contention regarding violation of principles of natural justice. 2. Whether denying the petitioners the right to carry forward CENVAT credit due to failure to file Form GST Tran-1 within the due date violates Article 19(1)(g) of the Constitution of India? The petitioners argued that such denial severely impacts their working capital and ability to continue business, infringing upon their fundamental right to carry on trade or business. They relied on the Gujarat High Court's decision in Indsur Global Ltd. v. Union of India.