M/S Jay Bee Industries vs. Union Of INDIA And Others

Held

The Court held that it is not in dispute that there were glitches in the system, which led to numerous petitions before various High Courts. These High Courts have consistently granted relief to taxpayers by directing authorities to open the portal or accept manually filed forms. The Court acknowledged that GST is a new, progressive levy aimed at avoiding cascading taxes, and the seamless flow of tax credits is a key ideal. The due date for claiming transitional credit under TRAN-1 was considered procedural. Given the new GST regime and the IT platform's initial challenges, expecting taxpayers to back up digital evidence for every procedural step was deemed unreasonable. The Court found no reason to doubt the petitioner's claim of genuine efforts to file online, which failed due to technical glitches. The Court clarified that it was not deciding the entitlement to input credit itself, but rather the issue of technical glitches preventing filing. Relying on numerous judgments from other High Courts, the Court agreed that the GST system was in a "trial and error phase" during implementation. Therefore, the Court directed the respondents to permit the petitioner to file TRAN-1 either electronically or manually on or before December 31, 2019. The respondents were granted liberty to verify the genuineness of the claim, and it was stipulated that the claim should not be denied solely on the ground of not being filed by the original due date.

Facts

The petitioner, M/s Jay Bee Industries, engaged in manufacturing and selling electrical transformers, filed a writ petition seeking to re-open the common portal to file Form TRAN-1. This form is crucial for availing input tax credit on duties/taxes paid on inputs held in stock, semi-finished, and finished goods as of June 30, 2017, under the newly introduced Goods and Services Tax (GST) regime. The petitioner contended that the common portal was not accessible or operational for filing TRAN-1 due to system defects and glitches, despite repeated attempts to file it before the due date. The respondents, Union of India and others, opposed the petition, citing the limitation period prescribed under Rule 117 of the CGST Rules, 2017, for filing TRAN-1.

Key Issues

1. Whether the petitioner can be permitted to file Form TRAN-1 after the prescribed due date, considering the alleged technical glitches in the GST common portal? (Question of mixed law and fact, turning on Section 140(3) and Rule 117 of the CGST Act/Rules). Petitioner's Arguments: The petitioner argued that the GST portal was not functional and accessible for filing TRAN-1 due to system defects and glitches, preventing them from complying with the procedural requirement within the stipulated time. They relied on the principle that substantive rights (like input tax credit) should not be denied due to procedural technicalities, especially in a new tax regime with implementation challenges. They also referred to various High Court judgments that had allowed similar petitions due to system issues. Respondents' Arguments: The respondents contended that the petitioner failed to file Form TRAN-1 within the limitation period prescribed under Section 117 of the CGST Rules, 2017, which allows for transition of credit. They denied the petitioner's allegations of system problems, stating they were not supported by documentary evidence, and argued that the petitioner cannot be permitted to file the form after the period of limitation.