Court Allows Late GST Credit Filing Due to Portal Glitches, Sides with Taxpayer

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Case Name:

M/s Jay Bee Industries vs. Union of India and others (High Court of Himachal Pradesh)

CWP No.2169 of 2018

Date: 16.11.2019

Key Takeaways

• Technical glitches on the GST portal prevented many taxpayers from filing the TRAN-1 form on time to claim transitional input tax credit.
• The Court held that substantive tax rights should not be denied due to procedural lapses caused by system errors.
• The Court followed the approach of several other High Courts, allowing late or manual filing of TRAN-1 forms.
• The decision reinforces the principle that procedural deadlines are not absolute when technical issues prevent compliance.
• The authorities can still verify the genuineness of the taxpayer’s claim, but cannot reject it solely for being late.

Issue

Should a taxpayer be allowed to file the GST TRAN-1 form late (electronically or manually) to claim transitional input tax credit, when they were prevented from doing so on time due to technical glitches on the GST portal?

Facts

• Who: M/s Jay Bee Industries, a manufacturer of electrical transformers, registered under GST.
• What happened: With the introduction of GST on 01.07.2017, businesses had to file a TRAN-1 form to carry forward input tax credit from the old tax regime. The petitioner tried multiple times to file this form online but was unable to do so due to persistent technical glitches on the GST portal.
• Timeline: The petitioner made several attempts, including on 27.12.2017, and also approached authorities with written requests for help, but the portal remained inaccessible. The deadline passed, and the petitioner’s requests to file manually were ignored, leading to this court petition.

Arguments

Petitioner (M/s Jay Bee Industries)

• Argued that Section 140(3) of the Central Goods and Service Tax Act, 2017 entitles them to carry forward eligible input tax credit.
• Rule 117 of the CGST Rules, 2017 requires filing TRAN-1 electronically, but the portal was not functional.
• Made repeated, genuine efforts to comply but was blocked by system errors.
• Sought a writ to allow late or manual filing, and to prevent being penalized for a situation beyond their control.

Respondents (Union of India and others)

• Claimed that Rule 117 of the CGST Rules, 2017 sets a strict deadline (90 days from 01.07.2017, extendable by another 90 days).
• Argued that the petitioner failed to file within this period and did not provide documentary evidence of technical issues.
• Opposed any relaxation of the deadline, citing procedural compliance.

Key Legal Precedents

The Court cited several High Court decisions that addressed similar issues:

• Madras High Court (Tara Exports vs. The Union of India and others, 10.09.2018)
• Delhi High Court (Bhargava Motors vs. Union of India and others, 13.05.2019)
• Delhi High Court (M/S Blue Bird Pure Pvt. Ltd. vs. Union of India and others, 22.07.2019)
• Delhi High Court (Krish Automotors Private Limited vs. Union of India and others, 16.09.2019)
• Delhi High Court (M/s Aadinath Industries and another vs. Union of India and others, 20.09.2019)
• Delhi High Court (M/S Arora & Co. vs. Union of India and others, 06.11.2019)
• Punjab and Haryana High Court (Adfert Technologies Pvt. Ltd. vs. Union of India and others, 04.11.2019)

These cases held that:

• GST is a new system, and technical glitches are recognized.
• The deadline for filing TRAN-1 is procedural, not substantive.
• Taxpayers should not lose legitimate credits due to system errors.
• Courts have allowed late or manual filing in such cases.

Judgement

• The Himachal Pradesh High Court allowed the petition.
• Ordered the authorities to permit the petitioner to file the TRAN-1 form, either electronically or manually, by 31.12.2019.
• The authorities can verify the genuineness of the claim, but cannot deny it solely because it was filed after the original deadline.
• The Court aligned itself with the majority view of other High Courts, emphasizing that procedural lapses due to technical glitches should not defeat substantive tax rights.

FAQs

Q1: What is the TRAN-1 form?

A: It’s a form used to claim transitional input tax credit when moving from the old tax regime to GST.

Q2: Why couldn’t the petitioner file the form on time?

A: Due to persistent technical glitches on the GST portal, which prevented online filing.

Q3: What did the Court decide?

A: The Court allowed the petitioner to file the form late, either electronically or manually, and said the claim should not be denied just because it was late.

Q4: Can the authorities still check the claim?

A: Yes, the authorities can verify if the claim is genuine, but cannot reject it only for being late.

Q5: Does this case set a precedent?

A: Yes, it follows and reinforces a line of High Court decisions that prioritize substantive tax rights over procedural deadlines when technical issues are involved.

Q6: What legal provisions were discussed?

A: Section 140(3) of the CGST Act, 2017 and Rule 117 of the CGST Rules, 2017.