GST Portal Glitch? Punjab & Haryana HC Says File TRAN-1 or Claim ITC in GSTR-3B

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Case Name

M/s Ceamen Electronics vs Union of India and Others

Court Name: High Court of Punjab & Haryana at Chandigarh

Case No.: CWP No. 8369 of 2020 (O&M)

Date of Decision: 19th June 2020

Coram: Hon’ble Mr. Justice Jaswant Singh & Hon’ble Mr. Justice Sant Parkash

Key Takeaways

1. Technical glitches = valid excuse: The court confirmed that taxpayers who couldn’t file TRAN-1 due to technical difficulties — whether on the GST portal or otherwise — cannot be denied their rightful ITC credits.

2. Rule 117(1A) is too narrow: The court agreed with the Delhi High Court’s view that Sub-Rule (1A) of Rule 117 of the CGST Rules, 2017, which restricts relief only to cases of “technical difficulties on the common portal,” is arbitrary, vague, and unreasonable.

3. ITC is a constitutional right: The court reaffirmed that CENVAT/ITC credit is a vested property right protected under Article 300A of the Constitution of India, and cannot be taken away merely by delegated legislation (i.e., by framing rules).

4. Government can’t have double standards: The government cannot apply strict standards to taxpayers while being lenient about its own failures in setting up the GST system. This would violate Article 14 of the Constitution (Right to Equality).

5. Practical relief granted: The petitioner was given a clear, practical remedy — either upload TRAN-1 by 30.06.2020, or claim ITC in GSTR-3B for July 2020.

Issue

The Central Legal Question:

Can a taxpayer be denied the right to carry forward their pre-GST Input Tax Credit (ITC/CENVAT credit) simply because they could not upload Form GST TRAN-1 by the deadline of 31st December 2017, due to technical glitches on the GST portal?

And additionally:

Is Rule 117(1A) of the Central GST Rules, 2017 — which restricts deadline extensions only to cases of “technical difficulties on the common portal” — constitutionally valid?

Facts

• Who is the Petitioner? M/s Ceamen Electronics is a partnership firm engaged in trading of electronic items, registered under the Central Goods and Services Tax Act, 2017 (CGST Act).

• What was the old regime? Before GST came into effect on 1st July 2017, the firm was registered under the Punjab VAT Act, 2005 and had accumulated Input Tax Credit (ITC) — essentially tax already paid on purchases that could be offset against future tax liability.

• What was TRAN-1? When GST was introduced, taxpayers needed to file Form GST TRAN-1 to carry forward their old ITC credits into the new GST system. The deadline for this was 31st December 2017.

• What went wrong? The petitioner could not upload TRAN-1 by the deadline because of technical glitches on the GST portal. This was a widespread problem across India during the GST rollout.

• What did the government do? Under Sub-Rule (1A) of Rule 117 of the CGST Rules, the Commissioner (on the recommendation of the GST Council) can extend the deadline for those who faced technical difficulties. The government did extend the deadline — by an order dated 1st January 2020 (Annexure P-16) — till 31st March 2020.

• Why did the petitioner still go to court? Despite the extension, the petitioner still couldn’t get relief and challenged the constitutional validity of Rule 117(1A), arguing it was too restrictive and discriminatory.

Arguments

Petitioner’s Arguments (M/s Ceamen Electronics):

1. Covered by existing judgments: The petitioner’s counsel, Mr. Sandeep Goyal, argued that this issue is squarely covered by the Punjab & Haryana High Court’s own earlier judgment in Adfert Technologies Pvt. Ltd. vs Union of India (2019-TIOL-2519-HC-P&H-GST).

2. Delhi HC also supports them: The Delhi High Court in Brand Equity Treaties Ltd. and others vs. Union of India (2020-TIOL-900-HC-Del-GST) had already permitted taxpayers to file TRAN-1 on or before 30th June 2020.

3. Rule 117(1A) is arbitrary: The restriction in Sub-Rule (1A) — limiting relief only to “technical difficulties on the common portal” — is vague, arbitrary, and unreasonable, violating Article 14 of the Constitution.

4. ITC is a vested right: The CENVAT credit already accrued is a property right under Article 300A of the Constitution and cannot be taken away by a mere rule.

5. Government’s own failures: The GST system was new, complex, and poorly implemented. Taxpayers — including large corporations — struggled with it. It’s unfair to penalize taxpayers for the government’s own shortcomings.

Respondents’ Arguments (Union of India & Others):

The respondents — represented by Mr. Anshuman Chopra (Senior Standing Counsel) for respondents 1 to 3, 5 & 6, and Mr. Pankaj Gupta (Addl. AG Punjab) for respondent no. 4 — could not controvert (i.e., could not effectively challenge) the petitioner’s position. They essentially accepted that the issue was covered by the Adfert Technologies and Brand Equity judgments.

Key Legal Precedents

1. Adfert Technologies Pvt. Ltd. vs Union of India

Citation: 2019-TIOL-2519-HC-P&H-GST | CWP No. 30949 of 2018

• This was a landmark judgment by a Division Bench of the Punjab & Haryana High Court (which included Justice Jaswant Singh himself!), decided on 4th November 2019.

• It allowed a bunch of petitions from taxpayers who couldn’t file TRAN-1 due to technical glitches.

• The government challenged this before the Supreme Court via SLP, but the SLP was dismissed on 28th February 2020 — meaning the High Court’s decision stood firm.

• This case became the foundation for all subsequent similar cases, including the present one.

2. Brand Equity Treaties Ltd. and others vs. Union of India

Citation: 2020-TIOL-900-HC-Del-GST

• Decided by the Delhi High Court, this case followed the Adfert Technologies ruling and permitted taxpayers to file TRAN-1 on or before 30th June 2020.

• The Delhi HC made a very important observation: "The Government cannot adopt different yardsticks while evaluating conduct of the taxpayers and its own conduct, acts and omissions."

• The court held that Sub-Rule (1A) of Rule 117 is arbitrary, vague, and unreasonable, and violates Article 14 of the Constitution.

• It also held that CENVAT credit is a vested property right under Article 300A of the Constitution.

3. SKH Sheet Metals Components vs. Union of India

WP(C) 13151 of 2019 | Delhi High Court | Order dated 16th June 2020

• Just 3 days before the present judgment, the Delhi High Court in this case approved its earlier opinion in Brand Equity and permitted petitioners to file TRAN-1 till 30th June 2020.
• It also allowed revision of TRAN-1 in appropriate cases.

4. Key Legal Provisions Referenced:

Rule 117(1A) of Central GST Rules, 2017

Allows Commissioner to extend TRAN-1 deadline for those facing “technical difficulties on common portal”

Article 14 of the Constitution of India

Right to Equality — government cannot be arbitrary or discriminatory

Article 300A of the Constitution of India

Right to property — ITC/CENVAT credit is a vested property right

Central Excise Act, 1944

Under which CENVAT credit originally accrued

Limitation Act, 1963

Court noted civil rights can be enforced within 3 years — much longer than the 90-day TRAN-1 window

Judgment

Winner: M/s Ceamen Electronics (Petitioner)

1. Issue already settled: The court found that the issue was squarely covered by the judgments in Adfert Technologies Pvt. Ltd. (Supra) and Brand Equity Treaties Ltd. (Supra). There was no need to reinvent the wheel.

2. Rule 117(1A) not struck down, but…: Interestingly, the court did not declare Rule 117(1A) ultra vires (unconstitutional). However, it agreed that denying ITC to dealers who cannot prove they attempted to upload TRAN-1 would violate both Article 14 (equality) and Article 300A (property rights) of the Constitution.

3. Government’s double standards: The court noted that the government itself repeatedly extended deadlines for those with “technical glitches” — which actually vindicates the petitioner’s claim that denial of credit to others in similar situations is discriminatory.

Orders Made:

1. Respondents are directed to permit the Petitioner to upload TRAN-1 on or before 30th June 2020.

2. If the Respondents fail to open the portal, the Petitioner is at liberty to avail the ITC in GSTR-3B of July 2020.

3. Respondents retain the right to verify the genuineness of the claims made by the Petitioner.

FAQs

Q1: What is TRAN-1 and why was it so important?

A: TRAN-1 (GST TRAN-1) was a transitional form that businesses had to file when India switched to GST on 1st July 2017. It allowed them to carry forward tax credits (like VAT paid on stock) from the old tax regime into the new GST system. Missing this form meant losing legitimate tax credits — essentially losing money that was rightfully theirs.

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

A: The GST portal was plagued with technical glitches during the transition period. The system was new, complex, and many taxpayers — even large corporations with expert help — struggled to use it. The court acknowledged this was a systemic failure, not just the taxpayer’s fault.

Q3: What is Rule 117(1A) and why was it challenged?

A: Rule 117(1A) of the Central GST Rules, 2017 allows the Commissioner to extend the TRAN-1 deadline, but only for those who faced “technical difficulties on the common portal.” The petitioner challenged this because it’s too narrow — it only covers glitches logged on the GST portal, ignoring other real-world difficulties like poor internet, lack of computer skills, or offline problems.

Q4: Did the court strike down Rule 117(1A)?

A: No, the court did not declare Rule 117(1A) unconstitutional or ultra vires. However, it held that applying it in a way that denies legitimate ITC credits would violate Article 14 (equality) and Article 300A (property rights) of the Constitution.

Q5: What does Article 300A have to do with tax credits?

A: Article 300A of the Constitution protects the right to property. The courts have held that CENVAT/ITC credit that has already accrued is a vested property right — it belongs to the taxpayer. The government cannot take it away simply by framing a rule that imposes an unreasonable time limit.

Q6: What happens if the government doesn’t open the portal by 30th June 2020?

A: The court gave a practical alternative — if the portal isn’t opened, the petitioner can simply claim the ITC in their GSTR-3B return for July 2020. This ensures the taxpayer isn’t left without a remedy.

Q7: Can the government verify the petitioner’s claims?

A: Yes! The court specifically noted that “the respondents would be at liberty to verify the genuineness of claim(s) made by the Petitioner.” So while the petitioner gets relief, the government can still check if the claims are legitimate.

Q8: Does this judgment help other taxpayers in similar situations?

A: Absolutely! This judgment follows a long line of similar cases. The Punjab & Haryana High Court had already disposed of numerous similar writ petitions following the Adfert Technologies ruling. This case adds to that body of law, making it clear that taxpayers who genuinely couldn’t file TRAN-1 due to technical issues are entitled to relief.

Hearing conducted through Video Conferencing.

1. The Petitioner through instant petition is challenging vires of

Rule 117(1A) of Central GST Rules, 2017 (for short ‘Rules’) and seeking

direction to Respondent to permit Petitioner to electronically upload form

TRAN-I in order to avail credit of excess VAT reflected in Returns, as due

to technical glitches on the GST Portal, the petitioner could not file Form

TRAN-I.

2. The Petitioner-a partnership firm, engaged in the business of

trading of Electronic items, is registered with Respondent-GST Authorities

under Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).

The Petitioner prior to 01.07.2017 i.e. date of introduction of GST was

registered under Punjab VAT Act,2005. The Petitioner was entitled to claim

credit of the duties paid on inputs and credit of the Value Added Tax in

respect of inputs held in stock and excess ITC, if any reflected in the

Returns, for which it was required to furnish information in Form GST

TRAN-1. However Petitioner failed to upload TRAN-I by last date i.e.

31.12.2017. As per sub-Rule (1A) of Rule 117 of the Rules, the

Commissioner on the recommendation of the Council may extend date for

submitting the declaration, in respect of registered persons who could not

submit declaration by the due date on account of technical difficulties. The

Respondents in exercise of power conferred by sub-Rule (1A) of Rule 117

of the Rules, by order dated 01.01.2020 (Annexure P-16) has extended date

for filing TRAN-I till 31.03.2020.

3. Counsel for the Petitioner contended that issue involved is

squarely covered by judgment of this Court in the case of Adfert

Technologies Pvt. Ltd. Vs Union of India 2019-TIOL-2519-HC-P&H-

GST. The SLP filed against aforesaid decision stands dismissed. Delhi High

Court in the case of Brand Equity Treaties Ltd. and others vs. Union of

India 2020-TIOL-900-HC-Del-GST following decision of this Court and

various other High Courts has permitted Petitioners to file TRAN-I on or

before 30.06.2020. Delhi High Court has further directed Respondents to

permit all other similarly situated tax payers to file TRAN-I on or before

30.06.2020. Delhi High Court has further vide order dated 16.06.2020 in

SKH Sheet Metals Components vs. Union of India WP(C) 13151 of 2019

approved its earlier opinion in the case of Brand Equity and permitted

Petitioners to file TRAN-I till 30.06.2020.

4. Notice of motion.

5. Mr.Anshuman Chopra,Senior Standing Counsel accepts notice

on behalf of respondenets 1 to 3, 5 and 6 while Mr.Pankaj Gupta, Addl.AG

Punjab accepts notice on behalf of respondent no.4. They are unable to

controvert the fact that the issue in hand is squarely covered by the

judgment of this Court in Adfert Technologies Pvt. Ltd. (Supra) and of

the Delhi High Court in the case of Brand Equity (Supra).

6. Having heard learned Counsel for the parties and perused the

cited judgments, we are of the considered opinion that issue involved is

squarely covered by judgments of this Court as well as of the aforesaid

judgments of Delhi High Court.

7. A Division Bench of this Court consisting one of us (Jaswant

Singh J) vide order dated 4.11.2019 allowed a bunch of petitions which

included CWP No. 30949 of 2018 titled as Adfert Technologies Pvt. Ltd.

Vs Union of India. The revenue assailing decision of this court filed SLP

before Hon’ble Supreme Court which stands dismissed vide order dated

28.02.2020. Following opinion in Adfert Technologies (Supra) a number

of writ petitions involving identical question have been disposed of by this

Court, wherein Respondents have been directed to open portal so that

assessee may upload TRAN-I and in case Respondent fails to open portal,

Petitioners have been permitted to take ITC in monthly return GSTR-3B.

Division Bench of Delhi High Court in the case of SKH Sheet Metals

Components vs. Union of India WP(C) 13151 of 2019, vide order dated

16.06.2020 has permitted Petitioner to revise TRAN-I on or before

30.06.2020. Delhi High Court while passing aforesaid order has relied upon

its recent decision in Brand Equity Treaties Ltd. and others vs. Union of

India (Supra) wherein Court had held that Government cannot adopt

different yardsticks while evaluating conduct of the tax payers and its own

conduct, acts and omissions. It would be profitable to extract relevant

paragraphs of judgment of Delhi High Court in Brand Equity:

“18. In above noted circumstances, the arbitrary classification,

introduced by way of sub Rule (1A), restricting the benefit only to

taxpayers whose cases are covered by "technical difficulties on

common portal" subject to recommendations of the GST Council, is

arbitrary, vague and unreasonable. What does the phrase "technical

difficulty on the common portal" imply? There is no definition to this

concept and the respondent seems to contend that it should be

restricted only to "technical glitches on the common portal". We,

however, do not concur with this understanding. "Technical difficulty"

is too broad a term and cannot have a narrow interpretation, or

application. Further, technical difficulties cannot be restricted only to

a difficulty faced by or on the part of the respondent. It would include

within its purview any such technical difficulties faced by the

taxpayers as well, which could also be a result of the respondent's

follies. After all, a completely new system of accounting; reporting of

turnover; claiming credit of prepaid taxes; and, payment of taxes was

introduced with the implementation of the GST regime. A basket of

Central and State taxes were merged into a single tax. New forms

were introduced and, as aforesaid, all of them were not even

operationalised. Just like the respondents, even the taxpayers required

time to adapt to the new systems, which was introduced as a

completely online system. Apart from the shortcomings in the system

developed by GSTN Ltd., the assessees also faced the challenges

posed by low bandwidth and lack of computer knowledge and skill to

operate the system. It is very unfair on the part of the respondents, in

these circumstances, to expect that the taxpayers should have been

fully geared to deal with the new system on day-one, when they

themselves were completely ill-prepared, which led to creation of a

complete mess. The respondents cannot adopt different standards –

one for themselves, and another for the taxpayers. The GST regime

heralded the system of seamless input tax credits. The successful

migration to the new system was a formidable and unprecedented task.

The fractures in the system, after its launch, became visible as

taxpayers started logging in closer to the deadline. They encountered

trouble filing the returns. Petitioners who are large and mega

corporations - despite the aid of experts in the field, could not collate

the humongous data required for submission of the statutory forms.

Courts cannot be oblivious to the fact that a large population of this

country does not have access to the Internet and the filing of TRAN-1

was entirely shifted to electronic means. The Nodal Officers often

reach to the conclusion that there is no technical glitch as per their

GST system laws, as there is no information stored/logged that would

indicate that the taxpayers attempted to save/submit the filing of Form

GST TRAN-1. Thus, the phrase "technical difficulty" is being given a

restrictive meaning which is supplied by the GST system logs.

Conscious of the circumstances that are prevailing, we feel that

taxpayers cannot be robbed of their valuable rights on an unreasonable

and unfounded basis of them not having filed TRAN-1 Form within

90 days, when civil rights can be enforced within a period of three

years from the date of commencement of limitation under the

Limitation Act, 1963.

19. The introduction of Sub rule (1A) in Rule 117 is a patchwork

solution that does not recognise the entirety of the situation. It sneaks

in an exception, without addressing situations taken note of by us.

This exception, as worded, is an artificial construction of technical

difficulties, limiting it to those existing on the common portal. It is

unfair to create this distinction and restrict it to technical snags alone.

In our view, there could be various different types of technical

difficulties occurring on the common portal which may not be solely

on account of the failure to upload the form. The access to the GST

portal could be hindered for myriad reasons, sometimes not resulting

in the creation of a GST log-in record. Further, the difficulties may

also be offline, as a result of several other restrictive factors. It would

be an erroneous approach to attach undue importance to the concept of

"technical glitch" only to that which occurs on the GST Common

portal, as a pre-condition, for an assesee/tax payer to be granted the

benefit of Sub- Rule (1A) of Rule 117. The purpose for which Sub-

Rule (1A) to Rule 117 has been introduced has to be understood in the

right perspective by focusing on the purpose which it is intended to

serve. The purpose was to save and protect the rights of taxpayers to

avail of the CENVAT credit lying in their account. That objective

should also serve other taxpayers, such as the petitioners. The

approach of the Government should be fair and reasonable. It cannot

be arbitrary or discriminatory, if it has to pass the muster of Article 14

of the Constitution. The government cannot turn a blind eye, as if

there were no errors on the GSTN portal. It cannot adopt different

yardsticks while evaluating the conduct of the taxpayers, and its own

conduct, acts and omissions. The extremely narrow interpretation that

the respondents seek to advance, of the concept of "technical

difficulties", in order to avail the benefit of Sub Rule (1A), is contrary

to the statutory mechanism built in the transitory provisions of the

CGST Act. The legislature has recognized such existing rights and has

protected the same by allowing migration thereof in the new regime

under the aforesaid provision. In order to avail the benefit, no

restriction has been put under any provisions of the Act in terms of the

time period for transition. The time limit prescribed for availing the

input tax credit with respect to the purchase of goods and services

made in the pre-GST regime, cannot be discriminatory and

unreasonable. There has to be a rationale forthcoming and, in absence

thereof, it would be violative of Article 14 of the Constitution.

Further, we are also of the view that the CENVAT credit which stood

accrued and vested is the property of the assessee, and is a

constitutional right under Article 300A of the Constitution. The same

cannot be taken away merely by way of delegated legislation by

framing rules, without there being any overarching provision in the

GST Act. We have, in our judgment in A.B. Pal Electricals (supra)

emphasized that the credit standing in favour of the assessee is a

vested property right under Article 300A of the Constitution and

cannot be taken away by prescribing a time-limit for availing the

same.

Emphasis Supplied

In the above findings, Delhi High Court though has not

declared Rule 117 (1A) ultra vires the constitution, nonetheless treated as

violative of Article 14 of Constitution of India being arbitrary,

discriminatory and unreasonable.

8. The Petitioner has challenged vires of Rule 117 (1A) of Rules,

however we do not think it appropriate to declare it invalid as we are of the considered opinion that Petitioner is entitled to carry forward Cenvat Credit accrued under Central Excise Act, 1944. The Respondents have repeatedly extended date to file TRAN-I where there was technical glitch as per their understanding. Repeated extensions of last date to file TRAN-I in case of technical glitches as understood by Respondent vindicate claim of the Petitioner that denial of unutilized credit to those dealers who are unable to furnish evidence of attempt to upload TRAN-I would amount to violation of Article 14 as well Article 300A of the Constitution of India.

9. In view of decision of this Court in the case of Adfert

Technologies Pvt. Ltd. (Supra) and Delhi High Court in the case of Brand

Equity Treaties Ltd. (Supra) present petition deserves to be allowed and

accordingly allowed. The Respondents are directed to permit Petitioner to

upload TRAN-I on or before 30.06.2020 and in case Respondent fails to do

so, the Petitioner would be at liberty to avail ITC in question in GSTR-3B

of July 2020. No doubt, the respondents would be at liberty to verify

genuineness of claim(s) made by Petitioner.