GST Tech Glitch Blocks ITC Transfer — Delhi HC Orders Swift Action

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Case Name

Indusind Media Communications Ltd. & Another v. Union of India & Ors.

Court Name: High Court of Delhi at New Delhi

Case No.: W.P.(C) 8691/2018, CM Appl. Nos. 38569/2018 & 43568/2018

Order dated: 23rd January, 2019

Key Takeaways

1. GST portal technical failures cannot deprive taxpayers of their legitimate ITC. The court recognized that the petitioner’s inability to transfer ITC was due to system failures, not their own fault.

2. Manual filing was permitted as a workaround when the GST portal was not accepting the filings — a pragmatic solution to a tech problem.

3. Each branch/location is a “distinct person” under Section 25(4) of the CGST Act, which is why separate petitions were filed for different locations and why different Commissionerates needed to act independently.

4. The Bombay Commissionerate’s certificate is the first critical step — without it, the Delhi, Gujarat, and Karnataka branches cannot avail the transferred ITC.

5. Time-bound compliance was ordered — the Delhi Commissionerate was directed to complete verification within four weeks of receiving the orders.

Issue

The central legal question here is:

Can a taxpayer be denied the benefit of transitional Input Tax Credit (ITC) available as on 1st July 2017, due to technical glitches on the GST portal that prevented timely filing of TRAN-1 and distribution of ITC across branches?

The short answer the courts gave: No, they cannot be denied this benefit due to the government’s own technical failures.

Facts

• Indusind Media Communications Ltd. is a company with multiple branches/locations across India — including in Mumbai (Maharashtra), Delhi, Gujarat, and Karnataka.

• When GST was introduced on 1st July 2017, companies were allowed to carry forward their existing Input Tax Credit (ITC) into the GST regime by filing a form called TRAN-1.

• The petitioner had ITC available as on 1st July 2017 and wanted to distribute this credit from its Mumbai location to its other branches.

• However, the GST portal was not accepting the filings — a technical problem on the government’s end.

• The deadline to avail transitional ITC was 20th October 2018 under Section 16(4) of the CGST Act, but the system issues meant the petitioner couldn’t meet this deadline.

• The Bombay High Court (in W.P.© 2229/2018 — Indusind Media Communications Ltd. vs. Union of India) had already stepped in and allowed the petitioner to manually file TRAN-1, ITC-01, ITC-02, and GSTR-3B with the Mumbai Commissionerate.

• The Bombay HC also directed that the Mumbai Commissioner issue a certificate, based on which the other branches (Delhi, Gujarat, Karnataka) could avail the credit.

• Now, before the Delhi High Court, the petitioner reported that the Electronic Credit Ledger had just been submitted (only the day before the hearing), and sought the Delhi court’s intervention to ensure the process moves forward.

Arguments

Petitioner’s Side (Indusind Media Communications Ltd.)

• The petitioner argued that they were entitled to the transitional ITC as on 1st July 2017 and wanted to distribute it to their branches.
• The GST portal’s technical failures prevented them from doing so — this was not their fault.
• They had already complied with the Bombay High Court’s directions by filing the required forms manually.
• They needed the Delhi High Court to direct the Delhi Commissionerate to act on the Mumbai certificate and allow the credit transfer.

Respondents’ Side (Union of India & Tax Authorities)

• The judgment does not record any strong opposition from the respondents at this stage.
• The matter was at an interim/procedural stage, so the focus was on compliance with the Bombay HC’s directions rather than a contested legal battle.

Key Legal Precedents & Provisions

1. W.P.(C) 2229/2018 — Indusind Media Communications Ltd. vs. Union of India (Bombay High Court)

• This was the primary precedent relied upon. The Bombay HC had already ruled that the petitioner was entitled to distribute ITC and allowed manual filing as a workaround for the portal glitch. The Delhi HC took note of this order and built upon it.

2. Previous Order of the Delhi High Court dated 16.10.2018 (in the same matter)

• The Bombay HC had itself noticed and given effect to this earlier Delhi HC order, showing a coordinated judicial approach across High Courts on the same issue.

Statutory Provisions:

1. Section 16(4) of the CGST Act — This provision sets the deadline for availing transitional ITC. The deadline was 20th October 2018. The court noted that the petitioner risked losing their ITC if the system issues weren’t resolved before this date.

2. Section 25(4) of the CGST Act — This provision treats each registered branch/location as a “distinct person” under GST law. This is why the Mumbai, Delhi, Gujarat, and Karnataka branches had to be dealt with separately, and why separate petitions were filed for different locations.

Forms Referenced:

• TRAN-1 — Transitional credit declaration form
• ITC-01 — ITC claim form
• ITC-02 — ITC transfer form (used when transferring credit between branches)
• GSTR-3B — Monthly return form

Judgment

The Petitioner (Indusind Media Communications Ltd.) got relief — the Delhi High Court passed directions in their favour.

What Did the Court Decide?

The Delhi High Court, in this interim order dated 23rd January 2019, made the following key directions:

1. The Bombay Commissionerate must act first — It must issue the necessary certificate based on the manually filed TRAN-1, ITC-02, and GSTR-3B. This certificate is the first and critical step for the entire ITC distribution process to work.

2. The respondents must ensure compliance with the Bombay High Court’s orders with utmost expedience — no delays were to be tolerated.

3. The Delhi Commissionerate (and other Commissionerates) must then undertake verification within four weeks of receiving the orders/certificate from Mumbai.

4. The matter was listed for the next hearing on 27th March 2019 to review compliance.

The Court’s Reasoning:

The court’s logic was simple and fair — the petitioner was being denied a legitimate tax benefit not because of any wrongdoing on their part, but because of technical failures on the government’s own portal. The courts (both Bombay and Delhi HCs) took a practical approach: allow manual filing, issue certificates, and ensure the credit flows to the rightful branches in a time-bound manner.

FAQs

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

TRAN-1 is a form that businesses had to file when GST was introduced to carry forward their pre-GST Input Tax Credit into the new GST regime. It was crucial because if you missed filing it (or couldn’t file it due to technical issues), you’d lose your accumulated tax credits — which could be a significant financial loss.

Q2: Why did the petitioner have to go to BOTH the Bombay and Delhi High Courts?

Great question! Under Section 25(4) of the CGST Act, each branch of a company is treated as a “distinct person” for GST purposes. So the Mumbai branch, Delhi branch, Gujarat branch, and Karnataka branch are all separate entities under GST. Each jurisdiction’s Commissioner had to act independently, which is why separate petitions were filed in different courts.

Q3: What happens if the Bombay Commissionerate doesn’t issue the certificate?

The entire chain breaks down. The Delhi, Gujarat, and Karnataka branches cannot avail the transferred ITC without the Mumbai certificate. That’s why the Delhi HC specifically directed that the Bombay Commissionerate must act with utmost expedience.

Q4: Did the petitioner ultimately get their ITC?

This order is an interim order — it directed the authorities to act. The final outcome would depend on subsequent compliance and hearings. The next date was set for 27th March 2019. The judgment doesn’t tell us the final outcome.

Q5: What’s the broader significance of this case?

This case is part of a wave of early GST litigation where businesses faced genuine hardship due to the GST portal’s technical failures during the transition period. Courts across India consistently held that taxpayers should not be penalized for the government’s technical failures, and allowed manual filing as a practical solution. This case reinforces that principle.

Q6: What is Section 16(4) of the CGST Act about?

Section 16(4) sets a time limit for availing Input Tax Credit. In the context of transitional credits, the deadline was 20th October 2018. The court noted that if the portal issues weren’t resolved and the credit wasn’t availed before this date, the petitioner would permanently lose their ITC — which made the matter urgent.

1. At the outset, it was submitted that the petitioners have filed the

TRAN-1 in this case. Electronic credit ledger account is submitted only

yesterday. Learned counsel for the petitioner submits that this development

was consequent upon the Bombay High Court direction in W.P.(C)

2229/2018 Indusind Media Communications Ltd. vs. Union of India which

had noticed the previous order of this Court, particularly the order dated

16.10.2018 and given further effect to it on account of its directions. A copy of the order of the Bombay High Court has been shown to the Court.

That order pertinently directs as follows:-

“7. In view of the above, the undisputed position before us is

that the Petitioners are entitled to distribute the Input Credit

available with it as on 1st July 2017 amongst its

branches/locations. This distribution has not been possible on

account of technical problems of the Respondents. Further the

availment of input tax credit available on 1st July107 has to be

done on or before 20th October 2018 in view of Section 16(4) of

the Act. Thus, it is likely that the Petitioners may be deprived on

the facility of the input tax credit available with it on 1st July

2017, if the same is not taken before 20th October 2018. It is to

be noted that the Respondents have extended the time to the file

TRANS-1 and TRANS-2, but no such extension has been

granted to extend the time to file GSTR-3B. Thus, in the above

facts, pending the final disposal of the Petition (when these

issues will be considered in greater depth), as the system is not

accepting it, the Petitioners would manually file with the

Respondents a copy of its revised TRANS-1, ITC-01 and also

GSTR-3B at Mumbai (in physical form).

8. On the basis of the revised TRANS-1, ITC-02 and the GSTR-

3B at Mumbai (to be certified by the Commissioner at

Mumbai), the petitioners will be entitled to take the credit

reduced at Mumbai (Maharashtra) to its locations in Delhi,

Gujarat and Karnataka subject to the satisfaction of the

Commissioner having jurisdiction over those locations. We are

not giving any directions to the Commissioners of Delhi,

Gujarat and Karnataka as in terms of Section 25(4) of the Act

each registered location/branch is a distinct person. Therefore,

on the above basis of being distinct persons under the Act, they

have in cases of Delhi locations and Karnataka location (as

informed by Shri. Nankani, the learned Senior Counsel), the

Petitioner has filed separate Petitions. Moreover, the

Commissioners at separate locations/branches (except

Mumbai) are not parties before us. Therefore, appropriate

order from the jurisdictional Commissioners on the basis of the

certificates issued by the Mumbai Commissionerate be obtained

by the Petitioners locations/branches subject to the satisfaction

of the concerned Commissioners in accordance with law.”

2. In the light of the above, the Court is of the opinion that the

authorities should take all expedious steps to ensure that the certificate is issued by the Bombay Commissionerate to enable further steps to be taken

by the Commissionerate of Delhi, Karnataka and Gujarat. Since the first step

towards distribution of the input credit claim is the certificate to be issued by the Bombay Commissionerate, the respondent shall pass appropriate orders ensuring that the Bombay High Court’s orders are respected and complied with utmost expedience.

3. Thereafter, other Commissionerates, especially Delhi

Commissionerate, shall ensure that the verification is undertaken and

completed within four weeks of the receipt of the orders.

4. List on 27th March, 2019.A