GST Transitional Credit Claim: Court Allows Petitioner to Apply for TRAN-1 Filing

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Case Name

M/s. Sunil Kumar & Company Sri Ganganagar vs. Union of India & Others

Court Name: High Court of Judicature for Rajasthan, Bench at Jaipur

Case No.: D.B. Civil Writ Petition No. 717/2020

Order dated: 14th December 2020

Coram: Hon’ble Mrs. Justice Sabina & Hon’ble Mr. Justice Prakash Gupta

Key Takeaways

1. TRAN-1 Filing Rights Matter: A taxpayer’s right to claim transitional credit (carry-forward of pre-GST tax credits) is a legitimate right that courts take seriously.

2. Rule 117 Challenge Rejected: The constitutional validity of Rule 117 of the CGST Rules, 2017 has already been settled by earlier courts — it is no longer an open question (res integra), so the court refused to re-examine it.

3. Practical Remedy Provided: Even though the court didn’t strike down any rule, it gave the petitioner a clear procedural path — apply to the GST Council through the Standing Counsel for a recommendation to the Commissioner.

4. Precedent-Driven Decision: The court simply followed the earlier ruling in Obelisk Composite Technology LLP vs. Union of India rather than creating new law.

5. Time-Bound Relief: The benefit of CENVAT credit must be availed within the stipulated time as set by the Union of India.

Issue

The central legal questions were:

• Can the petitioner be permitted to file Form GST TRAN-1 (either online or manually) to claim transitional Input Tax Credit under Section 140 of the Central Goods and Services Tax Act, 2017?
• Is Rule 117 of the CGST Rules, 2017 (which sets a deadline for filing TRAN-1) constitutionally valid?
• Should the respondents give effect to the manually submitted Form GST TRAN-1 already submitted by the petitioner?

Facts

• Who is the Petitioner? M/s. Sunil Kumar & Company, a proprietorship firm based in Sriganganagar, Rajasthan, run by Mr. Sunil Kumar.

• What’s the Background? When India transitioned from the old tax system (which had CENVAT credit) to the new GST system in 2017, businesses were allowed to carry forward their accumulated tax credits by filing a special form called Form GST TRAN-1.

• What Went Wrong? The petitioner either couldn’t file TRAN-1 on the GST portal (due to technical issues or deadline problems) or had already submitted it manually to the department but it wasn’t being given effect to.

• What Did He Want?
• Permission to file Form TRAN-1 to claim transitional credit
• The department to honor the manually submitted TRAN-1
• Rule 117 of CGST Rules (which set the deadline) to be declared unconstitutional or “read down” so there’s effectively no last date
• When Was This Filed? The writ petition was filed in 2020 and decided on 14th December, 2020.

Arguments

Petitioner’s Side (M/s. Sunil Kumar & Company):

1. He should be allowed to file Form TRAN-1 to claim his legitimate transitional Input Tax Credit under Section 140 of the CGST Act, 2017.

2. The manually submitted TRAN-1 should be given effect to by the department.

3. Rule 117 of the CGST Rules (which imposes a deadline for filing TRAN-1) is unconstitutional and should either be struck down or “read down” so that there is effectively no last date to file TRAN-1.

4. The GST portal facility for filing TRAN-1 should be revived/reopened.

Respondents’ Side (Union of India & Others):

1. A similar writ petition — Obelisk Composite Technology LLP vs. Union of India & Others (D.B. Civil Writ Petition No. 18392/2019) — had already been decided by a Co-ordinate Division Bench at Jodhpur on 12.12.2019, and the present petition should be disposed of in the same terms.

2. The challenge to Rule 117 is no longer res integra (i.e., it’s a settled question) — it was already upheld by the Gujarat High Court in Willowood Chemicals Pvt. Ltd. vs. Union of India.

3. The Union of India had already extended the last date for submitting GST TRAN-1 up to 31st December, 2019, and a procedure under Sub-rule 1(A) of Rule 117 exists for the petitioner to follow.

Key Legal Precedents

1. Obelisk Composite Technology LLP vs. Union of India & Others (D.B. Civil Writ Petition No. 18392/2019)

• Decided by a Co-ordinate Division Bench at the Principal Seat at Jodhpur on 12.12.2019
• This was the primary precedent followed in the present case
• In that case, the court rejected the challenge to Rule 117’s constitutional validity but gave the petitioner liberty to approach the GST Council through the Standing Counsel for a recommendation

2. M/s Anupam Motors vs. Union of India (D.B. Civil Writ Petition No. 7454/2019)

• Decided by a Division Bench of the Rajasthan High Court
• Held that the challenge to Rule 117 of the CGST Rules was no longer res integra (settled law) in view of the Gujarat High Court’s decision in Willowood Chemicals

3. Willowood Chemicals Pvt. Ltd. vs. Union of India (R/Special Civil Application No. 4252 of 2018)

• Decided by the Gujarat High Court on 12th/19th September, 2018
• This case upheld the constitutional validity of Section 140(3) of the CGST Act and the proviso to Rule 117 of the CGST Rules
• This became the foundational precedent for rejecting challenges to Rule 117 across India

4. M/s Shree Motors vs. Union of India & Ors. (SBCWP No. 4315/2019)

• Decided by the Rajasthan High Court on 21.11.2019
• Referenced in the context of the procedure under Sub-rule 1(A) of Rule 117 for filing TRAN-1 after the extended deadline

Key Legal Provisions Referenced:

• Section 140 of the Central Goods and Services Tax Act, 2017 — deals with transitional arrangements for Input Tax Credit
• Rule 117 of the Central Goods and Services Tax Rules, 2017 — sets the deadline and procedure for filing TRAN-1
• Sub-rule 1(A) of Rule 117 — provides the procedure for late filing through GST Council recommendation

Judgment

This was a partial/procedural win for the petitioner — the court didn’t grant everything he asked for, but it didn’t leave him empty-handed either.

What the Court Decided:

1. Challenge to Rule 117 REJECTED: The court refused to examine the constitutional validity of Rule 117 since it was already a settled question (res integra).

2. Practical Liberty Granted: The court granted the petitioner liberty to make an application before the GST Council through the following procedure:

• Submit application → Standing Counsel → Jurisdictional Officer → GST Council
• The GST Council will examine the claim and issue a certificate of recommendation
• If the petitioner’s claim is found correct, the GST Council shall issue a recommendation to the Commissioner to enable the petitioner to get the benefit of CENVAT credit

3. Time Condition: The benefit must be availed within the stipulated time as set by the Union of India.

4. Writ Petition Disposed Of in terms of the directions above, following the precedent in Obelisk Composite Technology LLP (supra).

Court’s Reasoning:

The court found that the controversy in this case was identical to the one in Obelisk Composite Technology LLP, so there was no need to reinvent the wheel — it simply applied the same solution.

FAQs

Q1: Did the petitioner win the case?

Not entirely. The court didn’t grant him the right to directly file TRAN-1 or declare Rule 117 unconstitutional. However, it gave him a procedural pathway to pursue his CENVAT credit claim through the GST Council.

Q2: What is Form GST TRAN-1 and why is it important?

TRAN-1 is a form that businesses had to file when India switched to GST in 2017. It allowed them to carry forward their old tax credits (like CENVAT credit) into the new GST system. Missing this filing meant losing potentially significant tax credits.

Q3: Why did the court refuse to strike down Rule 117?

Because the constitutional validity of Rule 117 had already been upheld by the Gujarat High Court in Willowood Chemicals Pvt. Ltd. vs. Union of India and subsequently by the Rajasthan High Court in M/s Anupam Motors vs. Union of India. It was considered settled law.

Q4: What is “res integra” and why does it matter here?

Res integra is a Latin legal term meaning “an untouched matter” or an open question. When the court says the issue is “no longer res integra,” it means the question has already been decided and cannot be re-litigated. Here, the validity of Rule 117 was no longer open for debate.

Q5: What should the petitioner do next after this order?

The petitioner should prepare an application with all requisite particulars and evidence, submit it to the Standing Counsel, who will forward it to the jurisdictional officer, who will then send it to the GST Council for a recommendation to the Commissioner.

Q6: Is there a deadline for the petitioner to act on this order?

Yes — the benefit of CENVAT credit must be availed within the stipulated time as set by the Union of India. The petitioner needs to act quickly.

Q7: Does this judgment set a new legal precedent?

Not really. This judgment simply follows and applies the earlier precedent set in Obelisk Composite Technology LLP vs. Union of India (D.B. Civil Writ Petition No. 18392/2019). It reinforces the existing approach rather than creating new law.

Q8: What happens if the GST Council finds the petitioner’s claim incorrect?

The order only says that “if the petitioner’s assertion is found to be correct,” the GST Council shall issue the necessary recommendation. If the claim is found incorrect, the petitioner would presumably not get the benefit — though the order doesn’t explicitly address this scenario.

We have heard learned counsel for the parties.

Learned counsel for the respondent has submitted that

similar writ petition, i.e. Obelisk Composite Technology LLP

Vs. Union of India & Others (D.B. Civil Writ Petition No.

18392/2019) has been disposed of by Co-ordinate Division

Bench of this Court at Principal Seat at Jodhpur vide order dated

12.12.2019. Hence, present petition was liable to be disposed of in

terms of the order passed in Obelisk Composite Technology LLP

(supra).

In the writ petition, petitioner has prayed that he may be

permitted to file Form TRAN-1 in compliance of Central Goods and

Services Tax Act, 2017 (for short ‘the CGST Act’) read with Central

Goods and Services Tax Rules, 2017 (hereinafter referred to as

‘the CGST Rules’) in order to enable the petitioner to avail

Tansitional Credit in Electronic Credit Ledger. It was also prayed

that the respondents should give effect to Form GST Tran-1 that

had been manually submitted to the respondent-department to

avail relevant Legitimate Input Tax Credit.

In the writ petition, validity of Rule 117 of the CGST Rules

has also been challenged.

Order passed in Obelisk Composite Technology LLP

(supra) reads as under:-

“1. Heard learned counsel for the

respective parties.

2. In the present writ application, the

petitioner M/s Obelisk Composite Technology

LLP through its partner has made a prayer

seeking writ of mandamus to the effect that the

filing of declaration in form GST Trans-1 may be

allowed to enable the petitioner to claim

transition credit of eligible duties on the

appointed day in terms of Section 140 of the

Central Goods and Service Tax Act, 2017 and to

credit the same in its relevant ledger account or

in the alternative to refund the eligible amount

to the petitioner.

3. A further prayer has been made to

declare Rule 117 of the CGST Rules to claim

transitional Credit violates the Constitutional

provisions and therefore it may be turned down

or ordered to be read down as if there is no last

date to file TRANS-1.

4. A further prayer has been made to

direct the respondents to revive the facility of

filing TRANS-1 on common portal.

5. Learned counsel appearing for the

Revenue brought to our notice a judgment

rendered by Division Bench of this Court in D.B.

Civil Writ Petition No. 7454/2019 (M/s Anupam

Motors Vs. Union of India) wherein challenge to

Rule 117 of the Rules were held to be no longer

res integra in view of the decision of Gujarat

High Court in Willowood Chemicals Pvt. Ltd. Vs.

Union of India (R/ Special Civil Application No.

4252 of 2018) decided on 12th/19th

September, 2018 and the challenge to the

constitutional validity of Section 140 (3) of

CGST Act and the proviso to Rule 117 of the

Rules were dismissed.

6. Learned counsel for the State further

submits that the Union of India has extended

the last date for submitting the GST TRANS-1

upto 31st December, 2019 but the procedure

stipulated under Sub-rule 1(A) of Rule 117

requires the petitioner to make application

through the GST counsel who may make a

recommendation to the Commissioner who shall

act on the basis of such direction of the counsel.

7. In this respect, our attention was drawn

to a judgment passed by this Court in SBCWP

No. 4315/2019 (M/s Shree Motors Vs. Union of

India & Ors.) which was disposed of vide order

dated 21.11.2019.

8. Accordingly, upon taking the aforesaid

submissions into consideration, we are of the

considered view that the challenge to the

constitutional validity of Rule 117 no more

being res integra, this Court cannot entertain

such prayer and accordingly reject the same,

however, considering the fact that the Union of

India and the Finance Department have

extended the period contemplated under Rule

1A of Rule 117 till 31st December, 2019, we

grant liberty to the petitioner to make an

application before GST Council (through

Standing Counsel, who is further requested to

hand over the same to the jurisdictional officer)

for forwarding the same to the GST Council to

issue requisite certificate of recommendation

alongwith requisite particulars, evidence and a

certified copy of the order instantly and such

decision be taken forthwith and if the

petitioner’s assertion is found to be correct, the

GST Council shall issue necessary

recommendation to the Commissioner to enable

the petitioner to get the benefit of CENVAT

credit within the stipulated time as stipulated by

the Union of India i.e on or before 31st December, 2019.

9. The writ application stands disposed of

in terms of the aforesaid directions.”

Thus, the controversy involved in the present writ petition is

similar to the controversy involved in Obelisk Composite

Technology LLP (supra).

Hence, the writ petition is liable to be disposed of in terms of

the decision rendered by Co-ordinate Division Bench of this Court

Principal Seat at Jodhpur in Obelisk Composite Technology LLP

(supra).

Accordingly, we grant liberty to the petitioner to make an

application before GST Council through Standing Counsel, who is

further requested to hand over the same to the jurisdictional

officer for forwarding the same to the GST Council to issue

requisite certificate of recommendation alongwith requisite

particulars, evidence and a certified copy of the order instantly

and such decision be taken forthwith and if the petitioner’s

assertion is found to be correct, the GST Council shall issue

necessary recommendation to the Commissioner to enable the

petitioner to get the benefit of CENVAT credit within the stipulated

time as stipulated by the Union of India.

Writ petition stand disposed of in the above terms.

(PRAKASH GUPTA),J (SABINA),J