GST Transitional Credit Win: Proventus Life Sciences Gets Portal Access to File TRAN-1

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Case Name

M/s. Proventus Life Sciences Pvt. Ltd. v. The Commissioner, O/o Principal Commissioner & Central Excise & Others

Court Name: High Court of Judicature at Madras

Case No.: W.P. No. 7423 of 2019 & W.M.P. No. 8093 of 2019

Decided on: 28.07.2022

Coram: The Honourable Dr. Justice Anita Sumanth

Key Takeaways

1. Supreme Court’s Intervention Was the Game-Changer: The Madras High Court disposed of this writ petition primarily in light of the Supreme Court’s landmark ruling in Union of India and another v. Filco Trade Centre Pvt. Ltd. and another (SLP © Nos. 32700–32710 of 2018, dated 22.07.2022).

2. GSTN Portal Reopened for All: The Supreme Court directed the Goods and Service Tax Network (GSTN) to open the common portal for filing TRAN-1 and TRAN-2 forms for two months — from 01.09.2022 to 31.10.2022 — for ALL aggrieved registered assessees, not just those who had filed writ petitions.

3. No Technical Glitches Allowed: GSTN was specifically directed to ensure there are no technical glitches during this window period.

4. 90-Day Verification Period: After the filing window closes, the concerned officers were given 90 days to verify the claims and pass appropriate orders on merits, after giving reasonable opportunity to the parties.

5. Credits to Be Reflected in Electronic Credit Ledger: Once allowed, the transitional credit must be reflected in the Electronic Credit Ledger.

6. GST Council May Issue Guidelines: The Supreme Court also noted that the GST Council may issue appropriate guidelines to field formations for scrutinizing the claims.

Issue

Was the petitioner, M/s. Proventus Life Sciences Pvt. Ltd., entitled to upload Form GST TRAN-1 to claim transitional input tax credits under Section 140(3) of the CGST/SGST Act, and was the government’s order blocking this upload illegal and without jurisdiction?

Facts

• The Petitioner: M/s. Proventus Life Sciences Pvt. Ltd., represented by its Director, Mr. Manoj Kumar Bhaiya, is a company located at C-9 Industrial Complex, Maraimalai Nagar – 603 209, Kancheepuram District.

• The Problem: When India transitioned to the GST regime, businesses were allowed to carry forward their existing input tax credits (from the old tax regime) into the new GST system by filing Form GST TRAN-1. This is governed by Section 140(3) of the CGST/SGST Act.

• The Block: The 4th Respondent (Deputy Commissioner, O/o Principal Commissioner & Central Excise, Chennai Commissionerate) issued an order bearing C.No.IV/16/70/2019-COMP dated 11.04.2019, which effectively prevented the petitioner from uploading the TRAN-1 form.

• The Petition: The company filed W.P. No. 7423 of 2019 before the Madras High Court under Article 226 of the Constitution of India, seeking a Writ of Certiorarified Mandamus to quash the said order and direct the authorities to allow them to upload the TRAN-1 form.

• The Resolution: While this case was pending, the Supreme Court of India stepped in with a comprehensive ruling in the Filco Trade Centre case on 22.07.2022, which provided a universal solution for all such aggrieved taxpayers across the country.

Arguments

Given the brevity of the judgment (which was disposed of based on the Supreme Court ruling), the detailed arguments are not extensively recorded. However, here’s what we can piece together:

Petitioner’s Side (M/s. Proventus Life Sciences Pvt. Ltd.)

• The petitioner argued that the order dated 11.04.2019 (C.No.IV/16/70/2019-COMP) was illegal, invalid, and without jurisdiction.
• They contended that the order violated the principles of Natural Justice — meaning they weren’t given a fair hearing before being blocked.
• They claimed their right to claim transitional credits under Section 140(3) of the CGST/SGST Act for eligible duties on inputs held in stock on the appointed day (i.e., the day GST came into effect).
• Upon the Supreme Court’s ruling in the Filco Trade Centre case, the petitioner’s counsel, Mr. Adithya Reddy, on instructions from the petitioner, conveyed that the petitioner was inclined to avail the benefit extended by the Supreme Court’s directions.

Respondents’ Side (Government Authorities)

• The respondents were represented by Mr. V. Sundareswaran (Senior Panel Counsel for R1 to R3) and Mr. C. Harsha Raj (Additional Government Pleader for R2).
• The detailed counter-arguments of the respondents are not recorded in this short order, as the matter was disposed of based on the Supreme Court’s directions.

Key Legal Precedents

1. Union of India and another v. Filco Trade Centre Pvt. Ltd. and another

• Citation: SLP © Nos. 32700–32710 of 2018, dated 22.07.2022
• Court: Supreme Court of India
• Relevance: This is the cornerstone precedent of this case. The Supreme Court issued comprehensive directions to resolve the nationwide problem of taxpayers being unable to file or revise their TRAN-1 and TRAN-2 forms due to technical glitches or administrative blocks.
• Key Directions Applied:
• GSTN to open the portal from 01.09.2022 to 31.10.2022
• Any aggrieved registered assessee — whether or not they filed a writ petition — can file or revise their forms
• No technical glitches to be allowed
• Officers to verify claims within 90 days
• Allowed credits to be reflected in the Electronic Credit Ledger
• GST Council may issue guidelines for scrutiny

2. Statutory Provisions Referenced:

• Article 226 of the Constitution of India — The provision under which the writ petition was filed, giving High Courts the power to issue writs.
• Section 140(3) of the CGST/SGST Act — The provision that allows registered persons (who were not liable to be registered under the earlier law, or who were engaged in exempt supplies) to claim credit of eligible duties on inputs held in stock on the appointed day.

Judgement

The Petitioner (M/s. Proventus Life Sciences Pvt. Ltd.) effectively won, as the writ petition was disposed of in their favour.

What Did the Court Decide?

The Madras High Court, presided over by Dr. Justice Anita Sumanth, disposed of the writ petition on 28.07.2022 by:

1. Recording the Supreme Court’s directions in Union of India v. Filco Trade Centre Pvt. Ltd. (SLP © Nos. 32700–32710 of 2018, dated 22.07.2022).

2. Noting the endorsement made by the petitioner’s counsel that the petitioner was willing to avail the benefit of the Supreme Court’s directions — i.e., they would file their TRAN-1 form during the window period (01.09.2022 to 31.10.2022) opened by the Supreme Court.

3. Closing the connected Writ Miscellaneous Petition (W.M.P. No. 8093 of 2019).

4. No costs were awarded to either party.

The Court’s Reasoning:

The High Court essentially found that the Supreme Court’s universal directions in the Filco Trade Centre case had already addressed the petitioner’s grievance comprehensively. Since the petitioner was an “aggrieved registered assessee,” they were squarely covered by Direction No. 2 of the Supreme Court’s order, which permitted “any aggrieved registered assessee” to file or revise their transitional credit forms.

FAQs

Q1: What is Form GST TRAN-1, and why is it important?

Form GST TRAN-1 is a transitional form that businesses had to file when India switched to the GST regime. It allowed them to carry forward their existing input tax credits (from the old tax system like Central Excise, VAT, etc.) into the new GST system. Missing this filing meant losing out on potentially significant tax credits.

Q2: What is Section 140(3) of the CGST/SGST Act?

This section specifically allows businesses that were not registered under the earlier tax law (or were dealing in exempt goods) to claim credit for eligible duties on inputs held in stock on the day GST came into effect (the “appointed day”).

Q3: Why couldn’t the petitioner file TRAN-1 in the first place?

The 4th Respondent (Deputy Commissioner) had issued an order (C.No.IV/16/70/2019-COMP dated 11.04.2019) that blocked the petitioner from uploading the form. The petitioner claimed this was illegal and violated natural justice principles.

Q4: What does “Writ of Certiorarified Mandamus” mean?

It’s a combination of two writs — “Certiorari” asks the court to quash/cancel an illegal order, while “Mandamus” directs a government authority to perform a specific duty. Here, the petitioner wanted the court to both cancel the blocking order AND direct the authorities to allow them to upload TRAN-1.

Q5: Did the petitioner have to continue fighting the case after the Supreme Court ruling?

No! The Supreme Court’s ruling in Filco Trade Centre was so comprehensive that it covered the petitioner’s situation entirely. The petitioner’s lawyer confirmed they were happy to use the Supreme Court’s remedy (filing TRAN-1 during the reopened window), and the High Court case was closed.

Q6: What was the deadline for filing TRAN-1 under the Supreme Court’s directions?

The GSTN portal was directed to be opened from 01.09.2022 to 31.10.2022 — a two-month window for all aggrieved taxpayers to file or revise their TRAN-1 and TRAN-2 forms.

Q7: What happens after the TRAN-1 is filed?

The concerned officers have 90 days to verify the claims and pass appropriate orders on merits, after giving the taxpayer a reasonable opportunity to be heard. If the credit is allowed, it will be reflected in the taxpayer’s Electronic Credit Ledger.

Q8: Does this ruling benefit only those who filed writ petitions?

No! This is one of the most important aspects of the Supreme Court’s ruling. Direction No. 2 specifically states that any aggrieved registered assessee can file or revise their forms — irrespective of whether they filed a writ petition or whether their case was decided by the Information Technology Grievance Redressal Committee (ITGRC).

In light of the recent judgment of the Hon'ble Supreme Court in the case

of Union of India and another V. Filco Trade Centre Pvt. Ltd. and another

(SLP (C) Nos.32700 – 32710 of 2018 dated 22.07.2022), learned counsel for

the petitioner, on instructions from the petitioner, would convey that the

petitioner is inclined to avail the benefit extended to the assessees in the

aforesaid order. An endorsement is also made to the aforesaid effect.

2. The Hon'ble Court, has, in the aforesaid matter, issued a series of

directions as extracted below:

1.Goods and Service Tax Network (GSTN) is directed to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months i.e. w.e.f. 01.09.2022 to 31.10.2022.

2. Considering the judgments of the High Courts on the then prevailing peculiar circumstances, any aggrieved registered assessee is directed to file the relevant form or revise the already filed form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology

Grievance Redressal Committee (ITGRC).

3. GSTN has to ensure that there are no technical glitch

during the said time.

4. The concerned officers are given 90 days thereafter to

verify the veracity of the claim/transitional credit and pass

appropriate orders thereon on merits after granting appropriate

reasonable opportunity to the parties concerned.

5. Thereafter, the allowed Transitional credit is to be

reflected in the Electronic Credit Ledger.

6. If required GST Council may also issue appropriate

guidelines to the field formations in scrutinizing the claims.'

3. In specific, direction No.2 permits 'any aggrieved registered assessee'

to file a form seeking Transitional credit or revision thereof.

4. This Writ Petition is thus disposed recording the aforesaid and in light

of the endorsement made by the learned counsel for the petitioner. Connected

writ miscellaneous petition is closed. No costs.

28.07.2022