Medical Device Maker Wins Right to Claim Pre-GST Tax Credits via TRAN-1 Form

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Case Name

M/s Disposafe Health and Life Care Limited v. Union of India and others

Court Name: High Court of Punjab & Haryana at Chandigarh

Case No.: CWP 34205/2019 (O&M)

Date of Decision: 18.12.2019

Key Takeaways

1. TRAN-1 Filing Rights Protected: Businesses that couldn’t upload their pre-GST unutilized Input Tax Credit (ITC) on the GST portal due to technical issues have a legal right to do so.

2. Precedent Already Set: This case was decided quickly because the exact same issue had already been settled by the same court in the Adfert Technologies case just weeks earlier.

3. Alternative Relief Provided: If the GST portal wasn’t opened by the authorities, the petitioner was allowed to claim the credit manually or electronically through their GST-3B form for January 2020.

4. Taxpayer-Friendly Approach: The court showed a practical, taxpayer-friendly stance — ensuring that a technical/portal glitch doesn’t result in permanent loss of legitimately earned tax credits.

5. Transition from Old Tax Regime to GST: This case highlights the challenges businesses faced when transitioning from the old tax regime (VAT, Central Excise, Service Tax) to the new GST regime.

Issue

Can a taxpayer who was unable to upload their pre-GST unutilized Input Tax Credit (ITC) on the GST portal through Form TRAN-1 — due to technical difficulties — be allowed to do so belatedly, or claim the credit through an alternative mechanism?

In simple terms: Should a company lose its legitimately earned old tax credits just because the government’s online portal didn’t work properly?

Facts

• Who is the Petitioner? M/s Disposafe Health and Life Care Limited — a Private Limited Company engaged in the manufacturing of Medical Devices.

• Old Tax Registrations: Before GST came into effect, the company was registered under:
• Haryana Value Added Tax Act, 2003
• Central Sales Tax Act, 1956
• Central Excise under the Finance Act, 1994 read with Service Tax Rules, 1994

• The Problem: When GST was introduced, businesses were required to upload their old, unused Input Tax Credit (ITC) — i.e., taxes already paid under the old regime — onto the GST portal using a statutory form called TRAN-1. This was the mechanism to carry forward old credits into the new GST system.

• What Went Wrong? The petitioner could not upload the details of its unutilized ITC as per its account books onto the electronically generated statutory Form TRAN-1.

• Court Filing: The company approached the Punjab & Haryana High Court seeking relief.

• Quick Resolution: The respondents (Union of India and others) agreed that the issue was already covered by an earlier judgment, and the case was preponed and heard on the same day.

Arguments

Petitioner’s Side (M/s Disposafe Health and Life Care Limited):

• The petitioner argued that it had legitimate, unutilized ITC accumulated under the old tax laws that it was entitled to carry forward into the GST regime.
• It was unable to upload this ITC data onto the GST portal through Form TRAN-1 — not due to any fault of its own, but due to technical/portal issues.
• The petitioner’s counsel pointed out that this exact issue had already been decided by the same High Court in CWP 30949 of 2018 titled “Adfert Technologies Pvt. Ltd. Versus Union of India and others” (decided on 04.11.2019) in favour of the assessees.
• Therefore, the petitioner was entitled to the same relief as granted in the Adfert Technologies case.

Respondents’ Side (Union of India and others):

• Interestingly, the respondents did not oppose the petition!
• Their counsel stated they had no objection if the application was allowed and the main case was taken up for hearing immediately.
• Both sides conceded that the issue was squarely covered by the Adfert Technologies judgment.

Key Legal Precedents

Adfert Technologies Pvt. Ltd. Versus Union of India and others

CWP No. 30949 of 2018 — decided on 04.11.2019

High Court of Punjab & Haryana at Chandigarh

This is the cornerstone precedent of this case. Here’s what you need to know about it:

• This was the lead judgment that dealt with the exact same issue — taxpayers being unable to file Form TRAN-1 on the GST portal to carry forward their pre-GST unutilized ITC.
• The High Court had ruled in favour of the assessees in that case, granting them the right to file TRAN-1 belatedly.
• In the present case (Disposafe), both parties agreed that the facts and legal issues were identical, so the court simply applied the Adfert Technologies ruling directly.

Statutory Provisions Referenced:

Goods and Service Tax Act, 2017

The new tax regime under which TRAN-1 was required to be filed

Haryana Value Added Tax Act, 2003

Old state tax law under which ITC was accumulated

Central Sales Tax Act, 1956

Old central sales tax law

Finance Act, 1994 read with Service Tax Rules, 1994

Old service tax framework

Form TRAN-1

The statutory transitional form for carrying forward pre-GST ITC

GST-3B Form

Monthly GST return form — offered as an alternative relief mechanism

Judgment

The Petitioner Won

1. Petition Allowed: The court allowed the petition in terms of the earlier judgment in CWP No. 30949 of 2018 (Adfert Technologies case, decided on 04.11.2019).

2. Deadline to File TRAN-1: The petitioner was given permission/modification to file the statutory Form TRAN-1 by 31.12.2019.

3. Alternative Relief (Safety Net): In case the petitioner was hampered in any manner from availing the benefit — due to the non-opening of the Portal by the Respondents — then the petitioner was permitted, as an alternative, to claim the benefit of unutilized credit in their GST-3B Forms to be filed for the month of January 2020, either electronically or manually.

4. No Order as to Costs: The court made no order regarding legal costs — meaning neither party had to pay the other’s legal fees.

5. Judges: The judgment was delivered by Justice Jaswant Singh and Justice Sant Parkash on 18.12.2019.

FAQs

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

Form TRAN-1 was a transitional form introduced under the GST regime. When India switched from the old tax system (VAT, Excise, Service Tax) to GST, businesses had accumulated unused tax credits under the old laws. TRAN-1 was the mechanism to carry those old credits forward into the new GST system. If you couldn’t file it, you’d lose those credits permanently — which could mean a significant financial loss.

Q2: Why couldn’t the company file TRAN-1?

The judgment mentions that the petitioner “could not upload” the details onto the electronically generated Form TRAN-1. This was a common problem faced by many businesses during the GST transition — the government’s online portal had technical glitches and issues that prevented timely filing.

Q3: What was the Adfert Technologies case about?

It was a landmark case (CWP No. 30949 of 2018) decided by the same Punjab & Haryana High Court on 04.11.2019, just weeks before this case. It dealt with the same TRAN-1 filing issue and ruled in favour of taxpayers, establishing that they cannot be denied their legitimate pre-GST ITC due to portal issues.

Q4: What happens if the GST portal still doesn’t open?

The court was very practical about this! It provided a safety net — if the portal wasn’t opened, the company could claim its old ITC credits in its GST-3B return for January 2020, either electronically or manually. So the company was protected either way.

Q5: Does this judgment apply to other businesses in the same situation?

While this specific judgment applies to M/s Disposafe Health and Life Care Limited, it follows the broader precedent set in the Adfert Technologies case, which was a wider ruling covering many assessees. Businesses in similar situations could potentially rely on these judgments. However, please consult a tax professional for advice specific to your situation.

Q6: Was this a contested case?

Not really! Interestingly, the respondents (Union of India) had no objection to the petition being allowed. Both sides agreed the issue was covered by the Adfert Technologies judgment, making this a relatively smooth and quick resolution.

Q7: What is the significance of the “No order as to costs” direction?

It simply means the court didn’t order either party to pay the other’s legal costs. This is fairly common in cases where the matter is resolved amicably or where the government is a party.

The petitioner, a Private Limited Company, is engaged in business of manufacturing of Medical Devices. It is registered under the Goods and Service Tax Act, 2017. Prior to the introduction of Goods and Service Tax Act, the petitioner was registered under the provisions of Haryana Value Added Tax Act, 2003, Central Sales Tax Act,1956 and Central Excise with the provisions of Finance Act, 1994 read with Service Tax Rules,1994.

Grievance of the petitioner is that it could not upload the details of un-utilized Input Tax Credit (in short 'ITC') as per the accounts books to the electronically generated statutory Form “TRAN-I” which was the requirement under the GST regime for availing the benefit of the previous un-utilized ITC accrued under the Taxing Statutes.

Counsel for the petitioner submits that the issue raised

herein already stands decided by this Court, vide judgment dated

04.11.2019, passed in CWP 30949 of 2018 titled “Adfert

Technologies Pvt. Ltd. Versus Union of India and others” in

favour of the Assessees, hence the petitioner-Company is also

entitled to relief in the same terms.

Notice of motion was issued for 15.1.2020.

Upon notice of CM 18999/2019 learned counsel for the

respondents, state that they have no objection if the application is

allowed and main case is preponed and taken up for hearing today.

In view of the agreed stand, the application is allowed,

main case is preponed from 15.1.2020 and taken up today for

hearing.

Learned counsel for the parties concede that the issue

raised in the present petition is squarely covered by the aforesaid

judgment dated 04.11.2019, passed in Adfert Technologies case

(supra), therefore, the present petition is liable to be disposed of in

terms of the said case.

In view of above, present petition is allowed in terms of

the said CWP No.30949 of 2018 decided on 04.11.2019 with

permission/modification to file the said Statutory Form TRAN-I by

31.12.2019.

It is clarified that in case the petitioner is hampered in any

manner from availing the benefit of aforesaid judgment, due to non opening of the Portal by the Respondents, then the petitioner shall be

permitted, in the alternative to claim the benefit of unutilized credit in

their GST-3B Forms to be filed for the month of January,2020 either

electronically or manually.

No order as to costs.

(Jaswant Singh)

Judge

(Sant Parkash)

Judge