GST Transition Credit Claim: Court Directs Filing via GST Council Route

Case Name

M/s Obelisk Composite Technology LLP vs. Union of India & Ors.

Case No.: D.B. Civil Writ Petition No. 18392/2019

Court Name: High Court of Judicature for Rajasthan at Jodhpur

Order dated: 12th December 2019

Key Takeaways

1. The constitutional validity of Rule 117 of CGST Rules is no longer an open question — it has already been settled by earlier courts, so this court refused to re-examine it.

2. The deadline for filing GST TRANS-1 was extended to 31st December 2019 by the Union of India under Sub-rule 1(A) of Rule 117.

3. The court provided a practical remedy — the petitioner was directed to apply through the GST Council (via Standing Counsel) for a recommendation to the Commissioner to allow the TRANS-1 filing.

4. The challenge to Section 140(3) of CGST Act and the proviso to Rule 117 had already been dismissed in earlier cases, so the court followed that precedent.

5. Time-sensitive relief — the court directed that the decision must be taken “forthwith” (immediately), given the approaching deadline.

Issue

The central legal questions were:

• Can a taxpayer claim transitional CENVAT credit under Section 140 of the CGST Act, 2017 by filing GST TRANS-1 even after the deadline?
• Is Rule 117 of the CGST Rules, which sets a time limit for filing TRANS-1, constitutionally valid?
• Should the online portal for filing TRANS-1 be revived?

Facts

• Who is the petitioner? M/s Obelisk Composite Technology LLP, a Limited Liability Partnership firm based at Khasra No. 1102/740/1, MIA Phase II, Basni, Jodhpur, represented through its partner Mr. Mukesh Maheshwari.

• What did they want? When India transitioned from the old tax regime (which had CENVAT credit) to GST in 2017, businesses were allowed to carry forward their existing tax credits by filing Form GST TRANS-1 on the GST portal. This petitioner wanted to file that form to claim their eligible transitional credit.

• What was the problem? The petitioner was unable to file the TRANS-1 form within the prescribed time limit set under Rule 117 of the CGST Rules. They also found that the facility to file TRANS-1 on the common portal was no longer available.

• What did they ask the court? They made three prayers:

1. Allow them to file TRANS-1 to claim transition credit under Section 140 of the CGST Act, 2017
2. Declare Rule 117 of CGST Rules unconstitutional (or “read it down” so there’s no last date)
3. Direct the respondents to revive the TRANS-1 filing facility on the portal

• Who were the respondents? The Union of India (through the Secretary, Ministry of Finance), the Secretary of the GST Council, and the Assistant Commissioner, GST, Circle C Ward-3, Jodhpur.

Arguments

Petitioner’s Side (Obelisk Composite Technology LLP):

• They argued that they should be allowed to file GST TRANS-1 to claim their transitional CENVAT credit as provided under Section 140 of the CGST Act, 2017.
• They challenged the constitutional validity of Rule 117 of the CGST Rules, arguing that the time limit imposed by this rule for filing TRANS-1 was unconstitutional.
• They requested the court to either strike down Rule 117 or “read it down” — meaning interpret it in a way that removes the deadline.
• They also asked for the TRANS-1 filing portal to be revived.

Revenue/Respondents’ Side (Union of India):

• The Revenue’s counsel pointed out that the challenge to Rule 117 is no longer res integra (i.e., it’s a settled matter — not open for fresh debate), citing the Division Bench decision of the same court in D.B. Civil Writ Petition No. 7454/2019 (M/s Anupam Motors Vs. Union of India).
• They also cited the Gujarat High Court’s decision in Willowood Chemicals Pvt. Ltd. Vs. Union of India (R/Special Civil Application No. 4252 of 2018, decided on 12th/19th September 2018), which had already upheld the validity of Rule 117.
• The Revenue informed the court that the Union of India had extended the deadline for filing TRANS-1 to 31st December 2019 under Sub-rule 1(A) of Rule 117, and that the petitioner could apply through the GST Council for a recommendation to the Commissioner.

Key Legal Precedents

1. D.B. Civil Writ Petition No. 7454/2019 — M/s Anupam Motors Vs. Union of India

• This was a Division Bench decision of the Rajasthan High Court itself.
• It held that the challenge to Rule 117 of the CGST Rules is no longer res integra (i.e., already settled).
• It relied on the Gujarat High Court’s decision in Willowood Chemicals to dismiss the challenge to the constitutional validity of Section 140(3) of the CGST Act and the proviso to Rule 117.

2. Willowood Chemicals Pvt. Ltd. Vs. Union of India — R/Special Civil Application No. 4252 of 2018 (Gujarat High Court, decided 12th/19th September 2018)

• This was the landmark Gujarat High Court decision that upheld the constitutional validity of Rule 117 of the CGST Rules.
• It was the foundational precedent that settled the question of whether Rule 117’s time limit is constitutionally valid.
• The Rajasthan High Court followed this precedent in the present case.

3. SBCWP No. 4315/2019 — M/s Shree Motors Vs. Union of India & Ors. (Rajasthan High Court, disposed of on 21.11.2019)

• This was another Rajasthan High Court case that was brought to the court’s attention.
• It appears to have dealt with a similar issue regarding TRANS-1 filing and the procedure under Sub-rule 1(A) of Rule 117.

Key Legal Provisions Referenced:

• Section 140 of the Central Goods and Service Tax Act, 2017 — deals with transitional arrangements for input tax credit (ITC), allowing businesses to carry forward CENVAT credit from the pre-GST regime.
• Rule 117 of the CGST Rules — prescribes the time limit and procedure for filing GST TRANS-1 to claim transitional credit.
• Sub-rule 1(A) of Rule 117 — the specific provision that allows the Commissioner to extend the deadline for filing TRANS-1 based on GST Council recommendations.
• Section 140(3) of the CGST Act — specifically deals with transitional credit for traders/dealers who were not registered under the earlier tax regime.

Judgment

This was a partial win for the petitioner — they didn’t get everything they asked for, but the court gave them a practical path to claim their credit.

What the Court Decided:

Prayer Rejected: The court refused to entertain the challenge to the constitutional validity of Rule 117, holding that this issue is no longer res integra (already settled by earlier courts).

✅ Practical Relief Granted: The court granted the petitioner liberty to make an application before the GST Council (through the Standing Counsel, who was requested to hand it over to the jurisdictional officer) for forwarding to the GST Council to issue a certificate of recommendation.

📋 Specific Directions:

1. The petitioner must submit their application along with requisite particulars, evidence, and a certified copy of the court’s order — immediately.
2. The GST Council must take a decision forthwith (without delay).
3. If the petitioner’s claim is found to be correct, the GST Council shall issue the necessary recommendation to the Commissioner to enable the petitioner to get the benefit of CENVAT credit.
4. All of this must happen on or before 31st December 2019 — the extended deadline set by the Union of India.

📁 Disposal: The writ petition was disposed of (not dismissed, not fully allowed) with the above directions.

Bench: Hon’ble Chief Justice Mr. Indrajit Mahanty and Hon’ble Dr. Justice Pushpendra Singh Bhati

FAQs

Q1: What is GST TRANS-1 and why is it important?

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

Q2: What is CENVAT credit?

CENVAT (Central Value Added Tax) credit was a mechanism under the old tax regime where businesses could offset taxes paid on inputs against their output tax liability. Under GST, this was to be transitioned via TRANS-1 filing under Section 140 of the CGST Act, 2017.

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

Because the constitutional validity of Rule 117 of the CGST Rules had already been upheld by the Gujarat High Court in Willowood Chemicals Pvt. Ltd. Vs. Union of India and followed by the Rajasthan High Court itself in M/s Anupam Motors Vs. Union of India. The court said this issue is “no longer res integra” — meaning it’s a settled legal question.

Q4: What does “res integra” mean?

It’s a Latin legal term meaning “an untouched matter” or “a fresh question.” When the court says an issue is “no longer res integra,” it means the question has already been decided by earlier courts and cannot be reopened for fresh debate.

Q5: Did the petitioner ultimately get to claim their credit?

The court gave them a chance to do so — but it was conditional. They had to apply through the GST Council, which would then make a recommendation to the Commissioner. The final outcome depended on whether the GST Council found their claim to be correct, and whether all of this could be completed before 31st December 2019.

Q6: What happens if the GST Council doesn’t act in time?

The court directed the decision to be taken “forthwith,” but the judgment doesn’t explicitly address what happens if the deadline is missed. This could potentially require the petitioner to approach the court again.

Q7: What is the significance of the extended deadline of 31st December 2019?

The Union of India had extended the TRANS-1 filing deadline to 31st December 2019 under Sub-rule 1(A) of Rule 117. This extension was the window within which the petitioner had to complete the entire process — application, GST Council recommendation, and Commissioner’s action.

Q8: What is the broader impact of this judgment?

This judgment reinforces that:

• The time limit under Rule 117 is constitutionally valid and cannot be challenged.
• Taxpayers who missed the TRANS-1 deadline must follow the prescribed administrative route (GST Council → Commissioner) rather than seeking court intervention to bypass the rules.
• Courts will provide practical relief within the existing legal framework rather than striking down rules.

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.

(DR. PUSHPENDRA SINGH BHATI),J (INDRAJIT MAHANTY),CJ