Technical Glitches At Transition Stage To GST Not To Affect Statutory Right Of Dealers: Kerala High Court

The Kerala High Court recently upheld that technical glitches at the transition stage to GST should not affect the statutory right of dealers. 

Justice S.V. Bhatti and Justice Bechu Kurian Thomas while dismissing the appeal, held that discrimination in terms of the time limit to allow the availing of Input Tax Credit (ITC) with respect to the purchase of goods and services made in the pre-GST and post GST regime is arbitrary and unreasonable.

The appellant Revenue department preferred the appeal aggrieved by the direction of the Single Judge to the IT Redressal Committee of the GST Council to consider the petitioner's request for the transition of unavailed input tax credit in accordance with the law. 

The respondent in this matter had initially approached the Court seeking a direction for credit of the input tax balance lying in their CENVAT Credit Ledger to its Electronic Credit Ledger under the GST regime. According to the petition, their multiple bonafide attempts to comply with the process of filing forms and to file the GST TRAN-1 Form went in vain. 

It was for this purpose that a Redressal Committee was formed. Since the issue raised was technical in nature, it was found that in the interest of all, such technical issues should not stand in the way of rendering justice.

"It is axiomatic that computer literacy has not reached its pinnacle in our country. Technical glitches at the transition stage to GST should not affect the statutory right of dealers. In such instances, the department should have, while assisting the assessees, acted with alacrity and promptness rather than deny bonafide claims," the Court stated.  

Keeping in perspective the contentions in the case, the Division Bench held that the impugned judgment does not reflect any error of law warranting interference by this Court in appeal. 

In fact, the impugned judgment of the Single Judge was found to be 'an innocuous one' and that the respondents ought not to have pursued the same in appeal, wasting judicial time and energy.

"It is significant to note that the statute does not provide for any provision for lapsing of unutilized input tax credit for non-filing of TRAN-1. The input tax credit is required by law to be credited to the electronic credit ledger of an assessee. Failure to credit the input tax credit is an infraction of section 140(1) and to Rule 117(3) of the GST Rules," the Court observed.

"Input tax credit is an asset in the hands of the dealer. A registered dealer had a statutory right under the VAT regime to get a refund. An unutilized input tax credit of the erstwhile regime can be denied from being credited to the electronic credit ledger only under the contingencies mentioned in the proviso to section 140(1). In all other situations, this statutory right cannot be defeated by any procedural rules under the GST regime."

In this context, the decision was made keeping in mind the salutary principles enshrined in Article 265 and Article 300A of the Constitution of India.

Moreover, it was also found that granting an opportunity of hearing is only to enable the process of decision-making simpler since it is one of the basic principles of natural justice. In the process of rendering justice, an opportunity of hearing is a basic postulate. Therefore, the challenge raised by the appellant against the opportunity of hearing directed to be afforded by the Single Judge in the impugned judgment was found to be not tenable. 

Advocate PR Sreejith appeared for the appellants, and Advocate A Kumar appeared on behalf of the respondent. 

Case Title: Union of India & Ors v. M/s Merchem India Pvt Ltd. 

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