Bombay High Court Directs CBIC To Issue Clarification Regarding Distribution/ Reporting Of ISD Credit

The Bench of Justices K.R. Shriram and Gauri Godse was dealing with a batch of writ petitions, highlighting the difficulties faced by the petitioners in the distribution/ reporting of the ISD credit.

The petitioners, including Unichem Laboratories Limited and Pfizer Limited, filed writ petitions before the Bombay High Court, raising the issue of procedural difficulties faced by them with respect to the distribution of the Input Service Distributor (ISD) credit of Service Tax/ Excise Duty under Section 140 of the CGST Act, 2017.

The petitioners submitted before the Bombay High Court that they were not able to distribute the ISD credit or recognise and report the distribution of the ISD credit by the ISD to their respective units/offices, in view of the procedural and functional difficulties faced by them in relation to the GST forms and portal.

To this, the revenue department averred that the ISD credit cannot be transitioned directly into the Electronic Credit Ledger (ECL) maintained under the GST Regime. The department submitted that, in view of the provisions of the CGST Act, the ISD credit has to be distributed by the said ISD to its different units/offices before 1.07.2017. The department added that in order to transition the said credit distributed to the transferee by the ISD, into its Electronic Credit Ledger, the transferee unit/offices are required to file TRAN-1.

The Court observed that the Supreme Court in Union of India & Anr. versus Filco Trade Centre Pvt. Ltd. & Anr. (2022) had directed the GST Network to open the common portal to file or rectify TRAN-1 and TRAN-2 for a specified period, i.e., with effect from 1^st September, 2022 to 31^st October, 2022, in order to aid the assessees to overcome the procedural/technical hurdles faced by them and enable them to avail the Transitional Credit.

While holding that they intended to adopt the same approach, the Bench allowed the petitioners to avail the said window and file the GST TRAN-1 or revised GST TRAN-1 at the units/offices between 1^st September, 2022 to 31^st October, 2022, in terms of the order passed by the Supreme Court in Filco Trade Centre (2022).

Further, the Court directed the Central Board of Indirect Taxes and Customs (CBIC) to issue a clarification in relation to the distribution/ reporting of the ISD credit within 21 days.

"The Central Board of Indirect Taxes and Customs (CBIC), keeping in mind the problems faced by various parties, to issue a clarification, after due deliberation, in relation to the distribution / reporting of ISD credit preferably within 21 days from the date this is Order is uploaded, keeping in mind the approach adopted by the Hon'ble Supreme Court of India in Filco Trade (Supra). Petitioners, may, if so advised, approach the CBIC in this regard.", the Court said.

Directing the authorities to verify the claims of the petitioners regarding Transitional Credit within a specified time, the Court disposed of the petitions.

Case Title: Unichem Laboratories Limited versus Union of India and Ors. (Writ Petition No. 109 of 2020)

Dated: 23.08.2022 (Bombay High Court)

Counsel for the Petitioners: Mr. Jitendra Motwani a/w Mr. Nishant Shah, Ms. Virangana Wadhawan and Mr Neeraj Hande i/b Economic Laws Practice

Counsel for the Respondents: Mr Pradeep S. Jetly, Senior Advocate a/w Mr. Dhananjay B. Deshmukh

Click Here To Read/Download Order