BOMBAY HIGH COURT
BMW INDIA FINANCIAL SERVICES PVT. LTD. v. UNION OF INDIA
Writ Petition No. 85 of 2020 | Date: 29.10.2020
In the present case, the Petitioner is an NBFC engaged in the financing of automobiles through loans and financial leases as well as acts as a corporate insurance agent.
The Petitioner entered into leasing contracts with various customers in the indirect tax regime and the same has been continuing post implementation of the GST regime. Previously on such contracts, the Petitioner paid service tax and had deposited 100% Value Added Tax (VAT) in the first month of the contract itself.
The VAT paid by the Petitioner was entitled to be carried forward in terms of Section 142(11)(c) of the Maharashtra GST Act, 2017 read with Section 142(11)(c) of the CGST Act, 2017. The Petitioner submitted the declaration in Form GST TRAN-1, however the transitioning credit amounting to Rs. 17,07,673/- was denied.
Being aggrieved, the Petitioner filed a writ petition under Article 226 of the Constitution of India challenging the denial of transitioning of credit after the submission of declaration in Form GST TRAN-1 by the Respondent, the GSTN.
ISSUES BEFORE THE HIGH COURT
1. Whether the filing of the GST TRAN-1 was successful?
2. Whether technical issues or lack thereof in filing of GST TRAN-1 affects the party’s right to obtain transitional credit?
CONTENTIONS OF THE PARTIES
The Petitioner contended that the Petitioner had entered into contracts before the introduction of the GST and had paid 10% Service tax of the interest portion of the contracts and deposited 100% of the VAT on the entire value of rentals and, thus, intended to carry forward the paid-up VAT as per Section 142(11)(c) of the Maharashtra GST Act, 2017.
The VAT amount that was to be transitioned was thus reflected in the FORM GST TRAN-1 as necessitated by Rule 118 r/w Rule 117. The Petitioner further submitted that the declaration for the form has been submitted on 27.12.2017 and was acknowledged by a confirmation e-mail.
However, the electronic credit ledger did not reflect the VAT credit so filed. This was due to technical glitches on part of the Respondent and thus, the Petitioner maintained their right to obtain transition tax credit.
It was further submitted that to resolve the error, the Petitioner had corresponded with the GST Helpdesk, the CEO of GSTN as well as GST Maharashtra Commissionerate of Mumbai.
However, such issue could not be resolved on the ground that the said issue occurs on a regular basis and that they had faced the same in Delhi as well as Haryana. Thus, the Petitioners filed a writ of Mandamus against the Respondents to safe-guard their substantive right to transition credit.
The Petitioners further relied on Bhargava Motors v. Union of India 2019 (26) GSTL 164 (Del.) and Adfert Technologies Pvt. Ltd. v. Union of India 2019- VIL-537- P & H in a similar circumstance wherein the High Court enabled the Petitioners to gain their right to transitional credit. This is because credit is a vested right and property as per Article 300A of the Constitution.
The Respondents contended that the grievance of the Petitioner had been sent to the IT Grievance Redressal Committee (ITGRC) which observed that no technical glitch has been found in the GST TRAN-1 filing.
Therefore, as per the Procedure prescribed in the CBIC Circular No. 39/13/2018, all appropriate actions had already taken place. Based on the aforesaid, the Respondents contented that there exists no evidence to support the claim of there being technical glitches in the filing of GST TRAN-1.
The Respondents further relied on the case of NELCO Limited v. Union of India and Others (W. P. No. 6998 of 2018) wherein the Bombay High Court decided that once the ITGRC does not find a technical glitch, the portal for filing of GST TRAN-1 cannot be reopened.
DECISION AND FINDINGS
The High Court observed that it is an undisputed fact that the filing of the GST TRAN-1 was successful and took place without any technical glitches. Thus, the question before the Court remained whether the transitional credit would be granted or not.
The High Court determined that the facts of the cases of NELCO Limited v. Union of India and Others (supra) as well as Bhargava Motors v. Union of India (supra) could not be deemed similar to the present case as no successful filing of GST TRAN-1 took place in those circumstances.
The Court further held that “The whole objective of digitization is to convenience the taxpayers and not to harass them” and thus lack of technical glitches could not be deemed to be grounds for depriving a taxpayer of their right to transitional credit.
The Respondents were thus directed to consider the merits of the case and verify the amount of VAT credit claimed by the Petitioner and further to ensure the reflection of the same in physical or electronic form.
In the present case, the Bombay High Court clearly placed the importance of rights of taxpayers over technicalities in electronic format of taxation namely, the GSTN.
Thus, it is clear that irrespective of the review of technical glitches by ITRGC, such report does not take away a taxpayers right to obtain the credit. Even if technical glitches have not taken place, it is the responsibility of the GSTN to look into the merits of the matter and award the requisite credit to the taxpayer.
This judgement is therefore a step towards making the electronic GSTN more consumer and taxpayer friendly, putting their rights on a higher pedestal than mere technical requirements.
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