Transitional input tax credit cannot be denied merely because there were technical difficulties: HC

The petitioners are engaged in manufacture of explosives. The factory of the petitioner was shut down for two years because of a huge fire accident and was only able to re-open the factory only during August 2018. The petitioner was required to file Form GST TRAN-1 on common web portal under Rule 117 of the Central Goods and Services Tax Rules, 2017 read with Section 140 of the Central Goods and Services Tax Act, 2017 which he was unable to file Form in time as the factory was closed and was under lock and seal. The respondents rejected the request of the petitioner to allow reprieve under sub-rule (1A) to Rule 117 of the Central Goods and Services Tax Rules, 2017.

This petition was filed before the court which held that since the input tax credit is equivalent to cash meant for being used for discharging the tax liability, the transition of the input tax credit cannot be restricted or denied merely because there were technical difficulties. As the respondents were unable to permit the petitioner to file TRAN-1 belatedly, they were directed to credit the corresponding amount in the electronic cash register of the petitioner, provided such credit remained unutilized on the cut-off date. The court held that if it existed on that day, such credit should be allowed to the petitioner either by way of suitable credit entry in the electronic cash register of the petitioner or by way of cash refund to the petitioner. Thus, the court directed the respondents to verify the same and to allow such credit which remained unutilized on the date of the accident in the regular returns filed by the petitioner. Thus, the writ petition was disposed of in terms of the above observation with no costs.