- vide decision of High Court of Telangana in BMW India Financial Services (P.) Ltd. v. Union of India
Facts of the case:
- The petitioner is into the business of non-banking financial company engaged in financing automobiles in the form of loans and financial leases to its customer and has operations in 14 States across India, including in the State of Telangana.
- For the purposes of carrying on business in the State of Telangana, the petitioner obtained registration under the provisions of the Telangana
State Value Added Tax Act, 2005, as well as under the provisions of the Finance Act, 1994, for the purpose of service tax payable on leasing activity.
- The petitioner upon introduction of Goods and Service Tax Act, 2017 w.e.f. 01.07.2017, the petitioner got itself registered under the CGST Act and SGST Act, in the State of Telangana and has been filing returns and paying applicable GST both under CGST and SGST on its transactions.
- The petitioner contended that with the introduction of GST and in terms of provisions of Section 142(11)(c) of the CGST Act read with Section 142(10)(c) of the TGST Act, the petitioner became entitled to take credit of Value Added Tax or Service Tax paid under the existing law, namely, the TVAT Act, or the Finance Act, 1994.
- It is also claimed that 100% of VAT on the entire value of lease rentals receivable, is paid upfront in the first month of entering into contract itself under the relevant provisions of the TVAT Act, even though the tenure/ term of lease / rental contracts is spread over a period of time.
- Thus, the petitioner became entitled to avail the transitional VAT credit in a sum of Rs.21,07,574/-, in respect of lease / rental contracts / agreements, where the tenure / term is continuing post introduction GST w.e.f. 01.07.2017.
- The petitioner declared an amount of Rs. 21,07,574/- as transitional credit in Form GST TRAN-1, by uploading the same electronically on GST portal through GSTN Network.
- It is the contention of the petitioner that though it had encountered certain technical difficulties/glitches on the GSTN portal, even while uploading the above information, however, by making efforts, the petitioner could upload the information in Form GST TRAN-1 on 27.12.2017 at 11.13 AM.
- Upon uploading the Form GST TRAN-1 electronically, the petitioner received acknowledgment of successful filing of the said form electronically and received an email confirming the same.
- The petitioner contends that even after successful filing, the transition
credit was not reflected in in the online electronic credit ledger.
- The petitioner further adds that on noticing that the credit was not being reflected in the electronic ledger on the common portal, the petitioner immediately raised a query on this aspect of technical error on the part of GSTN on 02.01.2018 and also followed it up by addressing a letter to the CEO of the GSTN, New Delhi, on 19.03.2018, requesting them to look into the issue and provide a solution for getting the credit transitioned.
- Though the petitioner made efforts, there was no response, nor the grievance of the petitioner was resolved.
- The petitioner further addressed a letter to the GST Telangana Commissionerate and requested the said authority to consider the issue so that the petitioner company can overcome the issue of outflow of cash flow during Covid-19 period.
- Upon the petitioner addressing the letter, the petitioner received an email communication from the Assistant Commissioner of the State GST informing the petitioner that the case of the petitioner was sent to ITGRC( Information Technology Governance, Risk, and Compliance) Portal through GSTN, but the same was not considered for reopening for filing Form GST TRAN-1, “as no technical issues were noticed in their log.”
- The petitioner contends that the said e-mail communication is wholly improper, a non-speaking and arbitrary, for the reason that it did not consider the evidence submitted by the petitioner by its earlier communication and that no opportunity of hearing was accorded to the petitioner before deciding to reject the petitioner’s plea to look into the issue of technical glitches on the GSTN.
- The respondents, by the counter-affidavit filed, have contended that there are absolutely no merits in the writ petition and that though the transitional provision permitting to carry forward of CENVAT credit of eligible duties, no legitimate right can be claimed for allowing such credit.
- In the facts of the present case, even though the petitioner is in receipt of an acknowledgment number and also an email confirming successful submission of the Form GST TRAN-1 electronically,
the information furnished thereunder is not transitioned into online electronic credit ledger of the petitioner maintained on the portal, which admittedly is in the control of the respondents.
- The respondents instead of taking steps to set-right their house in order, are alleging negligence on the part of the petitioner.
- The said action of the respondents is a highly reprehensible and only goes to show the high-handed attitude and approach of the respondents in dealing with the taxpayers.
- By denying the transitional credit as in the present case, the respondents are compelling the tax payer to pay tax in full without availing the benefit of adjustment / debit from its credit ledger
The High Court of Telangana held the case as follows:
i. As the various activities under GST are technology driven, and given the fact that there exists no seamless connectivity between a tax payer and
the respondent network, and a tax payer is required to go through various intermediate service provides, more so in the initial stage of implementation by migrating from existing system of indirect taxation, it would be highly improbable to expect the transition to be smooth and without glitches as being claimed by the respondents.
ii. Accordingly, the writ petition is allowed. The respondents are directed to transition the credit of amount of Rs. 21,07,574/- claimed by the petitioner, into petitioner’s electronic credit ledger in Form GST PMT-2 maintained on the portal, within a period of four weeks from the date of the order.