Carry forward of ITC not reflected in revised ST-3 by filing Tran-1

We have come across number of decisions allowing the benefit of carrying forward the credit in GST regime on account of various technical glitches occurred in filing of TRAN-1 by various High Courts. However, recently, the Hon’ble Gujarat High Court in the case of M/S DEENDAYAL PORT TRUST VERSUS UNION OF INDIA rendered a landmark judgment wherein the carry forward of cenvat credit was allowed to the assessee under section 140(1) of the CGST Act, 2017 even if certain cenvat credit was missed to be reflected in the revised ST-3 return filed on the aces portal. This decision is important as the Hon’ble High Court has provided substantial relief by allowing carry forward of the cenvat credit by concluding that reflection of such cenvat credit in the ST-3 return is only a procedural lapse.

The decision is discussed in detail as follows:-

In the given case, the petitioner stated that after filing ST 3 return for the period April 2017 to June 2017, it was realized that there were certain invoices pertaining to the said period which remained unaccounted and consequently, ITC involved in such invoices could not be claimed in the return of service tax in Form ST­3. The petitioner filed revised Form ST­3 on 17.09.2017, wherein ITC of Rs.6,94,19,228/­ was claimed on ACES portal. 

Thereafter, it was further realized that some more invoices remained unaccounted and ITC involved therein amounting to Rs.99,46,810/­ was left out even in the revised return in Form ST­3. The petitioner, therefore, again tried to file second revise return so as to claim correct amount of ITC. The online ACES did not permit the petitioner to file revised return for the second time. The petitioner, therefore, could not claim the ITC to the tune of Rs.99,46,810/­. However, petitioner did informed Assistant Commissioner vide letter about such additional claim of ITC.

The petitioner claimed correct amount of ITC being Rs.7,93,66,038/­ (i.e. Rs. 6,94,19,228/­ + as per revised return Form No. ST­3 + Rs.99,46,810/­ being the ITC which was not permitted to be claimed by filing second revised return on the ACES portal in GST Tran 1). 

The revenue authorities claimed that provision of Rule 7B of the Rules­ 1994 provides option to the assessee to correct a mistake or omission within a period of 90 days from the date of submission of the return under rule 7. Therefore, the assessee cannot keep on filing the revised return again and again because once option of revising return is exercised, the ACES portal would not allow the petitioner to revise the revised return again. 

On one hand, when the ACES Portal did not permit the petitioner to file revised return for the second time due to which the claim of ITC to the tune of Rs.99,46,810/­ was not reflected in the last return in Form ST­3 filed by the petitioner and on the other hand, when the petitioner entered the correct amount of ITC including the amount of Rs.99,46,810/­ in Form Tran­1 while claiming the ITC under CGST­2017, there is no mechanism whereby such claim can be verified by the system and as such there is difference in amount of ITC in the form of ST­3, in the system and the Form Tran­1 which is filed by the petitioner. 

The Court said that differential amount of ITC of Rs.99,46,810/­ cannot be denied to the petitioner on the ground of technical glitches not permitting the petitioner to file second revised return within the prescribed time period, as there is no prohibition as per Rule 7B of Rules­ 1994 to file revised return more than one time to revise return filed under Rule 7 of the Rules 1994 within stipulated period under Rule 7B of the Rules­1994.

ACES portal not allowing the petitioner to revise the Form ST­3 for the second time within prescribed period resulting into technical glitches is contrary with the provisions of Rule 7B of Rules 1994.

For the foregoing reasons, the Hon’ble High Court directed the revenue authorities to consider the claim of the petitioner for the amount of ITC of Rs.99,46,810/­ manually under Rule 7B of the Rules­ 1994, so as to enable the petitioner to take advantage of the order dated 07.02.2020 to revise the Form Tran­1 to be filed online on or before 31.03.2020. 

The above decision sets a milestone as regards the favourable decisions pertaining to technical glitches is concerned as it granted benefit to the petitioner on account of technical glitch on the erstwhile aces portal not allowing the assessees to revise ST-3 return second time while there was no such restriction in Rule 7B of the Service Tax Rules, 1994. It is worth noting that this decision can be correlated to the present restriction imposed by the GST portal on filing GSTR-3B wherein the return cannot be filed without payment of taxes. However, there is no such restriction in CGST Act, 2017 that for filing returns under GST, payment of taxes is pre-requisite. Therefore, one can perceive that the above decisions will be a useful precedent for availing various benefits which are being denied to the assessees due to technical glitches on the portal. Another important analogy of this decision is substantive right cannot be lapsed due to technical breaches. This is very important that procedural requirements cannot take away the substantive right

This is a landmark judgement for the assessee directing the department that no taxpayer should be deprived of his constitutional right of claiming unavailed credit due to technical glitches of any portal.