Telangana HC Allows Standard Chartered Bank to File GST Returns in Other States, Waives Penalty and Interest for Credit Transfer [Read Order]

The Telangana High Court has permitted Standard Chartered Bank to file Goods and Service Tax ( GST ) returns on another state's GST portal due to technical glitches, allowing the transfer of credit without any penalty or interest.

The petition filed under Article 226 of the Constitution contains an interesting conundrum whether the petitioner Bank which is Registered under Sales Tax and GST regime in Maharashtra, but could not file its return in GST portal of that State because of technical glitch and filed it in the GST portal of Telangana can be saddled with demand, penalty and interest despite the fact that Bank's branch, exists in the State of Telangana.  When credit taken by petitioner was transferred to Maharashtra portal on the same day. The quagmire is about the scope and ambit of Section 140 of GST Act, 2017.

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The Headquarter of the petitioner’s bank is in Mumbai, Maharashtra and the centralized Registration of petitioner’s bank is also at Maharashtra under the Service Tax as well as under the Goods and Services Tax, 2017

The petitioner was entitled to enjoy the credit of Rs.1, 41, 26, 69,646/-. The petitioner made efforts to file the Return in the official GST portal of Maharashtra, but because of technical glitch in the Maharashtra portal, his efforts went in vain. Petitioner admittedly, has a branch in Telangana and accordingly, on 18.10.2017, he filed the Returns in the portal of Telangana and took credit on the same day and transferred it on the same day to the portal of Maharashtra.

It was served with a pre-show cause notice on 03.09.2021 (Annexure P-16) wherein it was alleged that the credit availed by the petitioner through TRAN-I return filed by the Telangana registration is ineligible and required to be reversed along with applicable interest and penalty.

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Further petitioner promptly filed reply on 09.09.2021 ( Annexure-P-17 ) and made it clear that total transitional credit of Rs.1,41,26,69,646/- was transferred to Maharashtra GST registration on the same day of filing the TRAN-1 and only the differential balance of ITC amounting Rs.2,00,000/- was available in the State of Telangana. To support the aforesaid submission, the Electronic Credit Ledger for the period July, 2017 to March, 2018 was annexed with the reply.

The respondents issued a show-cause notice dated 29.12.2021 and in turn the petitioner filed his detailed reply on 27.01.2022 ( Annexure P-20 ). The respondents were not satisfied with the reply to the show-cause notice and passed the impugned Order-in-Original dated 31.10.2023, which is subject matter of challenge in this petition.

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Mr. Lakshmi Kumaran Sridharan. Representing the petitioner submitted  that the show-cause notice shows that there were technical glitches in the Maharashtra GST portal and the petitioner admittedly filed its return before due date in Telangana GST portal and transferred the credit amounting to Rs. 1,41,26,69,646/- to Maharashtra portal on  the same date.

Thus, the petitioner did it under compelling circumstances and there is no prohibition under the Act for filing such return electronically in another State where the branch of petitioner exists. More so, when the petitioner has not derived any undue benefit from the said act nor revenue suffered any loss. In these circumstances, the impugned order is bad in law.

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B.Narayan Reddy representing revenue raised a preliminary objection regarding maintainability of this Writ Petition and urged that Section 107 of the Act provides an efficacious statutory alternative remedy. The petitioner should have availed the same. However, during the course of argument, he fairly admitted that the singular question involved in this case is, indeed, a pure question of law.

Further submitted that admittedly, the petitioner’s centralised registration is in the State of Maharashtra. Thus, the petitioner should have filed the return on the GST portal of Maharashtra and not in Telangana. Even assuming that the portal of Maharashtra had any technical glitch, the petitioner was not remedial and he should have approached the higher authorities of GST Regime of Maharashtra for redressal of his grievance.

The petitioner should not have filed the return on the GST portal of Telangana, and for this reason alone, no fault can be found in the action of the respondents. Furthermore, it is submitted that by a plain reading of Section 140(1) (4)(8) of the Act, it was clear that the intention of lawmakers is that the return should be filed in the same State where the registration exists. Thus, the petition was meritless and may be dismissed.

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 It was an admitted fact in the show cause notice itself that the petitioner faced problems in filing returns electronically because of a technical glitch in the GST portal of Maharashtra. For this reason and considering the last date of filing return, the petitioner filed the return in the Telangana GST portal.

The court noted that If the portal was not functional or having technical glitch and because of that the petitioner was compelled to file return in the portal of Telangana, the petitioner cannot be saddled with demand, interest and penalty.

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The division bench of Justice Suyoj Paul and Justice Namavarapu Rajeshwar Rao opinionated that the very foundation of show cause notice itself is bad in law and the assumption of respondent No.2 that return could not have been filed in the GST portal of telangana was not flowing from Section 140 of the Act. Therefore, the impugned action founded upon such notion was bad in law and deserves interference.

Accordingly , the writ petition was  allowed by setting aside the impugned show cause notice dated 03.09.2021 and order-in original dated 31.10.2023 issued by respondent No.2. There shall be no order as to costs.

To Read the full text of the Order CLICK HERE

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