Bonafide Error Cannot Defeat Substantive Transitional ITC Claim: Kerala HC Allows Rectification of Revised TRAN Filing [Read Order]
The High Court held that a bonafide mistake in revised TRAN filings cannot extinguish a substantive transitional ITC claim and permitted rectification.
In a recent ruling, the Kerala High Court allowed rectification of revised TRAN-1 and TRAN-2 filings and held that a bonafide error cannot defeat a substantive claim for transitional input tax credit under Section 140 of the CGST Act.
The case arose when Pinnacle Motor Works Pvt. Ltd., a registered dealer, filed TRAN-1 in December 2017 claiming transitional credit of Rs. 88,04,678.87 and TRAN-2 claiming Rs. 2,01,681. Following the directions of the Supreme Court permitting reopening of the TRAN filing window, the petitioner filed revised TRAN-1 and TRAN-2 in October 2022. In the revised TRAN-1, the petitioner mentioned only Rs. 6,84,886 and showed nil in TRAN-2.
The department proceeded on the basis that the revised filings replaced the earlier claims. An assessment order was passed under Section 73(9) of the CGST Act denying the earlier transitional credit on the ground that the revised forms showed a lower figure. Recovery proceedings were also initiated.
The petitioner's counsel argued that while filing the revised forms, it was under the impression that only additional claims were required to be entered and that the amounts already declared in 2017 need not be repeated. They submitted that the omission was a bonafide mistake and sought an opportunity to correct the revised filings.
The State's counsel argued that the writ petition was not maintainable since the petitioner had not filed a statutory appeal within the prescribed time. They also argued that the revised filings nullified the original claims and that the credit was wrongly availed.
Justice Ziyad Rahman A.A. observed that the relief sought by the petitioner, namely permission to rectify the revised TRAN forms, was beyond the powers of the statutory authorities under the CGST Act and could be granted only in exercise of writ jurisdiction. The court held that in such circumstances, the existence of an alternate remedy would not bar the writ petition.
On merits, the court observed that verification by the Central Tax Authority had found the petitioner eligible for transitional credit to the extent of Rs. 69,31,718.31 out of the original claim. The court pointed out that it was unlikely that a taxpayer would intentionally reduce a substantial credit claim while filing a revised form. It explained that the circumstances indicated a bonafide mistake.
The court further observed that no allegation of tax evasion was raised against the petitioner and that denial of an opportunity to rectify the error would result in double taxation.
The court quashed the assessment order and the consequential recovery notice. It directed GSTN to permit the petitioner to rectify the revised TRAN-1 and TRAN-2 by incorporating the original claims made in 2017. The assessing authority was directed to reconsider the matter after granting an opportunity of hearing and to pass fresh orders in accordance with law.
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