Technical Glitches Cannot Deny Legitimate Credit: Delhi HC Directs GST Dept. to Reflect Rs. 99.18 Lakh Transitional ITC on ECL [Read Order]

The Delhi High Court has held that transitional Input Tax Credit (ITC) available to a registered entity cannot be denied merely due to technical or portal-related glitches during the shift from the pre-Goods and Services Tax (GST) regime.

Clyde Pumps Private Limited, a Delhi-based Input Service Distributor (ISD), had approached the Court seeking reflection of transitional ITC amounting to ₹99,18,972 on its Electronic Credit Ledger (ECL). The petitioner argued that although it possessed eligible CENVAT credit for the period March to June 2017, it was unable to distribute or carry it forward because the GST portal did not permit ISDs to file TRAN-1 at the relevant time.

It submitted that the credit was duly reflected in the TRAN-1 filed in August 2017, and the Department’s refusal to operationalise the credit resulted in severe financial prejudice.

The Department contended that the GST law does not establish maintenance of an electronic credit ledger for ISDs. They argued that an ISD cannot file TRAN-1 and any procedural gap in the system cannot be attributed to departmental fault. The Delhi GST Department maintained that the existing statutory framework prohibited granting the relief claimed.

Also Read: Challenge to ITC Reversal notEntertained under Article 226: Madras HC Declines Interference with GST OrderConfirming Demand

The Bench, comprising Justice Prathiba M. Singh and Justice Shail Jain, referred extensively to the scheme of Sections 20 and 140(7) of the CGST Act and noted that the transitional provisions explicitly recognise the right of an ISD to distribute pre-GST credits.

The Court observed that the absence of a prescribed timeline or an operational portal mechanism could not nullify this statutory entitlement. It also relied on decisions such as Vision Distribution Pvt. Ltd. v. Commissioner, SGST & Ors (2019) and Dell International Services India Private Limited v. Union of India & Ors. (2025) which consistently held that taxpayers cannot be penalised for systemic failures in the implementation of the GST regime.

The Court held that the petitioner’s ITC, which stood duly recorded in the TRAN-1, must be made available in its ECL within three months. It further directed that once the credit is reflected, the petitioner would be entitled to distribute the same to its respective units within one month. The Delhi GST Department and GSTN were ordered to coordinate to ensure compliance with these directions.

As a result, the petition was disposed of.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates