22 六月 2020

TRAN-1 – Delhi High Court decision in Brand Equity stayed by Supreme Court

The Supreme Court of India has on 19-06-2020 stayed the Delhi High Court decision in the case of Brand Equity Treaties Ltd. v. Union of India (decision dated 05-05-2020). The High Court had held that an assessee can avail Input Tax Credit of the accumulated Cenvat credit as on 30-06-2017 by filing GST Form TRAN-1 beyond the period of limitation prescribed under Rule 117 of Central Goods and Services Tax Rules, 2017 (“CGST Rules”).

Delhi High Court decision in Brand Equity

Allowing the assessee to file the return by 30-06-2020, the Delhi High Court had observed that there was absence of any specific provision providing for the time limit under the Central Goods and Services Tax Act, 2017 (“CGST Act”). The High Court had read down the provisions of Rule 117 as being directory in nature, insofar as it prescribed the time-limit for transitioning of credit. It held that the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed.

Retrospective amendment of CGST Act, 2017

It may be noted that Section 140 of the CGST Act was amended retrospectively by Finance Act, 2020 when a notification was issued by the Central Board of Indirect Taxes and Customs (“CBIC”) on 16-05-2020 appointing 18-05-2020 as the date for bringing in force Section 128 of the Finance Act, 2020 amending Section 140 of the CGST Act with effect from 01-07-2017. Section 140 of the CGST Act relates to transitional arrangements for input tax credit and the amendment prescribes the time limit and the manner for availing input tax credit against certain un-availed credit under the ‘existing law’.

Brand Equity applicable even after retrospective amendment

The confusion over relevance of the Delhi High Court decision in the case of Brand Equity, after retrospective amendment of Section 140 was considered by another Bench of the Delhi High Court where it was held that the decision was applicable in respect of time-lines for filing GST Form TRAN-1, regardless of the recent retrospective amendment. The Court in the case of SKH Sheet Metal Components v. Union of India & Ors. [Judgment dated 16-06-2020 in W.P. (C) 13151/2019] noted that the earlier decision did not entirely rested on the fact that statute did not prescribe any time limit for availing the transition credit. It also noted that the exclusion of non-technical cases under Rule 117(1A) was arbitrary and irrational.

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