The court ruled that system delays in transitioning Input Tax Credit should not prevent a taxpayer from obtaining a refund, emphasizing the need for operational efficiency in tax administration.

ORDER :

This is the second round of litigation before this Court. Earlier, the petitioner had filed W.P.No.15467 of 2020 for a mandamus to direct the respondent No.7 to dispose of the petitioner's letter dated 18.06.2020 filed by the petitioner seeking permission to file a revised GSTR-3B for the months from July 2017 to November 2017.

2. The said writ petition was dismissed as infructuous in the light of the order dated 30.09.2020 impugned herein. Relevant portion of the impugned order reads as under:-

“Please take notice that the letter received in the reference 1^st cited has been examined in detail and inform you that there is no provision to file revised return under the TN GST Act/CGST Act, 2017. Therefore, your request to rectify the returns in GSTR-3B for the period from July 2017 to November 2017 is not capable of compliance.”

3. The brief background of the case is that the petitioner was an assessee under the provisions of the Finance Act, 1994 and had reportedly accumulated Input Tax Credit (ITC) for a sum of Rs.82,91,19,712/-. The petitioner had managed to transition the ITC of Rs.74,61,65,427/- out of Rs.82,91,19,712/-, after collating all the necessary informations under the previous regime for the purpose of Section 140 of the CGST Act, 2017. The Form Tran-I itself was electronically enabled by the Central Board of Indirect Taxes sometime during last week of September 2017 on 25.08.2017 to facilitate to transition of ITC that was earned by the registration under the previous regime.

4. The case of the petitioner is that although the portal was enabled on 25.08.2017,the petitioner was not able to transition the credit legitimately that was lying unutilized on the cut off date viz., 30.06.2017 i.e. one day before the implementation of the respective GST enactments. It is submitted that during the month of July 2017 the tax liability of the petitioner was Rs.1,13,15,86,524/-. It was partly discharged out of the ITC availed during the month of July 2017 and the balance of Rs.57,78,89,597/- in cash as the aforesaid input tax credit of Rs.Rs.74,61,65,427/- could not be transitioned.

5. It is the further case of the petitioner is that if the GST portal was enabled w.e.f. 01.07.2017, the petitioner could have legitimately discharged the entire tax liability from and out of the transitional credit of Rs.74,61,65,427/- out of Rs.82,91,19,712/-. Under Rule 86B of the CGST Act, Rule 17 where an assessee discharges the entire tax liability from and out of the ITC, 1% of tax has to be paid in cash. However, this provision was inserted only w.e.f. 01.01.2021 vide Notification No.94/2020 – Central Tax dated 22.12.2020.

6. The learned counsel for the petitioner would submit that the petitioner could have discharged the tax liability till November 2017, out of Rs.74,61,65,427/- transitional credit of accumulated ITC in Tran- 1 in the GST portal. However, Tran- 1 in the GST portal was enabled only from November 2017. He would further submit that the petitioner has a huge accumulation of the ITC on account of the inverted structure due to exports made by it.

7. It is therefore submitted that while the petitioner is entitled for refund of tax that was paid in cash as transitional credit of Rs.74,61,65,427/- could not be utilized by the petitioner and the petitioner continues to accumulate ITC as the petitioner is under inverted duty structure and has no immediate prospect of liquidating the same towards its tax liability.

8. In this connection, the learned counsel for the petitioner has drawn attention of this Court to the