1. GST regime has witnessed a surge in the writ petitions filed before various High Courts. The writ litigation aimed at redressal of technical glitches is propelled by taxpayers wary of losing transitional credit in view of the deadlines for filing of FORM GST TRAN-1 and FORM GST TRAN-2 1. Though "technical glitch" is a novel term for indirect taxation, the meaning and scope of "technical glitch" has been liberally interpreted in a plethora of decisions which should set the tone for disposal of applications pending before the IT Grievance Redressal Committee (ITGRC).
Technical glitch - Grievance & Redressal
2. Recognizing the difficulties faced by the taxpayers owing to technical glitches faced on the GST portal and to evolve a structural mechanism for redressal of such grievances, the ITGRC was set up vide Circular No. 39/13/2018-GST dated 03.04.2018. ITGRC is tasked with approving and recommending to GSTN the steps to be taken to redress the grievance. While the relief could be in the nature of allowing for filing or amending of any form or return prescribed in the law, ITGRC is empowered to address any IT issue/ glitches which are not confined to TRAN-1 issues 2 .
3. Taxpayers have availed the above mechanism and filed applications before the Nodal Officer which have been forwarded to the ITGRC. Due to the delay in disposal of the applications by the Nodal Officer and non-redressal of technical glitches, or genuine mistakes resulting in transitional credits not flowing to the Goods & Services Tax regime, several writ petitions were filed before the High Courts seeking directions to the Nodal Officers for disposal of the applications. The High Courts have disposed off several writ petitions by issuing directions to the Nodal Officers to dispose the applications 3 or even permit manual filing of TRAN-1 and TRAN-2 4.
4. While the above decisions are issued in respect of applications pending before the ITGRC, a second batch of writ petition awaits in cases where the ITGRC has rejected the applications holding absence of technical glitch, which calls upon the High Court to examine and decide the presence of technical glitch. Recently Hon'ble High of Karnataka has in the case of Yokogawa India Ltd. v. Union of India, quashed the communication from ITGRC holding the absence of technical glitch5.
5. As High Courts would invariably and increasingly be examining the presence of technical glitch, an interesting question arises as to whether disputable system configurations which prevents an assessee from filing of forms/availing of credit are technical glitches?
Are disputable system configurations technical glitches?
6. In the absence of any definition of technical glitch either in the Circular dated 03.04.2018 or under the CGST Rules, the meaning and scope of the term "technical glitch" has been liberally interpreted to traverse beyond mere inability to file/amend TRAN-1/ TRAN-2 and to encompass disputable system configurations.
7. One instance of disputable system configuration pertains to carry forward of credit of eligible duties as reflected in the last return filed under the erstwhile law in terms of Section 140(1) of the CGST Act. In order to carry forward the credit of eligible duties the taxpayer is required to fill Table 5(a) of GST-TRAN-1. Where the details of credit are not indicated in Column (6) of Table 5(a), the credit will not be carried forward to the electronic credit ledger, even though the details of credit are contained in Column (5) of the Table 5(a). In the case of Pragathi Automation Pvt. Ltd. v. Union of India 6, the High Court has directed the Nodal Officer to consider the complaint of the taxpayer even though the taxpayer is deprived of credit due to a bona fide error which crept in while filing the FORM GST TRAN-17, considering the same as a technical glitch.
8. Another issue which is of significant consequence to retailers involves availment of notional credit in terms of Proviso to Section 140(3) of the CGST Act. Proviso to Section 140(3) of the CGST Act provides that a registered person shall be entitled to take credit of the eligible duties in respect of inputs held in stock on the appointed day, for which he is not in possession of invoice or document evidencing payment of duty, subject to filing of FORM GST TRAN-2. The system does not facilitate filing of FORM GST TRAN-2 where the taxpayer has not filled the details of inputs held in stock in FORM GST TRAN-1 or not filed FORM GST TRAN-1 at all. The High Court of Karnataka has in the case of Arvind Lifestyle Brand Ltd. v. Union of India 8 directed the Nodal Officer to enable filing of FORM GST TRAN-2, regardless of the details furnished in FORM GST TRAN-1, thus once again considering a system configuration to be a technical glitch.
9. While disposing the applications filed under Circular dated 03.04.2018, ITGRC should not adhere to a strict definition of "technical glitch" and should consider disputable system configurations also as technical glitches. This is more for the reason that the GSTN portal was not properly put in place on the date of introduction of GST and this resulted in widespread changes and repeated extension of time. The delay in activating the portal for filing before due dates has also contributed to the litigation. The Government having not put in place a robust system prior to introduction of the new tax regime cannot deny the rightful benefit to an assessee due to minor infractions including technical issues.
10. There exists in law a distinction between a mandatory and directory condition. Where substantive conditions are mandatory in nature, provisions which are procedural and technical in nature are directory9. While filing of FORM GST TRAN-1 and TRAN-2 is a mandatory condition for availment of credit10, the bona fide errors / disputable system configurations arising during the filing of FORM GST TRAN-1 should be considered as violation of a procedural condition which cannot result in denial of substantive benefit of credit which otherwise is rightfully due to an assessee.
11. The High Courts have permitted amendment of the Forms even where the error has crept in due to bona fide error rather than a technical glitch by liberally interpreting a beneficial provision. In the case of Field Motor Pvt. Ltd v. UOI11, the High Court has issued directions for amendment of TRAN-1, where the credit was denied to assessee due to bona fide errors in mentioning the credit in column 7d instead of column 7a of TRAN-1 12. Thus, a case for liberal interpretation of the phrase "technical glitch" is in consonance with the object and purpose of the transitional provisions which are beneficial provisions that needs to be construed liberally13.
12. Circular dated 03.04.2018 did not envisage setting up of ITGRC to adjudicate on the substantive entitlement of transitional credit but only to facilitate the availment of transition credit by filing / amending the Forms. Rule 121 of the CGST Rules provides that proceedings may be initiated under Section 73 / 74 of the CGST Act for recovery of the amount credited on filing of TRAN-1. As substantive entitlement to transition credit will in any case be examined by the proper officer after filing of the Forms, ITGRC needs to facilitate filing of Forms, by liberally interpreting "technical glitches". Rejection of applications by ITGRC would preclude the assessee from staking any claim for transitional credit before the proper officer and consequently preclude the assessee from the adjudication and appellate mechanism provided in the CGST Act.
Conclusion
13. ITGRC should accept the liberal interpretation of the term "technical glitch" as accorded by the High Courts and should favorably consider the grievances for filing / revision of forms, by treating disputable system configurations as technical glitch. ITGRC should relegate the role of adjudicator and own its role as facilitator and adopt a pragmatic approach to sub-serve the ends of justice.
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