The Decision Of The Supreme Court In Filco Trade Center Pvt Ltd ' A Happy Ending To The Undesirabletale Of Transitional Credit?

• Published date: 08 August 2022
• Subject Matter: Tax, Sales Taxes: VAT, GST, Tax Authorities
• Law Firm: Economic Laws Practice
• Author: Mr Jitendra Motwani, Rinkey Jassuja and Alifya Vora

Despite GST completing half a decade of its existence, its implementation is still plagued by many issues including disputes regarding transitional credit. Recently one such issue with respect to the carry forward of credit from the erstwhile regime was finally put to an end by the decision of the Supreme Court in the case of Union of India & Ors V. Filco Trade Center Pvt. Ltd & Anr. (Filco Trade Center Pvt Ltd.) ¹

In this case, the Supreme Court has directed the Goods and Service Tax Network (GSTN) to re-open the common portal for accepting form GST TRAN-1 and GST TRAN-2 from 01.09.2022 to 31.10.2022 and to further ensure that there are no technical glitches during those two months. Furthermore, jurisdictional tax authorities are directed to adjudicate claims of such transitional credit after giving the assessee an opportunity to defend its interest. Most importantly (and a very welcome step), the Supreme Court has extended the benefit of this judgement to all the asseesees and not just the asseesees who have chosen to litigate this issue.

Background to decision in the case of Filco Trade Center Pvt Ltd

Despite several extensions being granted for filing of Form GST TRAN-1 many assessee's were unable to file and carry forward their cenvat credit to the GST regime on account of technical glitches. Such assessees approached their jurisdictional High Courtsseeking reliefs inter alia on the ground that the right to credit is a vested indefensible right and the same cannot be restricted basis purely technical considerations. A challenge was also mounted in several of these petitions that right to utilize the cenvat credit duly availed is an indefeasible right and no time limit can be inserted to restrict the transition and availment of the said credit under GST. Divergent views were expressed by the High Courts on the said issue. Finally, the Supreme Court has via the case of Filco Trade Center Pvt. Ltd. conclusively put an end to this divergence.

A throwback to previous judgements

To understand the significance of this judgement, it is important to understand the historical context of this issue. One of the earliest cases challenging the time-limit placed on transition of cenvat credit came up before the Gujarat High Court in the case of Willowood Chemicals Pvt Ltd. V. Union of India & Ors². In this case, Gujarat High Court upheld the vires of Rule 117 of the CGST Rules and accordingly, disallowed the plea of the petitioner therein to file his form GST...