Denied Transitional Credit? CESTAT Says It’s a Violation of Fundamental Rights
If you’re a taxpayer who missed the deadline to claim transitional credit under GST, there’s good news.
The CESTAT has ruled that denying transitional credit solely on limitation grounds violates Articles 14 and 300A of the Constitution. This landmark decision reinforces taxpayer rights and challenges the rigid interpretation of time limits imposed under the GST regime.
What Is Transitional Credit Under GST?
Transitional credit allowed taxpayers to carry forward their existing input tax credit (ITC) from the pre-GST regime (like Excise, Service Tax, VAT) into the GST era using Form TRAN-1 and TRAN-2.
- Form TRAN-1: For carrying forward pre-GST credits
- Form TRAN-2: For dealers not registered under old laws but eligible under GST
What Was the Issue?
Many taxpayers failed to file TRAN forms within the original deadline due to:
- Technical glitches on the GST portal
- Lack of clarity on procedural rules
- COVID-19 disruptions
As a result, the GST authorities rejected claims, citing the expiration of time limits under Rule 117 of the CGST Rules.
What Did CESTAT Say? (Legal Insight)
In a crucial ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held:
“Denial of accrued credit on the basis of time limitation violates Articles 14 (Right to Equality) and 300A (Right to Property) of the Constitution of India.”
Key takeaways from the judgment:
| Legal Point | Explanation |
|---|---|
| Article 14 | Treats all taxpayers equally – arbitrary rejection of refund due to procedural delay is unfair. |
| Article 300A | Input tax credit is a vested right – it cannot be taken away without legal authority. |
| No overriding time bar | Section 140 of the CGST Act does not prescribe a strict limitation period. |
| Precedents cited | Supported by Supreme Court views that procedural lapses shouldn’t override substantive rights. |
Relevant Notifications & Cases
- Rule 117, CGST Rules: Laid down time limit for filing TRAN-1 and TRAN-2
- SC in Filco Trade Centre Pvt. Ltd. Case (2022): Allowed reopening of TRAN forms
- Madras HC in P.R. Mani Electronics (2020): Recognized credit as property
- CBIC Circulars: Advised procedural compliance but not at cost of substantive rights
Expert View
“Transitional credit is not a concession but a vested legal right. Authorities must ensure that system-related or minor procedural delays don’t cause irreversible loss to businesses,” says Rajesh T., Tax Consultant at Efiletax.
What Should Taxpayers Do Now?
- If your TRAN-1 claim was rejected due to delay, you may:
- File a writ petition before High Court
- Refer to the CESTAT ruling and SC’s Filco decision
- Seek condonation of delay citing technical or genuine hardship
Conclusion
This CESTAT ruling is a major relief for taxpayers affected by GST transition challenges. If you were denied credit due to missed timelines, you now have strong legal backing to reclaim your rightful input tax credit.
Need help with transitional credit or GST disputes?
Efiletax is here to guide you step-by-step.
Summary
CESTAT rules that denying transitional credit refund on limitation grounds violates Articles 14 & 300A. Input tax credit is a vested right, not a concession.
FAQs
Q1. Can I still claim transitional credit if my TRAN-1 was rejected?
Yes, if it was due to delay or portal issues, recent rulings allow relief via writ petitions.
Q2. What is the basis for claiming credit beyond time limit?
Article 300A – your input tax credit is protected as a property right.
Q3. Does the Supreme Court support this view?
Yes, in the Filco Trade Centre case, SC allowed reopening of TRAN forms for all taxpayers.