Bombay High Court Quashes Denial Of ₹6.29 Crore Transitional ITC Over Wrong TRAN-1 Entry

The Bombay High Court on 30 October allowed a petition filed by Laxmi Organic Industries Limited challenging the denial of transitional credit of Rs. 6.29 crore on the ground that it had been claimed under an incorrect provision of the Central Goods and Services Tax (CGST) Act, 2017.

A Bench of Justices M.S. Karnik and Sandesh D. Patil held that transitional input tax credit (ITC) cannot be denied merely because a taxpayer mentioned an incorrect provision or column in Form TRAN-1, when its eligibility for the credit is otherwise undisputed. It said:

“Only on the ground that the credit was transitioned under a wrong category/column could not be a ground to disallow the same. The unutilized credit arising on account of duty/tax paid is a vested right which cannot be taken away on a technical grounds. Right to input credit is an indefeasible right. Only because incorrect provision/column was mentioned was not sufficient to disallow the same.”

Laxmi Organic Industries transferred its accumulated CENVAT credit to the GST regime by filing Form TRAN-1. However, the GST authorities denied the credit on the ground that the company had claimed it under Section 140(5) instead of Section 140(1) of the CGST Act.

The company challenged the denial, arguing that its eligibility for the credit was never disputed. It submitted that the relevant taxes had already been paid and Form TRAN-1 had been filed within the prescribed time. Therefore, the credit could not be denied merely because it was disclosed under an incorrect provision. The Revenue defended the denial.

The Court noted that the authorities had never questioned the company's eligibility for the credit and that the dispute was confined to the provision under which it had been claimed.

It observed that Form TRAN-1 is a declaration subject to verification by the tax authorities. An incorrect mention of a provision or column in the form, by itself, cannot justify denying credit that is otherwise admissible.

Further, the Bench also relied on its earlier decision in Heritage Lifestyles and Developers Private Limited v. Union of India, which held that admitted ITC cannot be denied merely on technical grounds.

Accordingly, the High Court allowed the writ petition and quashed the order denying transitional ITC of Rs. 6.29 crore to Laxmi Organic Industries.

For the petitioner: Advocates Bharat Raichandani, Mahesh Raichandani and Bhagrati Sahu.

For the Union and Central tax authorities: Advocates Juimala Ostwal and Sangeeta Yadav.

For the State of Maharashtra: Additional Government Pleader Shruti D. Vyas and Assistant Government Pleader Aditya R. Deolekar.