The Gujarat High Court has quashed the interest and penalty in the GST transitional credit dispute.
The bench of Justice Bhargav D. Karia and Justice Pranav Trivedi has observed that has allowed the petition filed by M/s Sanskar Ceramics Pvt. Ltd. and directed GST authorities to credit Rs. 1.13 crore of unavailed CENVAT credit into the petitioner’s Electronic Credit Ledger with retrospective effect from July 1, 2017.
The bench noted that the petitioner had genuinely attempted to transition the credit and filed TRAN-1 within time, but the credit was not reflected in the Electronic Credit Ledger due to reasons not attributable to the petitioner. The Court held that “no fault can be found on part of the petitioner” and emphasized that transitional credit is a vested right under Section 140 of the CGST Act.
The petitioner/assessee is engaged in the business of manufacturing of non-metalic material products. The petitioner had a balance of unavailed CENVAT credit of Rs.1,13,00,523/- as on 30th June, 2017 reflected in return ER-1 Form filed on 15.09.2017 for first quarter of 2017-18. As on 30th June, 2017, CENVAT credit of Rs.85,03,801/- and Rs.77,209 as well as Service Tax Input Tax Credit of Rs.27,19,513 was available with the petitioner.
After implementation of the GST regime with effect from 1st July, 2017, the petitioner claimed the unavailed CENVAT credit by filing Form TRAN-1 on 15th September, 2017.
However, after filing of the Form TRAN-1, the CENVAT credit was not reflected in the Electronic Credit Ledger of the petitioner.
The petitioner therefore by Email dated 19th September, 2017 raised a grievance with the help desk of GST Department and explained that petitioner has filed Form TRAN-1 within stipulated time before 30th September, 2017 and as per Rule 117 of the Central Goods and Services Tax Rules, 2017, the unavailed CENVAT
credit ought to have been reflected in the Electronic Credit Ledger. As no response was received to the aforesaid Email, another Email dated 29th September, 2017 was addressed by the petitioner requesting the respondent to do the needful to reflect the unavailed CENVAT as a credit in the Electronic Credit Ledger.
Senior Advocate Avinash Poddar, on behalf of the assessees contended that the department have not disputed filing of Form ER-1 showing the unavailed CENVAT credit which was claimed by the petitioner to be carried forward in GST Form TRAN-1 filed by the petitioner. It was submitted that the petitioner has shown the unavailed CENVAT credit of Rs.30,16,248/- in Form TRAN-1 which was pertaining to the Invoices prior to 1st July, 2017 but received thereafter.
Mr. Poddar added that the respondents have already given the credit of unavailed CENVAT credit reflected in Invoices received after 1st July, 2017 but the respondents did not give credit of unavailed CENVAT credit of Rs.1,13,00,523/-. It was submitted that unavailed CENVAT credit of the said amount is required to be reflected in the Electronic Credit Ledger on 1st July, 2017 and if such credit is reflected on the said date, the petitioner is not liable to pay the interest as per the impugned order passed by the respondent-Authority.
The court while allowing the petition held that since the petitioner had already reversed the amount in cash through DRC-03 and the credit was lawfully available, imposing interest and penalty would be hyper-technical and unjust. Relying on the Madras High Court ruling in PMA Controls India Ltd., the Court held that a taxpayer cannot be penalised for departmental delay or system errors.
Case Details
Case Title: M/S. Sanskar Ceramics Private Limited Versus Union Of India & Ors.
Case No.: R/Special Civil Application No. 5598 Of 2024
Date: 17/07/2025
Counsel For Petitioner: Mr.Avinash Poddar, Ms Anchal A Poddar
Counsel For Respondent: Shrunjal Shah, AGP
