GST Tribunal Upholds Dealer’s ₹36.35 Lakh Transitional Credit Despite Wrong TRAN-1 Table, As The Demand Notice Never Disputed Section 140(3) Eligibility

The taxpayer, a registered dealer, claimed transitional CGST credit of ₹36,35,704 under Section 140(3) of the CGST Act, 2017, but entered the claim in Table 5(a) of Form GST TRAN-1, prescribed for credit under Section 140(1), rather than Table 7(a), prescribed for Section 140(3) claims.

The taxpayer said the entry in the wrong table was inadvertent and maintained that it held the invoices and other records supporting its eligibility.

The adjudicating authority disallowed the credit solely because it had been entered in the wrong table; the first appellate authority allowed the taxpayer’s appeal, finding that the taxpayer’s substantive eligibility under Section 140(3) had not been disputed.

The Revenue appealed to the Tribunal, arguing, among other things, that the taxpayer’s eligibility had not been verified and that the first appellate authority should have made further inquiry.

Section 140(3) of the CGST Act permits specified registered persons, including first- and second-stage dealers, to claim credit for eligible duties on stock and requires them to satisfy the statutory conditions concerning use, eligibility, duty-payment documents and invoice dates.

Rule 117 requires a declaration in Form GST TRAN-1; Table 5(a) records credit under Section 140(1), while Table 7(a) records claims under Section 140(3).

Rule 121 provides for verification of transitioned credit and initiation of proceedings under Section 73 or 74 where credit is wrongly availed.

The Tribunal relied on High Court decisions, including Blue Bird Pure Pvt. Ltd. v. Union of India and R.R. Distributors Pvt. Ltd. v. Commissioner of Central Tax, for the principle that an inadvertent error in the TRAN-1 table is a procedural lapse that does not defeat a claim if the taxpayer is otherwise eligible.

It also applied the principle analogous to constructive res judicata discussed in Shankara Coop. Housing Society Ltd. v. M. Prabhakar: a party may not ordinarily raise later a ground available to it but omitted earlier.

Under Section 107(11), further inquiry is required only as may be necessary; it is not mandatory in every appeal.

The Tribunal found that the proceedings below turned exclusively on the taxpayer’s use of the wrong TRAN-1 table, not on a determination that it failed the substantive conditions of Section 140(3).

The taxpayer had offered supporting invoices and records, but the adjudicating authority did not examine them because it confined its decision to the table-entry error.

Applying the cited High Court decisions, the Tribunal treated that error as procedural and held it could not, by itself, defeat transitional credit where the taxpayer was otherwise eligible.

It further held that the Revenue could not introduce the separate eligibility objection for the first time in its appeal after omitting it from the show-cause notice and adjudication order.

Finally, it rejected the Section 107(11) argument, reasoning that the provision requires further inquiry only where necessary, not as a routine step in every appeal.

It held that the wrong-table entry was not, by itself, a sufficient basis to deny the taxpayer’s transitional-credit claim, and rejected the Revenue’s attempt to advance a new eligibility ground at the appellate stage.

No order as to costs was made.