Wrong TRAN-1 Category Alone Cannot Cost Laxmi Organic Its Undisputed ₹6.29-Crore GST Credit: Bombay HC

The petitioner, a manufacturer of Ethyl Acetate operating two units under a common GST registration, claimed transitional credit of ₹6,29,02,146 relating to Superior Denatured Spirit (SDS) used in its business.

It filed Form TRAN-1 and transitioned the credit under Section 140(5) of the CGST Act, 2017.

The Revenue issued a show-cause notice alleging that the credit had been wrongly transitioned under Section 140(5), and the demand was confirmed.

The petitioner’s appeal was dismissed by order dated 24 February 2022.

The petitioner challenged that appellate order, contending that its eligibility for the credit was undisputed and that the error concerned only the provision or category under which the credit was claimed.

Section 140(1) of the CGST Act permits a registered person, subject to its conditions, to carry forward eligible CENVAT credit reflected in the return for the period ending immediately before the appointed day; Section 140(5) provides for credit relating to inputs or input services received on or after the appointed day where the duty or tax was paid under the existing law, subject to the prescribed conditions.

Rule 117 and Form TRAN-1 govern the declaration and transition of eligible credit to the GST regime.

The Court applied the principle that an otherwise eligible and undisputed input credit should not be denied merely because it was disclosed under an incorrect provision or column, treating such an error as technical.

It relied on Heritage Lifestyles and Developers Private Limited v. Union of India, which held that admitted input credit should not be denied on technical grounds, and referred to the reasoning in Mangalore Chemicals and Fertilizers Ltd. v. Deputy Commissioner as discussed there.

The Court noted that the Revenue did not dispute the quantum or eligibility of the ₹6,29,02,146 credit and that the petitioner had filed Form TRAN-1.

It also observed that the impugned order recognised the petitioner’s entitlement to transitional credit under Section 140(1), while the Revenue’s objection was that the credit had been claimed under Section 140(5).

Applying the principle that an incorrect category or provision in the declaration was not, by itself, a sufficient basis to disallow eligible credit, the Court held that the credit could not be denied on that technical ground.

It made the Rule absolute and disposed of the petition accordingly.