Kerala High Court Refuses to Interfere in GST TRAN-1 Dispute Filed After Two-Year Delay

Background of the Dispute

The Kerala High Court in Dhanyamol V Vs State Tax Officer examined whether a writ petition could be entertained against an order passed under Section 73 of the Central Goods and Services Tax Act, 2017, when the assessee approached the Court after more than two years and had not availed the statutory appellate remedy.

The assessee was registered under both the Central Goods and Services Tax Act, 2017 and the Kerala Goods and Services Tax Act, 2017. She claimed transitional input tax credit (ITC) of excise duty on closing stock as on 30.06.2017 by filing Form GST TRAN-1. Her application was rejected and, based on that rejection, a demand order under Section 73 was passed on 28.12.2023 (referred to as Ext.P4) requiring payment of the disputed amount.

The assessee approached the High Court by way of writ petition, challenging Ext.P4 and contending that:

  • Her Form GST TRAN-1 claim had been rejected without providing a personal hearing.
  • Since the demand order under Section 73 flowed directly from this rejection, the order itself was unsustainable in law.

The Court was thus required to consider the maintainability of the writ petition in the face of:

  1. Failure to file a statutory appeal against Ext.P4; and
  2. A delay of more than two years in invoking the writ jurisdiction.

Core Facts Considered by the Court

Transitional Credit Claim via GST TRAN-1

The assessee had filed Form GST TRAN-1 to carry forward the excise duty component on closing stock as on 30.06.2017, when the GST regime commenced. This was a typical transitional credit claim filed by dealers holding duty-paid stock on the eve of migration to GST.

The rejection of this application formed the foundation for the subsequent demand under Section 73. The impugned order (Ext.P4) recorded the rejection of the TRAN-1 claim and consequently required payment of tax.

Nature of the Impugned Order: Ext.P4

Ext.P4 was an order passed under Section 73 of the CGST Act. The Court noted from the record that:

  • The order was dated 28.12.2023.
  • It specifically addressed and recorded the dismissal/rejection of the assessee’s Form GST TRAN-1 application.
  • Despite this, the assessee did not file any statutory appeal against Ext.P4.

Instead of pursuing the appellate remedy provided under the statute, the assessee directly invoked the writ jurisdiction of the High Court, and that too long after the order had been passed.

Delay in Filing the Writ Petition

An important factor that weighed against the assessee was the significant time gap between the date of the order and the filing of the writ petition.

  • Ext.P4 was issued on 28.12.2023.
  • The writ petition was instituted more than two years after the date of Ext.P4.