CGST Rules Prescribing Time-Bound Submission Of Declaration Under TRAN-1 To Claim Transitional Credit Not Directory But Mandatory: Rajasthan HC

The Rajasthan High Court has held that Rules prescribing the 'time and manner' for claiming transitional credit, in addition to the statutory procedure provided under Section 140 of the Central Goods and Services Tax Act 2017, are mandatory in nature. Petitioner contended that once it fulfilled the statutorily prescribed eligibility conditions enumerated under Section 140, non-compliance with Rule 117 would not defeat its indefeasible statutory right to claim transitional credit. Revenue on the other hand claimed that the right to claim transitional credit, as provided under Section 140, is not absolute, but can be availed upon fulfillment of eligibility conditions prescribed in the statutes and also by submitting specific statutory declaration, as provided in TRAN-1, appended to the CGST Rules, 2017 and that too within the stipulated period. At the outset, the High Court found that the expression “within such time and in such manner as may be prescribed” contained in Section 140 mandated the Rule Making Authority to make necessary provisions in this regard, which was done by the Central Government by framing the CGST Rules, 2017 and in particular, laying down complete procedure towards claim credit of eligible duties as input tax credit, under Rule 117. It constitutes a statutory pre-condition because eligibility to claim transitional credit under sub-section of Section 140 of the CGST Act, 2017, is based on certain conditions, which are statutorily prescribed.