Deconstructing Delhi High Court’s Landmark Decision on Transitional Credits

Epsiode Duration:
60 minutes.

Episode Background:

In a landmark decision in case of Brand Equity Treaties Limited v Union of India and Another [TS-256-HC-2020(DEL)-NT], the Hon’ble Delhi High Court held that credit of taxes paid on inputs is a vested right. Court concluded that the time limit prescribed under Rule 117 of CGST Rules is directory and not mandatory. In absence of any specific statutory limitation under CGST Act, the Court read down Rule 117 of the CGST Rules and pragmatically declared that the time limit of 3 years under the residuary provisions of the Limitation Act 1963 would apply.

In this important decision, the HC inter-alia held that the GST Act enabled all taxpayers registered thereunder to transition legitimate CENVAT credit. The vested right of the taxpayers which was constitutionally protected could not be curtailed by a delegated legislation i.e., CGST Rules, without any overarching provision in the Parent Statute. It was also observed that the benefit of this judgement should not be limited only to the petitioners but extended to all taxpayers who were unable to file the TRAN-1.

The present decision is significant for all taxpayers as it entitles them the benefit from legitimately acquired property. While the Court has extended the benefit of this judgement to all taxpayers facing TRAN-1 filing issues, its availability to those who are registered outside Delhi or even those whose plea were rejected in past by jurisdictional HCs. will need to be evaluated as the GST authorities in other jurisdictions may seek to deny this benefit.

What will the epsiode cover?

In this special episode, Adv. Abhishek A Rastogi who also argued the lead petition, has elaborately discussed and decoded the, (i) the concept of vested rights (ii) significance of directory and mandatory provisions and (iii) the impact of the decision on different classes of taxpayers (iv) impact of proposed amendments on the decision (v) how can benefit be taken from June 30, 2020.