Telangana HC in the case of M/s. Magma Fincorp Limited

Case Covered:

M/s. Magma Fincorp Limited

Versus

State of Telangana

Facts of the Case:

Challenging the rejection of transitional relief in terms of sections 73 and 74 of the Telangana Goods and Services Act, 2017 (for short ‘the Act’) read with Rule 121 thereto, and a consequential demand made for the alleged excess claim of transitional relief, the Dealer has come up with the above writ petition.

The petitioner is engaged in the business of leasing and financing vehicles and equipment. They were earlier registered under the Telangana Value Added Tax Act and now registered under the Central and State GST Acts.

According to the petitioner, they had an input tax credit to the tune of Rs.1,79,23,784/-, as on the date of bifurcation of the composite State of Andhra Pradesh, namely, 02.06.2014. In order to deal with the question of transfer of ITC, as between the bifurcated States that came into existence after reorganization, a circular dated 12.05.2015 was issued by the commissioner of Commercial Taxes. The circular prescribed that those dealers, who migrated from the State of Andhra Pradesh to the State of Telangana may claim Net Credit Carried Forward (NCCF) in the State to which they have migrated after the appointed date. It was further stipulated that the formula shall be in tune with Section 56 of the Andhra Pradesh State Reorganization Act, 2014.

Observation of the Court:

We have carefully considered the above submissions.

It is seen from the impugned order that there is no dispute about the fact that there was excess credit carry forward (NCCF) to the tune of Rs.1,77,65,101/- as on 01.06.2014, immediately preceding the day on which the State was bifurcated. It is also admitted in the impugned order that after the bifurcation, the petitioner paid taxes to the tune of Rs.93,38,148/-, in cash, instead of adjusting the 28 NCCF. Only a small portion of the credit available to them was adjusted towards tax. It is further admitted in the impugned order that one of the prescribed modes of utilizing 28 NCCF, was to claim a refund. But, according to the respondents, the State GST Act does not provide for utilization of the 28 NCCF as transitional relief. Therefore, the second respondent concluded that the Assessing Authority has no such power beyond what is prescribed by the Statute and that the Dealer is always at liberty to adjust the liabilities in pending assessments under VAT and CST and thereafter claim a refund.

The Decision of the Court:

Once it is admitted that credit was available to the petitioner on the date of switch over from VAT regime to GST regime and once it is admitted that the petitioner may be entitled to make a claim for this credit in other modes, we think that the second respondent ought to have given a purposive interpretation to Section 140 of the Act read with Sections 16 to 21 of the Telangana GST Act 2017. As he has failed to do the same, the matter requires reconsideration.

Therefore, the writ petition is allowed and the impugned order is set aside and the matter remanded back to the second respondent for fresh consideration in the light of the observations contained in this order. The second respondent may pass fresh orders within a period of 4 weeks from the date of receipt of a copy of this order.

Consequently, miscellaneous petitions, if any pending, shall stand closed. No order as to costs.

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