Admitted Transitional Credit Cannot Be Denied for Claim Under Wrong TRAN‑1 Provision: Bombay High Court

The Bombay High Court restored ₹6.29 crore of CENVAT credit carried into GST under Section 140(5) instead of Section 140(1), holding that admitted credit cannot be lost to a technicality.

The Bombay High Court has held that CENVAT credit whose eligibility and quantum are undisputed cannot be disallowed merely because it was carried into GST under Section 140(5) of the CGST Act instead of Section 140(1). It quashed an appellate order upholding disallowance of transitional credit of ₹6,29,02,146. [Laxmi Organic Industries Ltd. v. Union of India & Ors., 2026-juristway.com-3285-HC(Bombay)-GST]

Justice M.S. Karnik and Justice Sandesh D. Patil decided the writ petition, with Justice Sandesh D. Patil writing the judgment. The petitioner manufactures ethyl acetate at two units under a common GST registration, using Superior Denatured Spirit that is imported or bought from sugar factories, stored in tanks at one unit and transferred to the other.

It filed Form GST TRAN‑1 within time and carried forward credit on seven bills of entry of May and June 2017 under Section 140(5). An SCN dated 30 Sep 2020 alleged that the credit had been wrongly transitioned under that provision and proposed its recovery. The demand was confirmed, and the appellate order dated 24 Feb 2022 upheld it.

The Court noted that the eligibility and quantum of the credit were never disputed, that the petitioner had sought extension from the Commissioner under Section 140(5), and that the impugned order itself recorded entitlement to the credit under Section 140(1). TRAN‑1 is a declaration subject to verification, and claiming credit under a wrong category or column could not be a ground to disallow it. Unutilised credit of duty or tax paid is a vested right that cannot be taken away on technical grounds, and the Court added: “Right to input credit is an indefeasible right.”

Following its earlier ruling in Heritage Lifestyles and Developers Private Limited v. Union of India (2020), which drew on Mangalore Chemicals and Fertilizers Ltd. v. Deputy Commissioner, the Court held the order denying admitted credit on technical grounds totally without jurisdiction. The petition was allowed in terms of the prayers, including a declaration that undisputed credit transitioned in time cannot be disallowed because it was transitioned under an incorrect provision.

2026-juristway.com-3285-HC(Bombay)-GST