TRAN‑1 Credit Allowed Despite Unfiled ER-1 Return Caused by ACES Portal Glitch: GSTAT Hyderabad

The GST Appellate Tribunal’s Hyderabad Bench restored ₹12.91 lakh of CENVAT credit to a medicaments maker, rejecting the extended period and a penalty imposed under a clause not proposed in the notice.

The GST Appellate Tribunal, Hyderabad, has held that transitional credit under Section 140(1) of the CGST Act, 2017 cannot be denied solely because one pre-GST excise return could not be filed in time owing to glitches on the Department’s own portal. The Bench of A P Ravi, Member (Judicial), and Duvvuri Krishna Srinivas, Member (Technical), who wrote the order, set aside the denial of ₹12,91,000 and the penalty [Sain Medicaments v. Commissioner of Central Tax Hyderabad & Ors., 2026-juristway.com-3241-GSTAT(Hyderabad)-GST].

The appellant could not upload its ER-1 return for April 2017 on the ACES portal, raised CBIC-Mitra helpdesk tickets and informed the Range Superintendent on 12 May 2017. It filed the returns for May and June 2017 on time and finally uploaded the April return on 27 Aug 2022. A show cause notice (SCN) dated 31 Jan 2022 invoked clause (ii) of the first proviso to Section 140(1), and the credit was denied with interest and a 100% penalty.

The Bench found that the SCN proposed penalty under Section 122(2)(a) while invoking Section 74(1), and the orders imposed it under Section 122(2)(b). Relying on Section 75(7) and M/s. Armoor Security (India) Private Limited vs. CGST, Delhi East Commissionerate (2025), it held that the orders travelled beyond the SCN.

On merits, the Bench held that the proviso targets taxpayers who abandon filing, not one who was diligent and complied at the first opportunity. Applying lex non cogit ad impossibilia, it said the glitch on the Government’s own portal “can’t be weaponised to trigger an outright disallowance of vested transitional credit.”

It also held Section 74 inapplicable because the SCN set out no foundational facts of fraud or suppression and the Department already knew of the difficulty. It cited Tata Steel Ltd V. UOI (SLP (c) No. 16859 of 2026) and M/s G.R. Infra Projects Ltd Vs. State of M.P. (Civil appeal No. 11277 of 2026), along with CBIC Instruction No. 05/2023-GST. The order-in-appeal was set aside with consequential relief.

2026-juristway.com-3241-GSTAT(Hyderabad)-GST