The Delhi High Court has held that a taxpayer cannot be denied legitimate Input Tax Credit (ITC) merely because of technical or transitional glitches on the GST portal. The ruling arose in a writ petition filed by a company engaged in the business of manufacturing general-purpose machinery, which sought to avail transitional ITC accumulated before the introduction of the Goods and Services Tax regime. Under the GST regime, transitional credits available as of the appointed date were to be carried forward and distributed under specified GST rules. The petitioner had a closing balance of ITC amounting to several lakh rupees that should have been carried forward and distributed to its sub-offices. However, due to a glitch on the GST portal at the time of migration to GST, the requisite transitional form could not be filed, and consequently the credit did not reflect on the electronic credit ledger for distribution. This inability to file the form in time was not the petitioner’s fault; instead, it was attributable to the portal malfunction during the initial period of the GST rollout.
The bench, comprising Justices Prathiba M. Singh and Shail Jain, examined the relevant statutory provisions and noted that an Input Service Distributor is required to distribute available input tax credit to its branches within a specified period. The GST rules contemplate the distribution of transitional credit but do not prescribe a strict timeline beyond the immediate period for distribution in the transitional context. In this case, due to the portal’s non-functionality, the petitioner was unable to carry out the distribution within that period, and the credit consequently did not reflect for further distribution. The High Court observed that taxpayers facing such technical hindrances should not be penalised for shortcomings in the government’s IT infrastructure, especially when the entitlement to credit is not in dispute.
The Court emphasised that substantive rights conferred by the GST law cannot be denied on account of procedural or technical deficiencies in the GST portal. ITC that lawfully accrued and was reflected in the transitional form should not be withheld due solely to the portal’s inability to process or record the data at the relevant time. Given the petitioner’s uncontested entitlement, the High Court directed the tax department to reflect the transitional credit amount in the petitioner’s electronic credit ledger within a defined timeframe, enabling distribution in accordance with GST rules.
In reaching its decision, the Court reiterated a broader principle that technological limitations — including portal errors or glitches — cannot be used as ground to defeat statutory entitlements. The judgment reflects the High Court’s recognition that the GST portal, being an administrative tool, is not infallible, and where system failures frustrate taxpayers’ rights, the department must adopt remedial measures. The Court underscored that such credits should be manually or otherwise facilitated to ensure that taxpayers receive their lawful entitlements.
This ruling aligns with earlier decisions emphasising that tax authorities cannot rely on technical glitches to deny refunds or credits where the underlying legal entitlement exists. By protecting the taxpayer’s rights against denial caused by system deficiencies, the High Court affirmed the doctrine that substantive tax rights cannot be subordinated to procedural or technological obstacles. The petition was accordingly allowed, and the department was directed to make the necessary adjustments, ensuring that the petitioner’s transitional ITC is fully recognised and available for distribution as per law.
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