Kcl Limited vs. The Joint Commissioner

Counsel for the Petitioner: SRI. LAKSHMI KUMARAN SRIDHARAN Counsel for the Respondent Nos. 1 to 3: SMT SANTHI CHANDRA ( Standing Counsel for CBIC) Counsel for the Respondent No. 4: SMT DIVYA DATLA (CENTRAL GOVERNMENT COUNSEL) The Court made the following order:

Excise Act, 1944, had claimed a CENVAT credit of Rs.2,48,23,034/ - as on 2 30.06.2017. Subsequently, this CENVAT credit was transitioned to the GST regime, when it came into force on 01.07.2017. It appears that an audit objection was taken against the said CENVAT credit, to the extent of Rs.1,39,31,604. On the basis of this audit objection, a show-cause notice was issued to the petitioner, on 18.11.2019, to show-cause why the said CENVAT credit should not be disallowed. The petitioner had filed a reply, on 26.08.2020, setting out the grounds as to why the said CENVAT credit should be allowed. At that stage, an Order of abeyance, dated 17.02.2021 is said to have been passed on the ground that the issues raised in this case had been answered by the CESTAT in favour of the assessee and the same was subjected to further appeal before this Court.

The petitioner, had however utilized the said CENVAT credit of Rs.1,39,31,604 after it had been transitioned to the GST ’regime. Subsequently, another show-cause notice, dated 26.07.2021 was issued, under the Goods & Services Tax Act, 2017 [for the “the GST Act”] to show- why the said CENVAT credit should not be disallowed and recovered from the petitioner along with interest and the penalty. The petitioner had filed its reply, on 08.04.2022. The 1"' respondent after giving an opportunity of hearing to the petitioner had passed Order dated 30.06.2023 disallowing the transitioned CENVAT credit of Rs.1,39,31,604/- and demanded repayment of the said amount. Apart from this, the 1®* respondent had also sought payment of interest under the provisions of Section-50 of the Central Goods & Services Tax Act, 2017 [for the “the CGST Act”] along with a penalty of Rs. 13,93,245/-. cause

The contention of the petitioner, before this Court, was that the respondent is not in accordance with the provisions of Section-140(1) of the COST Act and that in any event the CENVAT credit vyas transitioned to the GST regime strictly in accordance with the provisions of Section-140(1) of the COST Act.

Order of the 1 Smt. S. Santhi Chandra, learned Senior Standing Counsel for the respondents 1 to 3 as well as Smt. Divya Datia, learned counsel appearing for the 4**^ respondent would contend that the view taken by the 1®' respondent as to the ineligibility of the petitioner, for transitioning such CENVAT credit to the GST regime is correct and in accordance with the provisions of the GST Act.

A reading of the show-cause notice as well as the Impugned Order, dated 30.06.2023, issued by the 1"' respondent, shows that the 1"' respondent has not gone into the question of whether the petitioner was eligible for grant of CENVAT credit or not. The 1"’ respondent, as can be seen from the paragraph Nos. 13.3 & 13.5 of his Order, has taken the view that the pendency of the show-cause notice issued under the Central Excise Act, 18.11.2019, would render the input tax credit ineligible for transitioning to the GST regime. 1944, on respondent has specifically held that the show-cause notice and the Orders are not on the question of whether the petitioner was St

The 1

It appears that the respondent, after framing this question, has taken the view that the pendency of and enquiry, on the eligibility of the petitioner to claim such CENVAT credit, is sufficient to hold that the transition of credit under Section-140(1) of COST Act is not permissible as the said provision stipulates that it is only eligible CENVAT credit that can be transitioned. Section-140(1) of the COST Act reads as follows;- “Section -140(1): Transitional arrangements for input tax credit:- (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit 1[of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law 2[within such time and] in such manner as may be prescribed; Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) here the said amount of credit relates to goods manufactured and under such exemption notifications as are notified by the 10. cleared Government.” This provision stipulates that a person shall be entitled to take in his electronic credit ledger the amount of CENVAT credit available as 30.06.2017. The CENVAT credit which was available to the petitioner as on 11. on 30.06.2017 was Rs.2,48,23,034/-. The petitioner was entitled to utilize this credit under the CENVAT regime even during the pendency of the 5 proceedings initiated under the show-cause notice dated 18.11.2019. It may also be noted that as on the date of transition, that is 01.07.2017, there was no show-cause notice or any doubt raised against the claim of the petitioner for availing of such CENVAT credit. Smt. S. Santhi Chandra, learned Senior Standing Counsel for the respondents 1 to 3 would contend that the words “of eligible duties carried forward” would mean only such duty/credit which is un-disputed and which is not under any cloud or dispute, and as such, the transition of the CENVAT credit of Rs.1,39,31,604/-, which was under a dispute or a cloud could not have been made. She would also submit that the show-cause notice does not amount to a duplication of Judgment. This contention cannot be accepted as mere issuance of a show- cause notice which is subsequently kept in abeyance, cannot disentitle the petitioner from claiming the transition of the available CENVAT credit as on 30.06.2017 to the GST regime. In the circumstances, this Writ Petition is disposed of setting aside the Impugned Order of the 1®' respondent dated 30.06.2023 bearing DIN.NO.20230655YL000000A330. s 12. 13. 14. This Court would also caution that this Order shall not be treated as a finding on the ultimate eligibility of the petitioner to claim the CENVAT credit as the proceedings under the show-cause notice dated 18.11.2019 are 15. 6 Still pending and the said proceedings shall be taken up, without being influenced, in any manner, by this Order. There shall be no order as to costs. As a sequel, pending miscellaneous petitions, if any, shall stand SHAIK MOHD l«FI assistant registrar ,,C>/ closed. //// OFFICER SECtI To 1. The Joint Commissioner, Office of the Commissioner of Central Tax, GST Commissionerate, Tirupati, 9/86-A, Amaravathi Nagar, West Church Compound, Tirupati 517502. 2. The Commissioner of Central Tax, Tirupati COST Commissionerate, 9/86-A, Amaravathi Nagar, West Church Compound, Tirupathi517502. 3. The Additional Commissioner, Office of the Commissioner of Central Tax, Central GST Audit Commissionerate, GST Bhavan, Port Area, Visakhapatnam 530 035. 4. The Principal Secretary to the Government, Union of India, Ministry of Finance, Department of Revenue, Udyog Bhavan, North Block, New Delhi 110 001. 5. One CO to Sri. Lakshmi Kumaran Sridharan Advocate [OPUC]

One CC to Smt. Santhi Chandra ( Standing Counsel for CBIC) [OPUC]

One CC to Smt. Divya Datla (Central Government Counsel) [OPUC]

Three CD Copies GSC