M/S Kalyan Jewellers INDIA Limited vs. The Joint Commissioner (GST-Appeals)

APARNA NANDA KUMAR 2.SAMIREDDY SAI SARAT CHANDRA Counsel fpr the Respondent{S); 1.N VIVEKANANDA The Court made the following Judgment; (perHomiesnjusticeR.Rs^hu nand^r^R3o) The petitioner is a Public Limited Company engaged in the business of manufacturing and sale of gold, diamond, silver, platinum and articles of Jewellery. The petitioner has registered itself earlier under the Andhra Pradesh Value Added Tax Act, 2005 [for short the APVAT Act, business in the State of Andhra 2005”] and had been carrying on Pradesh. Upon the introduction of the GST regime in the year 2017, the 2 i petitioner had migrated to the new regime and had obtained a registration vide GSTIN No.37AADCK6079K1Z0 and had been carrying on business under the said registration from 01.07.2017. Even prior to the introduction of the GST States and the Central Government had been experimenting with tax regimes, wherein taxes paid at the previous stage of manufacture sale could be reimbursed so that the cascading effect of multiple points of tax is reduced. These attempts had finally culminated in the introduction of the GST regime. 2. regime, various various or The provisions of the APVAT, 2005, as well as the CENVAT system of taxation being follow up under the Central Excise Act, 1944 [for short “the Act, 1944”], visualized a system where the taxes previously paid, were permitted to be used in the payment of subsequent taxes also. On account of these provisions, both under the Act, 1944, as well as the various State Laws relating to taxation on supply of sale of goods, dealers had credit balances in terms of the taxes which had already been paid and could be utilized towards clearing future taxes.

The Goods & Services Act, 2017 [for short “the GST Act, 2017”] and the Rules made there under, with a view to ensure that such credit balances available to dealers under different Acts, could be utilised under the GST regime also, had come up with the scheme of transitioning 4. 3 such credit balances available to dealers under the previous Acts to the credit balances under the GST regime. As part of this exercise, the Central Excise Rules, 2002 [for ‘the Rules, 2002”], which had earlier been formulated for implementing the CENVAT scheme was also pressed into service for the of transitioning the dealer from the earlier Act, 1944 to the GST 5. short purposes regime. The main provision for transitioning the credit balances of the dealers under the earlier Acts to the GST Act is under Section 140(1)&(3) of the GST Act, 2017 which reads as follows, is the relevant part of Section 140(1 )&(3) for the purposes of this Writ Petition: “Section-140: 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) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) (3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No.26/2012 Service Tax, dated the 20 June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi finished or finished 3 [goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to] the following conditions, .namely;- 6. 4 i (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and (v) the supplier of services is not eligible for any abatement under this Act: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.” The petitioner, invoking these provisions, transitioned to the GST regime by obtaining a credit of Rs.71,29,299/- on the ground that this was the Central Excise duty paid at the time of purchases made after 01.07.2016. Initially, the said credit was granted to the petitioner and the petitioner had utilized the said credit. 7. on or Subsequently, on the basis of an audit conducted on the accounts of the petitioner, proceedings were initiated for reversing the said credit apart from levying penalty and claiming interest on the credit 8. so reversed. 2nd

The respondent, by his Order-ln-Original DIN.20210755YK000000BC77, dated 02.07.2021, after considering the objections filed by the petitioner, had rejected the claim of the petitioner and raised a demand of Rs.71,29,299/- as recovery of wrongly availed credit, Rs.71,29,299/- as penalty for wrongful availed of credit, under Clause (b) 6f sub-section (2) of Section 122 of the Central Goods &

Aggrieved by the Order-In-Original and the Appellate Order passed by the respondents 2 & 1 respectively, the petitioner has moved this Court by way of the present Writ Petition.

Smt. Aparna Nanda Kumar, learned counsel appearing on behalf of Sri Samireddy Sai Sarat Chandra, learned counsel for the petitioner, would submit that the primary finding of the authorities that the branches at Mumbai, New Delhi, Tamil Nadu & Telangana did not have registration is incorrect. She would draw the attention of this Court to the provisions of Rule-9 of the Rules, 2002 which read as follows;- “Registration - RULE 9. (1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods [or an importer who issues an invoice on which CENVAT Credit can be taken], shall get registered : Provided that a registration obtained under rule 174 of the Central Excise Rules, 1944 or rule 9 of the Central Excise (No. 2) Rules, 2001 shall be deemed to be as valid as the registration made under this sub-rule for the purpose of these rules. The Board may by notification and subject to such (2) conditions or limitations as may be specified in such notification, specify person or class of persons who may not require such registration.

SECTION 3, New Delhi, the of March, 2016 G.S.R. (E)- In exercise of the powers conferred by-sub-rule (2) of rule 9 of the Central Excise Rules, 2002, the Central Board of Excise and Customs hereby exempts from the operation of said rule, every manufacturing factory or premises engaged in the manufacture or production of articles of jewellery other than articles of silver jewellery but inclusive of articles of silver jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (herein after referred to as the specified goods), where the manufacturer of such goods has a centralised billing or accounting system in respect of such specified goods manufactured or produced by different factories or premises and opts for registering only the factory or premises or office, from where such centralised billing or accounting is done and where the accounts/records showing receipts of raw materials and finished excisable goods manufactured or received back from job workers are kept. 2 For availing the exemption contained herein, the manufacturer taking the centralised registration shall give details of all premises (other than those of job worker's), from where such specified goods are removed for domestic clearance. Notwithstanding anything contained in this notification, a manufacturer of specified goods may also take separate registrations for all factories or premises where the accounts/records showing receipts of raw materials and finished excisable goods manufactured or received back from job workers are kept. 3. [F. No. 334/8/2016-TRU) (Mohit Tewari) Under Secretary to the Government of India She would contend that the petitioner had obtained a centralized registration and that all the branches of the petitioner have been enumerated in the annexure attached to the said registration 15. certificate which bears the registration No.AADCK6079KEM003. 8 She would further contend that in view of this registration certificate, the finding of the respondent authorities that the branches of the petitioner, at the places mentioned above, did not have registration is incorrect.

She would further submit that the invoices under which the goods had moved from the Kerala manufacturing unit to various branches mentioned above set out the amount of duty paid on which the petitioner was entitled to credit of 1 % of the value of the goods.

She would further submit that in view of the fact that all the said documents were available, the findings of the respondent authorities are not warranted in law and are not in accordance with the requirement of Section-140 of the CGST Act, 2007 or the Rules including the Rules, 2002. 18. Sri Y.N. Vivekananda, learned Standing Counsel appearing for the Revenue, would contend that the finding of the respondent authorities that the petitioner does not have an appropriate registration is correct. He would submit that the petitioner has not produced the centralized registration certificate and the annexure to the said certificate before the authorities and as such, the finding of the authorities cannot be disturbed.

Sri Y.N. Vivekananda, learned Standing Counsel for the respondents would also contend that the finding of the 1®* respondent- appellate authority that the invoices produced by the petitioner cannot be 20. 9 correlated to the claims of the petitioner is correct. He would also submit that there is no proof of payment of duty which was placed before the authorities. He draws the attention of this Court to the said finding of the respondent that no documents demonstrating proof of payment of duty has been placed before the authorities. As can be seen from the rival submissions, the claim of the 21. petitioner for grant of transition of the CENVAT credit available to the petitioner is being disputed on two grounds. Firstly, that, the stock transfer voucher has been issued by a person/branch which does not have registration. Secondly, there is no correlation between the claim made by the petitioner and the invoices produced by the petitioner. On the first issue, Rule-9, which requires registration also provides for an exemption under Rule-9(2). Such exemption had been granted, by way of the Notification of the Central Government dated 01.03.2010, which has been extracted above. The certificate of registration produced by the petitioner, before this Court, shows that a centralized registration under Rule-9 had been issued to the petitioner. The annexure has also been filed along with the certificate showing the various branches of the petitioner which are said to be covered under the 22. said registration. On the question of correlation of the claim of the petitioner with the invoices produced by the petitioner, the said issue can only be resolved by the respondent authorities by looking at the documents 23. 10 produced by the petitioner. It appears that at the original stage, documents were rejected on the ground that they have not emanated from the registered entity or branch. At the appellate stage, the appellate authority while affirming this finding of the original authority had taken an additional ground that there was no correlation. The learned Standing Counsel draws the attention of this Court to paragraph No.16.2 of the Order-in-Original as well as paragraph Nos.8 & 10 of the Appellate Order to contend that the finding of the authorities about the lack of correlation and payment is correct. As these are questions of fact which require adjudication at the primary level, we do not propose to go into this issue. However, in the fairness of things, it would only be appropriate that the petitioner is given an opportunity to allay the doubts expressed by the Original Authority and the Appellate Authority.

In the Circumstances, we deem it appropriate to dispose of this Writ Petition with the following directions:- The Order-in-original dated 02.07.2021 passed by the 2 respondent and the Appellate order dated 31.03.2022 passed by the 1 respondent are set aside. The present dispute is remanded back to the 2'''' respondent- Original Authority for determining whether the credit claimed by the petitioner is in accordance with the Rules and Law after verifying whether 26. 1. nd 2. 11 the registration certificate of the petitioner covered the branches at Mumbai, Tamil Naidu and Telangana etc. The petitioner is also at liberty to demonstrate payment of duty by producing necessary documents, including the documents of transfer from Kerala to respective branches from where the goods moved 3. to the branch of the petitioner in Andhra Pradesh. Accordingly, the Writ Petition is disposed. There shall be no 27. order as to costs. As a sequel, pending miscellaneous petitions, if any, shall stand closed. / 1 I- K.TATA RAO DEPUTY REGISTRAR //// SECTION OFFICER To,

The Assistant Commissioner, Office of the Assistant Commissioner of GST Krishna Lanka Circle Vijayawada - II Andhra Pradesh

One CC to SRI. SAMIREDDY SAI SARAT CHANDRA Advocate [OPUC]

One CC to SRI Y N VIVEKANANDA, SC for GST [OPUC]

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