M/S Esl Steel Limited (Earlier Known As Electrosteel Steels Limited) Through Rajesh Kumar Pandey vs. Principal Commissioner Central Goods And Services Tax And Central Excise

Held

The Court held that the Additional Commissioner had illegally and arbitrarily confirmed the demand of Rs. 6,02,34,616/- under Section 74(9) of the CGST Act, 2017, and imposed interest and penalty on the ground of irregular availment of transitional credit. However, the Court also held that the Petitioner could not take advantage of the Input Tax Credit (ITC) of the earlier period, i.e., any dues prior to April 17, 2018, the date the NCLT approved the resolution plan. Consequently, the Petitioner was not entitled to claim the Rs. 92,13,412/- which was claimed as transitional credit by filing a new TRAN-1 in light of the Supreme Court's order in the *Filco Trade Centre Pvt. Ltd.* case. The Court found that while the Revenue's reasoning regarding the current management not being a taxpayer for the prior period was correct, the conclusion that the entire amount taken as transitional credit was liable for recovery along with interest and penalties was a misdirection and against the ratio of the *Ghanshyam Mishra and Sons Private Ltd.* judgment. The Order-in-Original was quashed and set aside, but the Petitioner was denied the credit of Rs. 92,13,412/-.

Facts

M/s ESL Steel Limited (Petitioner) filed a writ petition challenging an Order-in-Original passed by the Additional Commissioner, CGST & CEX, Ranchi. The order confirmed a demand of Rs. 6,02,34,616/- under Section 74(9) of the CGST Act, 2017, for irregular availment of transitional credit during 2017-18. This included Rs. 5,10,21,204/- claimed prior to April 17, 2018, and Rs. 92,13,412/- claimed by filing a new TRAN-1 after a Supreme Court order in the *Filco Trade Centre Pvt. Ltd.* case. The Petitioner argued that the demand was illegal and arbitrary, failing to consider the Supreme Court judgment in *Ghanshyam Mishra and Sons Private Ltd.*, which stated no recovery could continue for alleged dues prior to April 17, 2018, the date the National Company Law Tribunal (NCLT) approved its resolution plan. The Petitioner's resolution plan under the IBC, 2016, was approved by the NCLT on April 17, 2018.

Key Issues

1. Whether the demand of Rs. 6,02,34,616/- confirmed by the Additional Commissioner, CGST & CEX, Ranchi, under Section 74(9) of the CGST Act, 2017, for irregular availment of transitional credit is legally sustainable, considering the approval of the Petitioner's resolution plan by the NCLT on April 17, 2018, and the Supreme Court's ruling in *Ghanshyam Mishra and Sons Private Ltd.*? Petitioner's arguments: The Petitioner contended that the Order-in-Original was illegal and arbitrary. They relied on the Supreme Court judgment in *Ghanshyam Mishra and Sons Private Ltd.*, asserting that no recovery or proceedings could be continued against them for any alleged dues prior to April 17, 2018, the date their resolution plan was approved by the NCLT. They also argued that the demand failed to consider their show cause reply and the binding nature of the NCLT's order under Section 238 of the IBC, 2016. Revenue's arguments: The Revenue, through the Additional Commissioner, argued that the current management was not a taxpayer for the period prior to June 4, 2018, the date of change of management. Therefore, the liability of the earlier management could not be shifted to the current management. Reciprocally, the credit available to the earlier management would also not be available to the current management, as the current management was not a taxpayer during the period of procurement of inputs or capital goods as availed in the TRAN-1 filed on November 30, 2022. They maintained that the entire transitional credit was liable for recovery along with interest and penalties.