Akshay Steel Works PVT LTD Through Its Managing Director Mr Rajendra Sachdev vs. Union Of INDIA Through The Secretary Department Of Revenue Ministry Of Finance

Facts

The petitioner, Akshay Steel Works Pvt. Ltd., sought to avail Input Tax Credit (ITC) for services received, specifically manpower supply, by filing Form GST TRAN-1. The petitioner had paid service tax on these services on August 12, 2017, for three invoices issued in June 2017. The Superintendent, CGST & CX, Adityapur-II Range, disallowed the credit due to a one-day delay in recording the invoices. The Commissioner, CGST & CX, Jamshedpur, allowed a partial transitional credit of Rs. 1,73,989/- but disallowed the remaining tax of Rs. 1,74,469/- paid on August 12, 2017, stating it was paid later than the prescribed date for transitioning. The petitioner challenged the Commissioner's letter dated March 31, 2021, which disallowed the remaining transitional credit.

Held

The Court held that the observations made by the Commissioner, CGST & CX, Jamshedpur, in his letter dated March 31, 2021, regarding the disallowance of transitional credit of Rs. 1,74,469/- were incidental to the main issue of condonation of delay in recording invoices. The Commissioner had admitted a valid transitional credit of Rs. 1,73,989/-. However, the Court found that the disallowance of the remaining transitional credit of Rs. 1,74,469/-, against tax paid on August 12, 2017, was uncalled for in the absence of any formal proceedings contemplated under the relevant provisions of the CGST Act. The Court reasoned that such observations could not prejudice the petitioner's case if fresh proceedings were initiated on that ground, and the petitioner would have his remedies in accordance with law. The Court disposed of the writ petition with these observations.

Key Issues

1. Whether the Commissioner, CGST & CX, Jamshedpur, acted without jurisdiction in disallowing the transitional credit of Rs. 1,74,469/- through a letter dated March 31, 2021, without initiating proper proceedings under the CGST Act? Petitioner's arguments: The petitioner contended that the Commissioner exceeded his jurisdiction by disallowing the ITC without proper proceedings. They argued that filing TRAN-1 before tax payment, when no ITC was availed, was a technical defect. The petitioner also stated that the transitional Cenvat credit was credited to the electronic credit ledger only on September 20, 2017, and that the disallowance violated the spirit and letter of the relevant provisions. They relied on Section 140(5) of the CGST Act. Revenue's arguments: The respondent CGST counsel argued that the writ petition was premature as no proceedings for wrongful availment of ITC had been initiated. They submitted that the Commissioner had merely incidentally mentioned the transition of ITC without tax being paid, as required by Section 140(5) of the Act. The respondent also pointed to paragraph 59 of their counter-affidavit, stating that the petitioner had statutory remedies available under the Act if proceedings were initiated.