Proceedings for Transition of CENVAT Credit alleged to be inadmissible not to be carried out under GST Act: Jharkhand HC [Read Order]

A Division Bench of the Jharkhand High Court has recently held that proceedings for transition of CENVAT credit alleged to be inadmissible cannot be carried out under the Central Goods and Services Tax (CGST) Act, 2017.

The proceedings were initiated by issuance of show cause notice by the Joint Commissioner in Form GST-DRC-01 proposing recovery of transitioned CENVAT credit in terms of Section 73(1) of the Central Goods and Services Tax Act along with interest and penalty. Prior to issuance of the notice, petitioner was served with a letter by Assistant Commissioner (Prevention), asking him to pay back the total amount of CENVAT credit of about Fifteen Crore Rupees.

After being given a personal hearing and due chance to file reply, the impugned order disregarding his submissions had been issued confirming recovery of CENVAT credit amounting to Ten Crore Rupees along with interest and penalty.

Counsel for the petitioner, Sujit Ghosh raised the question of lack of jurisdiction of the adjudicating authority to decide upon the availment of CENVAT credit by the petitioner under the pre-GST regime.

The petitioner referred to Section 73 of the Finance Act, 1994 and Rule 14 of the CENVAT Credit Rules(CCR), 2004 to submit that any such proceeding for wrongful availment of CENVAT Credit could have been initiated under the said Act only.

According to the petitioner, these proceedings being inchoate, legal proceedings or recovery of arrears or any such tax, surcharge, penalty, interest etc. could be levied or imposed under the pre-GST laws as if the repealed Acts, i.e. Finance Act, 1994 and Central Excise Act, 1944 are not being so amended or repealed.

Rule 14 of the C.C.R., 2004 otherwise specifically contemplates recovery of CENVAT Credit wrongly taken or erroneously refunded, the petitioner further submitted.

The Revenue, on the other hand, represented by CGC Prabhat Kr. Sinha, Amit Kumar and Ashish Kr. Shekhar submitted that the petitioners have alternate remedies and the action of the Additional Commissioner CGST and Excise was good in law.

Observing that initiation of proceedings by respondent no. 1 under section 73 (1) of the CGST Act, 2017 for alleged contravention of the Central Excise Act and Finance Act, read with CCR against the petitioner by filing TRAN 1 in terms of Section 140 of the CGST Act for transition of CENVAT Credit as being inadmissible under the existing law was beyond his jurisdiction, the High Court Bench said  that, “if proceedings for transition of CENVAT Credit alleged to be inadmissible is permitted to be carried under the CGST Act, it may lead to uncertainty not only in the minds of the ordinary citizen but also in the minds of the Tax authorities.”

The Division Bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan further observed that “The repeal and saving clause (e) under Section 174(1) of the CGST Act allowed such legal proceedings to be instituted in respect of inchoate rights except rights under transactions which were past and closed”, and quashed the adjudication proceedings along with the impugned order, saving the liberty for the revenue to initiate proceedings under existing law, i.e., CEA, 1944 and Finance Act, 1994 read with CCR, 2004 against the petitioner for the relevant tax period.

To Read the full text of the Order CLICK HERE

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