The Patna High Court while upholding the order recovering the ineligible CENVAT Credit held that no transitional credit is available for capital goods received after 1st July 2017.
The bench of Justice Rajeev Ranjan Prasad and Justice Ramesh Chand Malviya has relied on the decision of Gujarat High Court in the case of RSPL Limited vs Union of India in which it was held that Section 140(5) of the CGST Act, 2017 allows a registered person, credit of eligible duties and tax in respect of inputs or input services which were received on or after the appointed day but on which the tax was paid earlier. In absence of any matching provisions pertaining to capital goods, in a situation where the duty had been paid on purchase of goods prior to the appointed date, but the goods were received on or after the appointed date, there would be no possibility of availing availing credit on such taxes under the GST regime.
The petitioner/assessee is a public limited company incorporated under the provisions of the Companies Act, 1956. It is engaged in manufacturing business of MS-Bars and maintains its account on the basis of mercantile/accrual system.
It is a ‘person’ within the meaning of the Central Goods and Services Tax Act, 2017. The petitioner claimed that it is filing periodical central excise returns under its respective PAN based Central Excise Registration ID. In the present GST regime, the petitioner has been allotted GSTIN ID.
In the month of June, 2017, the petitioner placed order to the registered suppliers for supplying a few cenvatable/excisable goods of capital nature which were required to be used in the factory of the petitioner for the manufacturing of final centivable excisable produce.
Eleven different suppliers sent consignment of the requisite cenvatable/excisable goods without indicating their respective nature of use to the petitioner’s factory premises under cover of eleven different tax invoices, altogether charging CENVAT duty, amounting to Rs. 8,62,566/- on the various dates in the month of June 2017.
Those goods were received in the factory premises of the petitioner on various dates in the month of July 2017. The petitioner admits that the transaction value thereof under eleven different tax invoices has been duly recorded in the books of account in the month of July 2017.
The petitioner filed prescribed online return, namely TRAN-1 on 20.09.2017 in his GSTIN ID and claimed all the admissible components of CENVAT credit. The jurisdictional Range Superintendent vide his Letter dated 02.08.2019 as contained in an to the writ application informed the petitioner that during TRAN-1 verification against his claim of Rs. 2,19,18,000/-, it has been found that there was ineligible credit of Rs. 8,62,566 against his claim in Table No. 6(a) of TRAN-1 against capital goods in transit.
The department requested the petitioner to reverse the ineligible credit urgently under intimation to the office.
The petitioner submitted his response which did not satisfy respondent no. 4. By another communication, the department pointed out to the petitioner sub-section (2) of Section 140 of the CGST Act, 2017 read with Rule 117 of the CGST Act, 2017.
The petitioner was of the opinion that by virtue of the explanation under Section 140(2) of the CGST Act, 2017, the unavailed CENVAT credit means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the person was entitled in respect of the said capital goods under the existing law.
The department expressed his opinion that under Section 140(2) of the CGST Act, 2017, transitional credit on the amount of Rs. 8,62,566 is not available to the petitioner.
A show-cause notice in prescribed form DRC-1 proposing recovery of credit was issued to the petitioner. The department finally passed the order by which it was held that that Section 140(5) of the CGST Act allows a registered person, credit of eligible duties and tax in respect of ‘inputs’ or ‘input services’ which were received on or after the appointed day but not on which the tax was paid earlier. When it comes to the question of taking credit of the duty paid on the capital goods in transit received on or after 01.07.2017, no facility is provided to enable the assessee to claim credit of the excise duty paid on such capital goods.
The court held that the CENVAT Credit Rules, 2017 has superseded CENVAT Credit Rules, 2004 and conjoint reading of the provisions of GST Act and CENVAT Rules, 2017 leaves no room for taking any different view from that of the Gujarat High Court in the case of RSPL Limited.
Case Details
Case Title: M/s JMD Alloys Ltd. Versus Union of India
Case No.: Civil Writ Jurisdiction Case No.15940 of 2023
Date: 30-01-2025
Counsel For Petitioner: Viveka Nand
Counsel For Respondent: K.N. Singh
