GST Update no. 101 on UTILISATION OF CENVAT CREDIT BALANCE AS ON 30.06.2017 AGAINST SERVICE TAX DEMAND IN GST ERA

The transition of credit into GST regime has not been smooth as was expected. This is evidenced from the number of petitions filed before various High Courts regarding the technical glitches faced by the assessees while transitioning their credit into the GST regime. Hence, it can be concluded that the assessees had to face a lot of tussle in migrating their credit balance into GST regime. However, the assessee who intentionally did not carry forward their credit into GST regime are also not spared from the rigours of litigation as recently, a decision was reported before the Delhi Tribunal in the case of UTTARANCHAL CABLE NETWORK VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE & SERVICE TAX [SERVICE TAX APPEAL NO. 50294 OF 2021-SM] wherein the utilisation of cenvat credit balance which was not transitioned into GST was disputed by the revenue department. The analysis of the judgment is the subject matter of discussion of our present update. The issue involved in the case is regarding utilisation of CENVAT credit available prior to introduction of GST law i.e. as on 30.06.2017 for discharging the short-paidservice tax detected after implementation of GST regime. When the GST law was introduced i.e. on 01.07.2017, the assessees were having unutilised CENVAT Credit available with them as per CENVAT Credit Rules. They were allowed to transfer the said credit in GST Law after opting to file TRANS-1. However, filing of TRAN1 was not mandatory. The appellant contended that transferring credit to GST regime was optional and not mandatory. Moreover, provision contained in section 142 of the CGST Act, 2017 does not mandate any disability in adjustment of tax liability out of the cenvat credit available in the earlier law which was not carried forward to the GST regime. The revenue authorities contended that the amount of unutilised cenvat credit as on 30.06.2017 could not be adjusted against the service tax demand payable as Cenvat Credit Rules, 2004 are no longer applicable. The Commissioner Appeals also held that the amount of credit as on 30.06.2017 could not be utilised or adjusted except as provided in the transitional provisions. The Tribunal rejected the reliance placed by the department on the decision given in the case of Mountain Valley Springs India Pvt. Ltd. Versus Assistant Commissioner of GST, Chennai [2019 (24) GSTL 342 (Mad)] and Indus Ind Media Communication Ltd. Versus Union of India [2019 (20) GSTL 10 (Kar)] wherein it was held that benefit of cenvat credit cannot be given as there was failure to file transitional return due to technical glitches. However, this is not the point of dispute in the present case. Furthermore, the Tribunal held that there is no bar or restriction under section 140(1) read with section 142 of CGST Act, on an assessee for claiming adjustment of the tax demand from the unutilised input tax credit as on 30.06.2017 which has not been carried forward to the GST regime. Hence, the appeal was allowed. The above decision fortifies the general principle that if demand is fastened against assessee, the consequential benefits should also be extended. There have been numerous judgments in the Central Excise Laws wherein it was held that even in cases of clandestine clearances, the benefit of cenvat credit as available should be extended to the assessee. Likewise, merely because the cenvat credit balance as on 30.06.2017 was not transferred to GST electronic credit ledger, the said accrued vested right cannot be extinguished by the department. The closing balance of cenvat credit balance as on 30.06.2017 is a substantive right that has been legitimately accrued to the assessee which cannot be snatched on flimsy grounds such as non-transition of credit to GST regime. In this context, reference may be made to the Apex Court decision in the case of EICHER MOTORS LTD. VERSUS UNION OF INDIA [1999 (106) E.L.T. 3 (S.C.)] wherein it was held that right to adjustment of tax on final products accrued to the assessee on the date when they paid tax on the raw materials and provisions of the statue do not enable authorities concerned to frame rule enabling lapse of balance lying in credit account. The analogy of this decision is aptly applicable in the present case as the legitimately earned cenvat credit balance as on 30.06.2017 cannot be lapsed for non-transition into GST regime. Therefore, the above decision will be definitely be fruitful to the assessee struggling to utilise cenvat balance not transitioned into GST regime.

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GST Update no. 101 on UTILISATION OF CENVAT CREDIT BALANCE AS ON 30.06.2017 AGAINST SERVICE TAX DEMAND IN GST ERA

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