GST Update on admissibility of transitional credit in absence of CTD 111/2020-21

The issue of carry forward of transitional credit is still under dispute even after three years of implementation of GST. There have been lot of decisions before several high courts on the issue concerning transitional credit under GST regime. In the present update, we seek to discuss one of the recent decision given by Hon’ble Gujarat High Court in the case of DOWNTOWN AUTO PVT. LTD. V. UOI [SCA NO. 2409 of 2019] wherein the issue was regarding admissibility of transitional credit on cars and spare parts purchased from registered dealer not issuing any tax invoice or Credit Transfer Document (CTD).
As per Sec 140 (3), there is provision for claiming transitional credit of CENVAT on specified goods by a dealer or trader who was not registered under the Central Excise Law. Specified goods mean goods which have value more than Rs. 25,000/- per piece and bear the brand name of the manufacturer or the principal manufacturer and are identifiable by a distinct number such as chassis or engine number of a car. It was stated that manufacturer of specified goods is required to issue Credit Transfer Document (CTD) to enable the person not in possession of tax invoice under erstwhile law to avail transitional credit on stock of goods as on 01.07.2017.
However, in the instant case the dispute arose because the petitioner did not have credit transfer documents (CTDs) required to be issued by manufacturer as per Cenvat Credit Rules. The petitioner argued that based on invoices issued by dealers and invoices issued by car manufacturers to such dealers showing payment of excise duty along with chassis number of cars, duty payment can be verified and credit should be allowed.
The High Court held that even though CTDs are not available, department can verify duty payment based on documents submitted by the petitioner and so it directed the authorities to verify such documents and allow transitional credit subject to such verification.

It is trite principle of law that substantial benefit of credit cannot be denied for procedural irregularities. The purpose of CTDs is to verify duty payment by the manufacturer and if the assessee is submitting original excise invoice issued by manufacturer, the benefit of transitional credit cannot be denied for procedural lapse of not furnishing CTD.

This is solely for educational purpose.
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GST Update on admissibility of transitional credit in absence of CTD 111/2020-21

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