GST Update on proceedings under Central Excise Act post implementation of GST regime

GST Update on proceedings under Central Excise Act post implementation of GST regime

Even after one year of implementation of the revolutionary taxation reform, cases of Central Excise and Service Tax evasion are being reported. This update seeks to highlight the fact whether initiation of proceedings under the repealed Acts is within authority of law?

The starting point of this dispute was the decision pronounced by the Gauhati High Court in the case of MASCOT ENTRADE PVT. LTD. VERSUS UNION OF INDIA [2018 (9) G.S.T.L. 5 (GAU)]wherein it was concluded that after enactment of CGST Act, 2017, and omission of Entry 92C from List I of Constitution of India, issuance of show cause notice is without jurisdiction. Although the High Court granted interim relief by staying the proceedings initiated vide show cause notice and has adjourned the case but this decision is the triggering point for initiating litigation as regards proceedings under Central Excise and Service Tax Laws in the GST era.

It is also pertinent to mention that recently, the Hon’ble Rajasthan High Court in D.B. Writ Petition No. 2031/2018 has directed the Central Government to hold inquiry and take action against officers of DGGSTI for conducting vexatious search under Central Excise Act. The High Court has also passed an order not to take any coercive measure and observed that after introduction of GST, the officers appointed under section 3 and 5 of the CGST Act have no power to take action against the Central Excise Act, 1944. It was held that the proceedings were without jurisdiction and without authority of law and the matter is posted for hearing in September, 2018.

After observing the above mentioned decisions, the moot question that arises is whether the officers of GST are authorised to initiate proceedings under the repealed Acts after implementation of GST? In this regard, reference may be made to the provisions contained in section 174 of the CGST Act, 2017 which reads as follows:-
174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (hereafter referred to as the repealed Acts) are hereby repealed.

(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not—

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:

Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or

(d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or

(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;

(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed.

The above produced provisions indicate that there is no embargo in conclusion of proceedings with respect to tax liability pertaining to repealed Acts. However, the decisions of various High Courts are taking a different view which is favourable to the assessees and binding on all lower formation. Well, the decisions referred are not final and the actual legal position will be known in the days to come. In light of the above cited decisions, one may also conclude that if search and investigation cannot be done with respect to repealed Acts in the GST regime, even audits cannot be done by the said GST officers.

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GST Update on proceedings under Central Excise Act post implementation of GST regime

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