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Appeal No.:APL/8/THN/2026

Tribunal: Goods and Service Tax Appellate Tribunal (Thane Bench)

Case Title: M/s Tata Unistore Limited v. Commissioner, CGST & C.Ex.

Outcome:Appeal allowed in favour of the appellant

Judgement Date: 31.07.2026

BRIEF FACTS OF THE CASE:

M/s Tata Unistore Limited (Appellant) was duly registered under the service tax regime and was availing CENVAT credit of eligible input services and also ITC of VAT paid on goods which were sold on its online platform. As the GST regime came into existence w.e.f. 01.07.2017, appellant became entitled to transition of the ITC balance of the balance as per its service tax and VAT returns into the GST regime by filling FORM GST TRAN-1 as per Section 140 of the CGST Act 2017 read with Rule 117 of the CGST Rules. The appellant filed its ST-3 return on 14.08.2017 for the period of April 2017 to June 2017, which was later revised by the appellant by filing a revised return on 26.09.2017. In the said return, appellant disclosed Rs. 31,83,93,930/- as Basic Service Tax and Rs. 74,67,109/- towards Krishi Kalyan Cess as CENVAT Credit. An amount of Rs. 22,14,479/- representing ITC of VAT paid on Stock in Trade was transitioned into the GST regime under Section 140(6) of the CGST Act. The appellant filed GST TRAN-1 for transferring of aforesaid CENVAT credit. Thus, a total of Rs. 32,80,74,878/- was transitioned from the erstwhile regime into the GST regime by filing form GST TRAN-1. The appellant had reversed under protest Rs. 74,67,109/- towards credit of transitioned KKC in the return of Dec. 2017 due to doubts of its eligibility during the relevant time. Later on, a SCN was issued disputing the transition of credit on the ground that the appellant had not produced evidence to substantiate the eligibility of such credit under the GST law. Appellant produced his submissions in the reply to the show cause notice, however, same were not accepted/considered by the adjudicating authority and an order was passed confirming the allegations raised by impugned SCN. Being, aggrieved by the order of the adjudicating authority, appellant preferred an appeal before the appellate authority. However, appellate authority did not consider the submissions made by the appellant and confirmed the adjudicating authority’s order. Consequently, appellant preferred this appeal before the Tribunal.

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether ITC can be denied to the Appellant on the transitioned credit coming from the previous regime by the Department?
Whether department can reject the ITC on the invoices which was not questioned by them during the previous law?

BRIEF ARGUMENTS BY APPELLANT:
Appellant submitted following contentions: -

That the said credit was never disputed under the pre-gst regime and was duly reflected in the service tax returns filed by the appellant which have not been challenged by the Revenue till the date. Hence, same cannot be challenged under the GST regime.
That the department officials have went beyond the jurisdictional powers as provided under Section 142(6)(a) with regards to the proceedings which were not earlier initiated under previous law and now been initiated under Section 74(1) of the CGST Act 2017. Further, there is no contravention of Section 140 of CGST Act.
That the department has erred in holding that service tax revised return was filed beyond the statutory limit and that the substantial benefit should not be denied due to procedural lapses.
That the law does not mandate the requirement of verification of invoices, along with that, it is not feasible to co-relate closing balance with specific invoices.
Credit of KKC cannot be denied in view of the judgement of the Hon’ble Bombay HC in the case of Godrej & Boyce Mfg Co. Ltd v. UOI & Ors[ 2021 (11) TMI 157].
Moreover, that the invocation of Section 74 and consequently, imposition of penalties not sustainable.

Therefore, based on submissions made above the impugned order should be set aside.

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

Revenue Department contended that:

That the appellant failed to substantiate eligibility of the transitioned credit despite being provided with repeated opportunities for furnishing invoices and had furnished only 174 sample invoices which constituted merely 29% of the transitioned credit. Thus, the onus under Section 59 and 155 of CGST Act had not been discharged.
Furthermore, only CENVAT credit of eligible duties could be transitioned under Section 140(1) of the CGST Act and credit of Krishi Kalyan Cess was not an eligible duty for being transitioned into the GST regime. For this, reliance was placed upon the Explanation 1 and 3 to Section 140 of the CGST Act, Notification No. 02/2019-GST dated 29.01.2019 and Circular No. 87/06/2019-GST dated 02.01.2019.
Along with that, for the credits claimed under Section 140(5) and 140(6) of the CGST Act the appellant did not furnished documentary evidence to verify credits. Hence, the same were rightly denied.
Moreover, appellant failed to establish the receipt of goods/services or accounting thereof in its books of accounts with respect to the credit availed. Hence, the case laws on procedural lapses which were relied upon by the appellant were distinguishable and the credit was wrongly availed.
In continuation of above, that the tax paid under reverse charge was not supported by requisite documents such as statement invoice details, challans, payment details and date of availment.
That the ITC on invoices was denied due to non-furnishment of one invoice by the appellant and with respect to the other invoice, there was mismatch in the date of the invoices. Furthermore, no payment voucher/proof of payment was submitted.
Further, that the proceedings have been validly initiated under Section 74(1) of the CGST act since, the disputed CENVAT credit was related to contravention of Section 140 of the CGST Act read with Rule 117 of the CGST Rules. Section 142(6)(a) was inapplicable, and the matter was squarely covered by Section 142(9)(a), Section 174, Rule 121 and Section 160 of the CGST Act/Rules.
That the decisions in the case of Usha Martin Ltd. and Steel Authority of India Ltd. v. State of Jharkhand and Kunjal Synergies Pvt Ltd. & Anr. v. Assistant Commissioner of CGST & CX, Park street division were distinguishable on facts and hence, not applicable on the proceedings in the instant case.

FINDINGS & JUDGEMENT:

Following are the findings of the Tribunal in the instant case:

That there were no proceedings initiated or pending against the Appellant under the previous laws with respect to the admissibility of such credit and thus, credit of which has now been claimed. This fact has also been accepted the Revenue department.
Reference was made to the Section 142(6)(a) and Section 174(2)(e) of the Central Excise Act 1944. Thus, it is clear that recovery proceedings related to inadmissible credit under erstwhile laws can be initiated only under the provisions of the erstwhile laws, even after the enactment of CGST Act.
Furthermore, that the above provisions do not empower the Department authorities to initiate proceedings relating to erstwhile period under the provisions of the CGST Act. As per Section 142 of the CGST Act read with Section 174 thereof, the relevant authority should have initiated proceedings for adjudicating correctness of credits availed by the Appellant, only if there is a case of wrong availment of CENVAT credit in terms of Rule 14 of the CENVAT Credit Rules 2004.
Reliance was placed upon the judgement in the case of Usha Martin Limited v. Additional Commissioner of CGST & CEx.[(2022) 1 Centax 46 (Jhar)] , Steel Authority of India Ltd. v. State of Jharkhand- [(2025) 28 Centax 60 (Jhar.)] and Kunjal Synergies Pvt Ltd. v. Assistant Commissioner of CGST & CEX- [(2025) 28 Centax 198 (Cal.)]. Thus, based on the above referred judgements it was held that the proceedings initiated by the Department are beyond the jurisdictional powers vested under CGST Act.
Further it was observed that credit disclosed in the service tax return filed for the period April 2017 to June 2017 which was subsequently transitioned into the GST regime was never disputed nor challenged on the ground of eligibility under the former/previous law.
That the appellant is entitled to carry forward the amount of CENVAT credit of eligible duties, as reflected in the return relating to the period ending immediately preceding the period 01.07.2017 as per Section 140(1) which was furnished under the previous law, into its electronic credit ledger maintained under the GST regime. However, it will be subject to the conditions which are as follows:
Where the said amount of credit is not admissible as ITC under the GST law;
Where the person has not furnished all returns required under the erstwhile law for the period of 6 months immediately preceding the appointed date i.e. 01.07.2017;
Where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as may be notified by the Government.

It was held that the compliance to conditions (ii) and (iii) above are not in dispute in the instant case. The lower authorities have sought to examine the correctness and eligibility of the credit availed under the erstwhile law under the guise of the powers conferred upon them under Section 140(1) of the CGST Act with respect to the condition (i).
Thus, the appellant’s contention of exercise of power is without authority of law and contrary to the ratio of judgements relied upon was accepted. Further, that the revenue in its submissions has merely argued that these judgements are distinguishable on facts without actually bringing out such distinguishing features.

Further, it was held that the lower authorities were not expected to undertake an examination of the correctness of the ITC availed under the erstwhile law where the same has been undisputedly remained unchallenged under the erstwhile regime, which is the position in the present case. Along with that, it was held that the approach adopted by the authorities in examining copies of invoices, CENVAT credit registers, payment details and the correctness of such invoices.
That the reliance placed upon Section 174 of the CGST Act by the Revenue is of no relevance as it only authorizes continuation of the proceedings initiated under the erstwhile law. However, it doesn’t authorize the officers appointed under CGST Act to examine the correctness of the ITC availed by the Appellant under the erstwhile regime.
Along with that, it was held that closing balance which was allowed to be transitioned was derived from the opening balance, credit availed and credit utilized. Hence, such balance cannot be co-related to any specific invoices.
That the lower authorities have misunderstood clause (i) of the proviso to Section 140(1) of the CGST Act which states that transition is not permitted when the said amount of credit is not admissible as ITC under CGST Act. Further, that this clause has to be read in the context of the parent proviso which states that the appellant shall be entitled to take into electronic credit ledger, the amount of CENVAT credit carried forward in the service tax return. Except in the case only when the ITC is not eligible as input tax credit under the CGST Act.
Thus, reading of the above-two provisions conjointly, it means when the CGST Act does not permit credit of ITC in certain situations, the tax or credit arrears determined of the erstwhile regime will not be permitted as ITC under the GST regime.
With respect to transition of Krishi Kalyan cess, reliance was placed upo the decision in the case of Godrej & Boyce (supra), it was held that the even though the Explanation 3 to CGST (Amendment) Act 2018 was inserted retrospectively w.e.f. 01.07.2017, the said explanation cannot be implemented in the absence of the Explanation 1 and 2 by issuance of notification.
Furthermore, reference was made to the CBIC Circular no. 87/06/2019-GST dated 02.01.2019 and it was held that the CBEC itself has clarified that there will be no issuance of Notification for operationalizing Explanation 1 and 2. Hence, the ratio decidendi of Godrej & Boyce (supra) will apply on the instant case jusfiying the KKC credit transitioned. That merely because the revenue has preferred special leave petition against the judgement of Bombay High Court that can not be the sole reason to hold our decision specially as the Supreme court has not granted the stay from the operation of the said Bombay High Court judgement. Along with that, it was categorically stated that the decision of Tribunal in the instant case is not solely based upon the Godrej & Boyce judgement, infact, it is based upon the independent interpretation of the provision and Board’s circular dated 02.01.2019. Hence, based on above the transitioned credit of KKC is in order.
With respect to the credit of VAT transitioned into the GST regime, it was observed that the appellant has provided all the details required to claim VAT credit on Stock in trade goods as on 30.06.2017. The lower authorities have rejected the credit without giving any specific objection for the same. Thus, in the absence of contrary findings, denial of the credit cannot be accepted. Furthermore, revenue failed to produce material evidence on the record to justify the denial of VAT credit.
That certain other reasons, to deny transitional credit, like incorrect address on the invoice, description of service not mentioned, copies of invoice or credit register not produced etc, are not sustainable at this stage especially when at the stage of claiming credit such objections have not been raised. Appellant has provided the correct invoice at the time appeal proceedings which have not been considered.
Further, it was held that Section 74 penalty is wholly unjustified in as much as the entire basis for initiation of the present proceedings arises from the disclosures made by the appellant by filing FORM TRAN-1 and by furnishing detailed submissions from time to time before the authorities.
In view of the above, the ITC transitioned is in accordance with law. Thus, the appeal filed by the appellant is allowed and the impugned order is set aside.

Author’s Comment:

This judgement lays down the principle that input tax credit which has been transitioned/carried forwarded from the former laws and which was not disputed by the revenue under the erstwhile laws cannot be denied merely on the procedural lapses like missing invoices etc. It is due to the fact that such credit is not specifically attributed to a specific invoice(s), unless such ITC is specifically restricted under the New law. Hence, the approach adopted by the department officials in denying of such credit in
CA Pradeep Jain_

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GST Update/ 2026-27/0066

GST UPDATE

BRIEF FACTS OF THE CASE:

QUESTION BEFORE HON’BLE TRIBUNAL:

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

FINDINGS & JUDGEMENT:

Author’s Comment:

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