2021 (11) TMI 599 - AT - Service Tax

Disallowance of adjustment of demand of service tax, out of the cenvat credit lying to their credit as on 30.06.2017 - period prior to 30.06.2017 - HELD THAT - There is no bar or disability under Section 140(1) read with Section 142 of CGST Act, 2017 on an assessee for claiming adjustment of the tax demand from the unutilised cenvat credit (lying to the credit as on 30.06.2017), which has not been carried forward to the GST regime. I further find that the Commissioner (Appeals) has committed a mistake of law. Accordingly, the appeal is allowed, and the impugned order of the Commissioner (Appeals) is set aside. It is further directed that the Adjudicating Authority to grant adjustment of the unutilised amount of ₹ 14,31,166/- against the demand payable by the assessee - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against disallowance of adjustment of service tax demand against cenvat credit, interpretation of Section 140 of CGST Act, entitlement to carry forward cenvat credit to GST regime, legality of adjustment of unutilised cenvat credit against demand payable.

Analysis:
The appellant, a Cable Operator service provider, appealed against the disallowance of adjusting the demand of service tax against the cenvat credit lying as of 30.06.2017. The Revenue alleged misdeclaration of turnover and incomplete information to evade service tax payment. The appellant admitted to the short payment of service tax and deposited the demanded amount along with interest. They sought to adjust the unutilised cenvat credit of ?14,30,166 against the demand, which the Adjudicating Authority disallowed citing inapplicability of Cenvat Credit Rules post-GST implementation.

In response, the appellant argued that Section 140 of the CGST Act allows transfer of credit to the GST regime without mandatory filing of Form TRAN-1. The Commissioner (Appeals) upheld the disallowance, but the appellant contended that there was no legal bar under Section 140(1) and 142 of the CGST Act for adjusting the tax demand from unutilised cenvat credit not carried forward to GST regime. The Tribunal agreed, setting aside the Commissioner's order and directing the Adjudicating Authority to allow adjustment of the unutilised cenvat credit against the demand payable.

The Tribunal emphasized that there was no legal impediment for the appellant to claim adjustment from unutilised cenvat credit not transitioned to the GST regime. Rulings from the Madras and Karnataka High Courts, cited by the Revenue, were deemed inapplicable to the current case. Consequently, the Tribunal allowed the appeal, granting the appellant the entitlement to adjust the unutilised cenvat credit of ?14,31,166 against the demand payable, along with any consequential benefits as per law.