2022 (10) TMI 785 - HC - GST

Recovery of accumulated credit transitioned - Input Service Distribution - Section 140 of Central Goods Services Tax Act, 2017 - HELD THAT - No effect will be given to the communication dated 04.02.2019 issued to the petitioner by the office of Commissioner of Central GST Audit-II, Delhi. The respondents are restrained from enforcing recovery of accumulated credit transitioned by the petitioner inter alia, in terms of Section 140 of the Central Goods and Services Tax Act, 2017 concerning Input Service Distributor (ISD) registration granted to it by the respondents - the petitioner would be free to approach the respondents for grant of consequential relief. Petition disposed off.

Summary

Issues:
Challenge to rejection of credit of unutilized Input Service Distribution (ISD), validity of instructions prohibiting transition of accumulated unutilized CENVAT credit, reference to judgments by other High Courts.

Analysis:
The petitioner, an Input Service Distributor registered with the respondents/revenue, challenged the rejection of its request for credit of unutilized ISD through a writ petition. The communication dated 04.02.2019, rejecting the petitioner's request, and the instructions dated 05.02.2017 issued by respondent no. 3, prohibiting ISDs from transitioning accumulated unutilized CENVAT credit, were contested. The petitioner's counsel argued that the issue was covered by judgments from other High Courts, including Bombay High Court and Gujarat High Court.

In response, the respondents' counsel agreed to examine the referenced judgments and return with instructions. The matter was listed for further hearing. Subsequently, the respondents conceded to the petitioner's contentions based on the judgments cited. Consequently, the High Court allowed the writ petition, quashed the instructions dated 05.07.2018, and directed that no effect be given to the communication dated 04.02.2019. The respondents were restrained from enforcing the recovery of accumulated credit transitioned by the petitioner concerning ISD registration.

As a result of the judgment, the petitioner was granted the relief sought in all prayer clauses. The petitioner was also given the liberty to approach the respondents for any consequential relief. The High Court disposed of the writ petition in the terms mentioned, providing a favorable outcome to the petitioner in challenging the rejection of credit and the instructions prohibiting the transition of accumulated unutilized CENVAT credit.