2024 (10) TMI 605 - HC - GST

Recovery of wrongly availed credit, with penalty for wrongful availment of credit - credit on transition to GST regime - stock transfer vouchers not issued by duly registered dealers - petitioner's branches not registered - no correlation between the invoices and the claims made by the petitioner. Registration status of the petitioner's branches under Rule 9 of the Central Excise Rules, 2002 - HELD THAT - Rule 9, which requires registration also provides for an exemption under Rule 9(2). Such exemption had been granted, by way of the Notification of the Central Government dated 01.03.2010, which has been extracted above. The certificate of registration produced by the petitioner, before this Court, shows that a centralized registration under Rule-9 had been issued to the petitioner. The annexure has also been filed along with the certificate showing the various branches of the petitioner which are said to be covered under the said registration. Correlation of the claim of the petitioner with the invoices produced by the petitioner - HELD THAT - The said issue can only be resolved by the respondent authorities by looking at the documents produced by the petitioner. It appears that at the original stage, documents were rejected on the ground that they have not emanated from the registered entity or branch. At the appellate stage, the appellate authority while affirming this finding of the original authority had taken an additional ground that there was no correlation. The Order-in-original dated 02.07.2021 passed by the 2nd respondent and the Appellate order dated 31.03.2022 passed by the 1st respondent are set aside - The present dispute is remanded back to the 2nd respondent-Original Authority for determining whether the credit claimed by the petitioner is in accordance with the Rules and Law after verifying whether the registration certificate of the petitioner covered the branches at Mumbai, Tamil Naidu and Telangana etc. The writ petiiton is disposed off by way of remand.

Summary

Issues Involved:

1. Validity of transitional credit claimed by the petitioner under the GST regime.
2. Registration status of the petitioner's branches under Rule-9 of the Central Excise Rules, 2002.
3. Correlation between the invoices produced by the petitioner and the claimed transitional credit.

Detailed Analysis:

I. Validity of Transitional Credit:

The petitioner, a public limited company engaged in the jewellery business, transitioned to the GST regime and claimed a transitional credit of Rs.71,29,299/- based on Central Excise duty paid on purchases made after 01.07.2016. Initially, this credit was granted and utilized by the petitioner. However, following an audit, proceedings were initiated to reverse the credit, impose penalties, and claim interest. The respondent authorities rejected the petitioner's claim, arguing that the stock transfer vouchers used as proof of duty payment were invalid as the branches issuing them were not registered under Rule-9 of the Central Excise Rules, 2002. The authorities also noted a lack of correlation between the invoices and the claimed credit.

II. Registration Status under Rule-9:

The petitioner contended that the branches involved in the stock transfers were covered under a centralized registration, exempting them from individual registration under Rule-9(2) of the Central Excise Rules, 2002. The petitioner produced a centralized registration certificate and an annexure listing all branches, arguing that this satisfied the registration requirement. The respondent authorities, however, maintained that the petitioner failed to provide this centralized registration certificate during the proceedings, leading to the rejection of the claim.

III. Correlation Between Invoices and Claimed Credit:

The authorities also found no correlation between the invoices provided by the petitioner and the claimed transitional credit. The appellate authority upheld this finding, stating that the petitioner did not demonstrate proof of duty payment. The petitioner argued that the invoices from the Kerala manufacturing unit to various branches showed the duty paid, entitling them to the credit. The court acknowledged that these are factual questions requiring primary level adjudication and decided not to delve into them directly.

Court's Decision:

The court set aside the Order-in-Original and the Appellate Order, remanding the matter back to the Original Authority for reevaluation. The court directed the Original Authority to verify the registration status of the petitioner's branches and assess the validity of the claimed credit in accordance with the law. The petitioner was granted the opportunity to present necessary documents to demonstrate duty payment and establish the correlation between the invoices and the claimed credit. The writ petition was disposed of without any order as to costs, and pending miscellaneous petitions were closed.