9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (2) TMI 96 - HC - GSTEntitlement to seamless transfer of CENVAT credit for excise duty paid on capital goods in transit as of the appointed date under the Central Goods and Services Tax Act 2017 (CGST Act) - input under Rule 2(g) of the CENVAT Credit Rules 2017 includes capital goods or not - transitional credit under Section 140(5) of the CGST Act for capital goods in transit - distinction between inputs and capital goods under the CGST Act - HELD THAT - Prior to 01.07.2017 a manufacturer was entitled to claim CENVAT credit of duty paid by him on inputs as well as on the capital goods utilized in the manufacturing process subject however to the conditions which were placed in the CENVAT Credit Rules 2004. There is no difficulty in understanding that the facility providing the manufacturers to claim credit of the duties paid on inputs as well as capital goods continued even after 01.07.2017 but with certain modifications. CGST Act contained transitional provision according to which unutilized CENVAT credit was eligible to be brought over to the GST regime. The statute made provisions to enable the assessee to avail the credit of duty paid on inputs which were in transit as on 01.07.2017. But under the CENVAT Credit Rules 2017 which were framed by the Central Government by virtue of powers conferred upon it under Section 37 of the Central Excise Act 1944 no facility has been provided to enable the assessee to claim credit of the excise duty paid on such capital goods. The word capital goods found its definition also in Rule 2(A) of the CENVAT Credit Rules 2004. Sub-rule (1) of Rule 3 provided that the manufacturer or purchaser of final products are a provider of output service shall be allowed to claim credit of the CENVAT credit of the various duties specified in Clauses (i) to (xi) contained therein paid on any input or capital goods received in the factory of manufacturer of final product or by the provider of output services or on after the tenth day of September 2004. A reading of subsection (3) of Section 16 makes it crystal clear that it provides for claim of depreciation of tax component of the cost of capital goods or plant and machinery under the Income Tax Act 1961 and if such claim has been made by a registered person the input tax credit on such tax component would not be allowed. Sub-section (1) and (2) of Section 17 pertain to restriction of the tax credit when the goods or services are utilized partially for business purpose and partially for other purposes or partially for effecting taxable supplies and partially for non-taxable supplies these provisions do not make any distinction between capital goods and inputs. The distinction in the matter of giving benefit of CENVAT credit on capital goods during the transitional period may be found in Section 140 of the CGST Act. While this provision enables an assessee to carry forward and take credit of unutilized CENVAT credit paid on inputs as well as on capital goods in the manner as may be prescribed and subject to the conditions contained in the provisions sub-section (5) of Section 140 makes a distinction between the capital goods and inputs. An identical question had fallen for consideration before the Hon ble Division Bench of the Gujarat High Court in the case of RSPL Limited 2018 (10) TMI 1521 - GUJARAT HIGH COURT where it was held that Article 14 as is well-known prohibits class legislation but not reasonable classification. To bring in the element of discrimination in terms of Article 14 of the Constitution the onus would be on the petitioner to establish that the persons or things treated differently form a homogeneous class. In the present case the source of the petitioner s grievance or dissatisfaction is that the inputs and capital goods are treated differently. When we find that the inputs and capital goods form different and distinct classes the question of subclassification or artificial demarcation would not arise. This Court finds that the CENVAT Credit Rules 2017 has superseded CENVAT Credit Rules 2004 and conjoint reading of the provisions of GST Act and CENVAT Rules 2017 leaves no room for taking any different view from that of the Hon ble Gujarat High Court in the case of RSPL Limited. Conclusion - The transitional credit under the CGST Act is not available for capital goods in transit as established in RSPL Limited. The claim for transitional credit denied. The distinction between inputs and capital goods under the CGST Act was lawful and justified. There are no error in the impugned orders - application dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were:
ISSUE-WISE DETAILED ANALYSIS 1. Entitlement to Seamless Transfer of CENVAT Credit Relevant Legal Framework and Precedents: The petitioner sought to transfer CENVAT credit for excise duty paid on capital goods in transit as of July 1, 2017, under the CGST Act. The relevant provisions were Section 140(5) of the CGST Act and Rule 2(g) of the CENVAT Credit Rules, 2017. Court's Interpretation and Reasoning: The Court examined the statutory provisions and found that the CGST Act and CENVAT Credit Rules, 2017 did not provide for the transfer of CENVAT credit on capital goods in transit. The Court referred to the Gujarat High Court's decision in RSPL Limited, which held that transitional credit was not available for capital goods in transit. Key Evidence and Findings: The petitioner had paid CENVAT duty on capital goods before July 1, 2017, but received the goods after this date. The Court found that the statutory framework did not support the petitioner's claim for credit transfer. Application of Law to Facts: The Court applied the provisions of Section 140(5) of the CGST Act and concluded that the petitioner was not entitled to claim transitional credit for capital goods in transit. Treatment of Competing Arguments: The petitioner argued that the definition of "input" under Rule 2(g) included capital goods, but the Court rejected this interpretation, aligning with the reasoning in RSPL Limited. Conclusions: The Court held that the petitioner was not entitled to seamless transfer of CENVAT credit for capital goods in transit. 2. Definition of "Input" and Inclusion of Capital Goods Relevant Legal Framework and Precedents: The petitioner contended that the definition of "input" under Rule 2(g) of the CENVAT Credit Rules, 2017 included capital goods. Court's Interpretation and Reasoning: The Court analyzed the definitions provided in the CGST Act and CENVAT Credit Rules, concluding that "input" did not encompass capital goods. The Court relied on the Gujarat High Court's interpretation in RSPL Limited. Key Evidence and Findings: The Court found no statutory basis for including capital goods within the definition of "input" for the purpose of transitional credit. Application of Law to Facts: The Court determined that the petitioner's interpretation was inconsistent with the statutory definitions and legislative intent. Treatment of Competing Arguments: The Court dismissed the petitioner's argument, emphasizing the clear legislative distinction between inputs and capital goods. Conclusions: The Court concluded that capital goods were not included in the definition of "input" under Rule 2(g) of the CENVAT Credit Rules, 2017. 3. Transitional Credit for Capital Goods in Transit Relevant Legal Framework and Precedents: The petitioner sought transitional credit under Section 140(5) of the CGST Act for capital goods in transit. Court's Interpretation and Reasoning: The Court referred to the transitional provisions of the CGST Act, which allowed credit for inputs but not for capital goods in transit. The Court cited the Gujarat High Court's decision in RSPL Limited. Key Evidence and Findings: The Court found that the statutory framework did not support the petitioner's claim for transitional credit on capital goods. Application of Law to Facts: The Court applied the legal provisions and found that the petitioner was not entitled to transitional credit for capital goods in transit. Treatment of Competing Arguments: The Court rejected the petitioner's argument, aligning with the reasoning in RSPL Limited. Conclusions: The Court held that transitional credit was not available for capital goods in transit under Section 140(5) of the CGST Act. 4. Lawfulness of Distinction Between Inputs and Capital Goods Relevant Legal Framework and Precedents: The petitioner challenged the distinction made between inputs and capital goods under the transitional provisions of the CGST Act. Court's Interpretation and Reasoning: The Court found that the distinction was lawful and justified, as it was based on legislative intent and historical treatment of inputs and capital goods. Key Evidence and Findings: The Court noted that the distinction was consistent with the legislative framework and previous statutes. Application of Law to Facts: The Court applied the legal principles and found that the distinction was reasonable and not arbitrary. Treatment of Competing Arguments: The Court dismissed the petitioner's argument, relying on the reasoning in RSPL Limited. Conclusions: The Court concluded that the distinction between inputs and capital goods under the CGST Act was lawful and justified. SIGNIFICANT HOLDINGS Core Principles Established: The Court reaffirmed the principle that transitional credit under the CGST Act is not available for capital goods in transit, as established in RSPL Limited. Final Determinations on Each Issue: The Court dismissed the petitioner's claims and upheld the orders of the lower authorities, finding no merit in the writ application.
|
