2019 (11) TMI 278 - HC - GST

Availment and utilisation of accumulated credit pertaining to Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC) - Carry forward of credit - Rule 117 of CGST Rules, 2017 - HELD THAT - Firstly, the Instructions issued by the Central Board of Excise and Customs dated 07.12.2015, reveal a policy decision, not to allow utilisation of accumulated credit of EC and SHEC, but nowhere states that the credit has lapsed - The Board only says that the cesses have been phased out and since there is no new liability to pay these cesses, no vested right can be said to exist in relation to the past accumulated credit in the light of Rule 3(7)(b) of the Cenvat Credit Rules, 2004 which stipulates that Cenvat Credit shall be utilised only as against payment of specified duties. The request of the petitioner in that case has to be seen in this perspective and specifically in the light of the embargo placed by Rule 3(7)(b) as aforesaid. The Board could well have stated even at that juncture that the credit lapsed, but did not choose to do so. A certain amount of planning and strategizing is undertaken by an assessee bearing in mind the credits and concessions available as well as liabilities imposed by a taxing Statute at any given point in time. The credit available in regard to EC, SHEC and KKC are no different. In strategising and conducting its business, the assessee would certainly have taken into account that credit was available for set-off against output tax liability. Such credit accumulated has not been stated to have lapsed. The impugned action of the assessing authority in rejecting the claim has however the consequence of insertion of a Rule/Regulation to this effect, is impermissible. The revenue has not made out any bar for the transitioning of EC, SHEC and KKC into the GST regime and the petitioner satisfies all conditions both under sub-section (1) and (8) of section 140. The embargo placed by Rule 3(7)(b) is long gone with the introduction of GST. Certainly the powers-that-be are conscious of these factors in drafting the new legislation and the specific provision in question i.e., Section 140. Admittedly, the claims were filed beyond the period of six months. Thereafter, Section 11B was amended on 12.05.2000, extending the period of limitation from six months to one year. The benefit of extension of time as sought by the assessee was granted and the assessee s appeal allowed. In appeal before the Supreme Court, the Bench held that the timeline of six months had expired on 20.11.1999 and 10.12.1999 respectively, whereas, the claims had been filed only on 28.12.1999. The provisions of amended 11B were held not to be applicable to revive a claim that was already beyond time - the benefit of one year for filing claim for rebate would be available from 12.05.2000 when the limitation was extended from six months to 12 months. Moreover, the proviso had been added in the section itself to the effect that the amended provision would not have the effect of bringing to life a dead claim. Significantly, Explanation (3) which clarifies that the expression eligible duties and taxes excludes any cess not specified in Explanation (1) or (2), has not been notified. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Interpretation of Section 140 of the Central Goods and Service Tax Act, 2017 (CGST Act) regarding transitional arrangements for input tax credit.
2. Eligibility to carry forward and utilize accumulated credit of Education Cess (EC), Secondary and Higher Education Cess (SHEC), and Krishi Kalyan Cess (KKC) under the CGST Act.
3. Validity of the Assessing Officer's rejection of the petitioner's claim for carrying forward the aforementioned credits.

Detailed Analysis:

1. Interpretation of Section 140 of the CGST Act:
The court examined Section 140 of the CGST Act, which provides for transitional arrangements for input tax credit. The petitioner argued that the term "CENVAT credit" under Section 140 includes EC, SHEC, and KKC, and thus these credits should be carried forward and utilized under the new GST regime. The court noted that the explanation to Section 140(1) and the provisions of Section 140(8) support the claim that all available credits as on the date of transition should be available for set-off.

2. Eligibility to Carry Forward and Utilize Accumulated Credit of EC, SHEC, and KKC:
The petitioner followed the procedure for carrying forward CENVAT credit as per Rule 117 of the CGST Rules, 2017, and had a closing balance of credits, including EC and SHEC. The court observed that there was no specific provision in the CGST Act or rules that provided for the lapsing of these credits. The court emphasized that the credits had been carried forward manually and reflected in the returns, and there was no notification or instruction from the authorities indicating that these credits had lapsed.

3. Validity of the Assessing Officer's Rejection of the Petitioner's Claim:
The Assessing Officer rejected the petitioner's claim on the ground that the explanation to Section 140(1) did not cover cesses such as EC, SHEC, and KKC. The court disagreed, stating that the credit continues to be available until expressly stated to have lapsed. The court highlighted that the authorities had not issued any notification or circular explicitly stating that the accumulated credit had lapsed. The court further noted that the provisions of Section 140(1) and (8) allow for the transition of all credits, barring those specifically excluded, and there was no exclusion for EC, SHEC, and KKC in these provisions.

Conclusion:
The court concluded that the petitioner is entitled to carry forward and utilize the accumulated credit of EC, SHEC, and KKC under the CGST Act. The impugned order rejecting the petitioner's claim was set aside, and the writ petition was allowed. The court emphasized that a fiscal statute should be interpreted strictly based on its apparent meaning, and the statutory provisions should not be interpreted in a way that defeats a legitimate statutory right. The court also noted that the proposed amendment to Section 140, which excludes any cess not specified in Explanation 1 or 2, had not been notified, further supporting the petitioner's claim.