2022 (5) TMI 974 - HC - GST

CENVAT Credit - substance of the dispute relates to the payment by the assessee of the service tax component pertaining to manpower and the like services received by the assessee partly for the quarter ending March 31, 2017 and partly for the quarter ending June 30, 2017 long after the appointed date of July 1, 2017 and claiming cenvat credit therefor - HELD THAT - In terms of Section 140(1) of the Act of 2017, a qualified registered person is entitled to take the amount of cenvat credit carried forward in the return relating to the period immediately prior to the appointed date as furnished by such person under the existing law. In other words, the essence of Section 140(1) of the Act of 2017 is that if a matter is reflected in the return for the relevant period, due credit therefor may be taken as long as the return has been filed in accordance with the existing law and in the manner prescribed thereby. In this case, the return pertaining to the quarter immediately preceding the appointed date was filed on October 24, 2017, a day after the service tax component pertaining to the payment was tendered by the assessee, together with a GST TRAN-1 form duly filled up. Since it is evident that the service tax return relating to the quarter ended June 30, 2017, immediately preceding the appointed date, was filed in accordance with the existing law and there is no dispute that it has been filed in the prescribed form since the Revenue has acted thereon, it is now necessary to see the impact of such service return filed in October, 2017 qua the entitlement of the assessee to obtain cenvat credit for the service tax component - it is Section 140(1) of the Act of 2017 which is the only guiding light. As noticed earlier, the relevant provision pertains to the cenvat credit carried forward in the relevant return. Cenvat credit is qualified in the amended provision by the additional words incorporated therein of eligible duties and further qualified by Rule 117 of the Rules of 2017 that refers to eligible duties and taxes . A fortiori, if the relevant return of an assessee irrespective of whether it was filed before the appointed date or not was furnished in accordance with the existing law and in the prescribed manner, the cenvat credit on account of service tax reflected therein could be availed of in terms of Section 140(1) of the Act of 2017. The Revenue s limited challenge to the appellate order of January 8, 2021 pertaining to cenvat credit claimed by the respondent assessee to the extent of Rs.2,18,75,232/- fails and the appellate order in such regard is found to be unexceptionable - Petition dismissed.

Summary

Issues Involved:
1. Entitlement of the assessee to claim CENVAT credit for service tax paid post-GST transition.
2. Interpretation of Section 140(1) of the Central Goods and Services Tax Act, 2017.
3. Applicability of the existing law and procedural compliance under the previous regime.
4. Validity of the Revenue's contention regarding the timing of tax payment and return filing.

Issue-wise Detailed Analysis:

1. Entitlement of the assessee to claim CENVAT credit for service tax paid post-GST transition:
The primary issue revolves around the assessee's entitlement to claim CENVAT credit for a sum of Rs. 2,18,75,232/- paid as service tax after the appointed date of July 1, 2017, under the GST regime. The Revenue contended that since the service tax was paid on October 23, 2017, long after the transition, the assessee was not entitled to claim the credit. However, the court found that the assessee had filed the relevant return and GST TRAN-1 form within the extended period, thus complying with the procedural requirements.

2. Interpretation of Section 140(1) of the Central Goods and Services Tax Act, 2017:
Section 140(1) allows a registered person to take the amount of CENVAT credit carried forward in the return relating to the period immediately preceding the appointed date. The Revenue argued that the credit could only be taken for amounts due as of the appointed date. However, the court interpreted that the provision's essence is that if the amount is reflected in the return filed in accordance with the existing law, the credit can be availed. The court emphasized that the return's timing or the tax payment date does not affect the entitlement if the return is filed as per the prescribed manner.

3. Applicability of the existing law and procedural compliance under the previous regime:
The court noted the complexity of the transitional provisions and the existing law's applicability. Section 174 of the Act of 2017 saves the rights, obligations, and liabilities under the previous regime. The court found that the assessee's return was filed in accordance with the existing law, and the service tax payment was made under the reverse charge mechanism, which the Revenue had accepted.

4. Validity of the Revenue's contention regarding the timing of tax payment and return filing:
The Revenue's argument that the tax component must have been paid before the appointed date was not supported by the clear wording of Section 140(1). The court held that the eligibility for CENVAT credit depends on the return's content and its compliance with the existing law, not on the payment or filing date. The court dismissed the Revenue's contention, stating that the return filed by the assessee was in order and the credit could not be denied.

Conclusion:
The court dismissed the Revenue's challenge to the appellate order, affirming the assessee's entitlement to CENVAT credit for the service tax component of Rs. 2,18,75,232/-. The court found the appellate order unexceptionable and ruled that the assessee's compliance with the existing law and procedural requirements justified the credit claim. The court also noted the complexity of the transitional provisions and the need for clear legislative drafting. No order was made as to costs, recognizing the arguable nature of the case.