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TMI Blog2019 (11) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... providing Information Technology enabled services to customers worldwide. It has eight (8) units registered under the Act, five (5) units registered in Special Economic Zones (SEZ), two (2) units in Software Technology Parks of India (STPI) and one (1) unit in a Domestic Tariff Area (DTA). 3.In the era prior to levy of goods and service tax (in short GST) the petitioner was assessed to service tax and was availing CENVAT credit on inputs, capital goods and input services, utilizing the same against payment of service tax liability. 4. Vide Finance Act 2004, Parliament introduced the levy of Education Cess and, vide Finance Act 2007, the levy of Secondary and Higher Education Cess. The CENVAT Credit Rules 2004, (in short Rules) enabled a manufacturer of final products or a provider of output services to avail CENVAT credit in respect of EC and SHEC against duty levied on excisable goods or taxable services in terms of Rules 3(1)(vi), (via), (x) and (x-a) thereof. The Rules specifically provided that once availed, the utilization thereof shall be only as against payment of EC or SHEC respectively. 5. While this was so, the levy of EC and SHEC on taxable services was abolished vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be entitled to take, in his electronic credit ledger, the amount of CENVAT credit [of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be prescribed. (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, (32 of 1994), but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,- (a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and (b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3). (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier: Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law. (9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day. (10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed. Explanation 1.-For the purposes of [sub-sections (1), (3), (4)] and (6), the expression "eligible duties" means- (i) the additional duty of excise leviable under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il. 11. In the present case, the petitioner followed the procedure for carrying forward CENVAT credit availed under the erstwhile regime, set out in terms of Rule 117 of the Central Goods and Service Tax (CGST) Rules, 2017 (in short Rules). The Rules provide that every person entitled to input tax credit under Section 140 shall submit a declaration electronically in Form GST Tran-1 within 90 days of the appointed date, being 01.07.2017, for carrying forward such credit to be utilised against turnover from taxable services. The petitioner had a closing balance of a total of Rs. 18,80,85,930/- comprising, credit availed on input services directly of an amount of Rs. 17,77,77,224/-, EC of an amount of Rs. 55,84,569/- and SHEC of an amount of Rs. 29,99,337/-. This is the sum total of the closing balance of credit available for being carried forward for utilisation in the new regime. 12. The provisions of Section 140(8) of the Act provide for Centralised Registration in respect of all the petitioners' units, pan India, and this was reflected in the Tran-1 return filed by it. There is no specific provision providing for the lapsing of the credit accumulated in the CENVAT register. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested right and it is only when all conditions under statute are complied with in full that the petitioner may claim utilisation of ITC. 17. In the present case, the scheme of Section 140 nowhere provides for utilisation of EC, SHEC and KKC. The learned counsel for the Revenue points out that with the abolishing of EC, SHEC and KKC in 2015 and 2016 respectively, the levy as well as availment of credit in regard to the aforesaid cesses has been removed from the sweep of the Act. To a pointed query from the Bench as to why the assessee was permitted to carry forward the credit manually in CENVAT register, the Revenue would only state, while admitting the aforesaid as a fact, that that by itself would not be a determinating factor as to the proper utilisation of the credit. The Revenue relies on the following cases: (1) M/s.Osram Surya P. Ltd. v. Commissioner of Central Excise, Indore (2) Union of India (UOI) and Ors. v. Uttam Steel Ltd. reported in (2015 (4) ABR 505) (3) Jayam and Co. v. Assistant Commissioner and Ors. reported in AIR 2016 SC 4443) (4) ALD Automotive Pvt. Ltd. v. The Commercial Tax Officer and Ors. reported in AIR 2018 SC 5235 (5) Cellular Operators Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available and that had been permitted to continue in the erstwhile taxing regime were thus meant to be continued. 20. EC was introduced in 2004, SHEC in 2007 and KK Cess in 2016. Upon introduction of the levy of EC in 2004, Section 95 of Finance Act, 2004 provided that EC would be levied in addition to service tax on taxable services and could be availed of and utilised against payment of EC alone. Likewise for SHEC, introduced in 2007, it was made clear that the benefits of SHEC on input were available to be utilised only as against the respective payments alone and not on the payment of excise duty or service tax on manufactured goods or taxable services. Likewise for KK cess. 21. Both EC and SHEC were abolished with effect from 01.06.2015 and consequently the unutilised credit of EC and SHEC available could not be set of and accumulated. As far as KK cess is concerned there was no specific notification providing for its abolishing. However, since the CGST Act did not provide specifically for the levy of KK cess, as such there was no avenue to claim the same after 01.07.2017. In all three of the aforesaid cases the unutilised portion of EC, SHEC and KKC continued in the electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to exempted goods and non-taxable/exempted services. As stated earlier, may taxpayers had accumulated Cenvat credit balance as on 1-4-2008. The matter to be considered was whether this credit balance should be allowed to be utilized for payment of service tax after 1-4-2008. As no lapsing provision was incorporated and that the existing Rule 6(3) of the Cenvat Credit Rules does not explicitly bar the utilization of the accumulated credit, the department should not deny the utilization of such accumulated Cenvat credit by the taxpayer after 1-4-2008. Further, it must be kept in mind that taking of credit and its utilization is a substantive right of a taxpayer under value added taxation scheme. Therefore, in the absence of a clear legal prohibition, this right cannot be denied. Pending issues may be decided accordingly.' 24. In the present case, admittedly, there is no notification/circular/instruction that has expressly provided that the credit accumulated would lapse. Not only this, the credit has been carried forward manually and reflected in the returns from time to time and such accumulated credits stare the Revenue in the face. Having permitted the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme is affected and, in particular, it loses sight of the fact that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assesses concerned. ..... 6.We may look at the matter from another angle. If on the inputs the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace in accordance with the scheme or the Rules, otherwise it would affect the rights of the assessees. Further, right had accrued on the date when the assessee had paid tax on the raw materials or inputs and the same would continue till the facility available thereto got worked out or until the goods existed. As noticed above, tax/duty had not been withdrawn. Lastly and more importantly, Section 37 of the Central Excise Tariff Act, 1985 did not enable the authorities to make the Rule impugned therein. The legal ratio in Eicher Motors Limited and Another (supra) was followed in Samtel India Limited (supra) wherein amended Rule 57-F(17) of the Central Excise Rules, 1944 was challenged. The Rules had postulated lapsing of credit in case of manufactured goods falling under sub-heading 8540.12, though the proviso had provided for credit of duty in respect of inputs lying in stock or contained in finished goods lying in stocks. It was held that the said scheme of credit of input tax, in view of amended provision, could not be made applicable to goods which had already come into existence and under which the assessee had claimed credit facility. As noticed above, in the present case, cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04, specifies that CENVAT credit of specified duties shall be utilized for payment of those specified duties only. CENVAT Credit of Education Cess and Secondary & Higher Education Cess can be utilized only for payment of Education Cess and Secondary & Higher Education Cess, respectively. Consequent upon grant of exemption there is issue of utilization of the accumulated credit of the past. It is suggested that an amendment to sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004 may be made to allow the utilization of balance CENVAT Credit of Education Cess and Secondary & Higher Education Cess towards payment of either duty of excise or Service Tax. Discussion & Decision The conference after discussion and briefing from the officers from the Board noted that it was Government's conscious policy ? decision to withdraw the Education Cess and Secondary & Higher Education Cess. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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. 36. Then again, the Division Bench while considering the rival contentions of the assessee and the Revenue has not anywhere indicated that the credit has lapsed, but only that, in the light of the embargo placed by Rule 3(7)(b), set off/credit as claimed could not be permitted. 37. Thirdly, even after the decision of the Division Bench, there has been no instructions/notification/circular from the Board till date to state that the accumulated credit has lapsed. Thus though there were a good many occasions that presented themselves to the Board to clearly stipulate that the accumulated credit had lapsed, this was not done. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of case law. If one were to apply these propositions to the case on hand, the provisions of section 140(1) provide for the transfer of all credits and levies, barring those set out in the proviso, which is, (i) where the said amount of credit is inadmissible as ITC (ii) where an assessee has not furnished returns required under the existing law for six preceding months or (iii) where the said credit relates to goods manufactured and cleared under exemption notifications. These are the only three conditions/ embargos that bar the transfer of accumulated credit. The language of section 140(1) and (8), both make it clear that an assessee to GST is entitled to transition of 'the amount of cenvat credit carried forward in the return relating to the period ending with the date preceding the appointed date' and this in the present case includes accumulated credit of EC, SHEC and KKC. 43. Section 140(8) which specifically deals with centralised registration also provides for transitioning of credit conditional upon an original or revised return being filed within three months of the appointed date reflecting a carry forward of the credit from the closing balance available. The intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w India Insurance Co. Ltd. V. Shanti Misra ((1975) 2 SCC 840, T.Kaliamurthi V. Five Gori Thaikkal Wakf ((2008) 9 SCC 306), Thirumalai Chemicals Ltd. V. Union of India ((2011) 6 SCC 739 and Mafatlal Industries Ltd. V. Union of India ((1997) 5 SCC 536 were cited by the Supreme Court in allowing the Revenues' appeal and holding that a dead claim could not be revived by a subsequent benefit. 47. Thus the Revenue argues that the accumulated credit of EC, SHEC and KKC is dead and gone and there is nothing that the assessee could claim as having been carried forward. This argument is rejected. At the risk of repetition, accumulated credit cannot be said to have been wiped out unless there is a specific order under which it lapses. Though there may be embargos placed by the Statutes and Rules, such as the embargo against cross -utilisation placed by Rule 3(7)(b) of the CCR, the accumulated credit continue in the books of the assessee till specifically wiped out. 48. Finally, the Central Goods and Service Tax Act, 2018 has seen several amendments. Section 28 of CGST (Central Goods and Service Tax) Amendment Act, 2018 proposes the following amendment, which is reproduced below in entirety. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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