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TMI Blog2021 (8) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 was done retrospectively w.e.f. 01.07.2017 because transition of cesses was never intended by the legislature. Thus, it is ample clear that carry forward of cesses as ITC through TRAN-1 by the appellant was not proper and in the instant case bounteous statutory provisions are available to restrict admissibility of cesses as ITC in GST to appellant. Whether liability of interest and penalty accrues when ITC of Cesses is reversed, or not? - HELD THAT:- The intention of the Legislature was never to transition the CENVAT Credit pertaining to cesses for the fact that Explanation (3) to Section 140, which barres transition of any cesses, was made effective retrospectively w.e.f. 01.07.2017. Further, reversing the credit pertaining to Ed. Cess and SHE in GSTR-3B for the month of September-2018 does not mean that the appellant became so entitled to carry forward even a dead claim of unutilised Ed. Cess and SHE after 01.07.2017. Hence, once ineligible ITC has been availed interest liability according to Section 50 sticks to anyone - the contention of the appellant regarding non-applicability of interest and penalty after reversing the Cenvat in question is not tenable as per afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit of their records, it was noticed that the appellant has transferred Education Cess and Secondary Higher Education Cess Credit lying with them at the end of June-2017 to TRAN-1 which does not appeared to be correct as per Transitional provisions defined in the Central Goods and Services Tax Act, 2017. 2.3 Further, it was observed that the appellant appeared to have irregularly carried forward of Input Tax Credit of ₹ 1,21,395/- (Education Cess ₹ 79,188/- + Sec. H. Edu. Cess ₹ 42,207/-) deliberately with intent to avail irregular ITC. It was only through Audit of the records of the appellant, that the appellant's act of availing the irregular ITC in their TRAN-01 statement could be detected. In this manner they appeared to have contravened the provisions of Section 140 of the CGST Act, 2017. Therefore, the provisions of Section 74 of the CGST Act, 2017 are invoked for recovery of the said credit of ₹ 1,21,395/- from them. The appellant also appeared liable to pay interest in terms of Section 50 of the CGST Act, 2017 and penalty in terms of Section 122 of the CGST Act, 2017 2.3 Thereafter, considering the reply/submissions of the appellant the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SHEC). It is an admitted fact that the EC and SHEC were eligible for CENVAT credit, which were validly claimed by the Appellant at the outset itself. Hence, in view of the provisions of section 140 at the time of transition as well as at the time of submission of form TRAN 1 which permitted the transition of entire CENVAT credit balance, without specifically restricting transition of credit of EC and SHEC, the Appellant had validly transitioned the EC and SHEC credit. The impugned OIO has completely misunderstood the language employed in the provisions of section 140 when alleging that the cesses are not eligible duties as defined, without considering the fact that the definition is not at all made applicable to section 140(1), which factually governed the transition of accumulated balance of CENVAT credit and under which the Appellant had transitioned these credits. However, section 140 was amended with retrospective amendment with effect from 01.07.2017 vide The Central Goods and Service Tax (Amendment) Act, 2018 which introduced explanation 3 to section 140 with retrospective effect from 01.07.2017, by specifically provided that the list of duties and taxes which can be carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned OIO, holding that as per preamendment provisions, the Appellant was ineligible is clearly incorrect and shows lack of application of mind. In view of the same, the impugned 0I0 should be set aside. vi. The position of the Appellant was validated and accepted by the Madras HC in the case of Sutherland Global Services Pvt. Ltd. [2019-VIL-536-MAD], regarding valid claim of ITC on EC and SHEC in Form Tran-1 in pre-amendment period. 3. No interest can be levied on the tax liability arising from a retrospective amendment in the law: Without prejudice to anything mentioned above, it is submitted that the interest cannot be demanded on any liability or tax payment arising solely due to the retrospective amendments in the law. In this case, the Appellant had validly claimed the credit at the time of making the claim and it is only due to the retrospective amendment in the law that such credit became ineligible. Hence, there is no question of any short payment or incorrect claim of ITC. This issue has been disputed in the past and the Courts and the CESTAT has consistently decided the issue in favour of the Appellant. In view of the above judgments, it is submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, in the unlikely event. The interest demand is sought to be confirmed, the interest should be computed only for the period of filing Tran 1 and utilizing such credit, till the date of reversal of credit, as a short payment of tax. Which attracts interest @ 18% p.a. and not @ 24% p.a. 5. Penalty under section 122(2)(b) of the CGST Act, 2017 not leviable: The Appellant though availed EC and SHEC credit in Tran 1 on the basis of provisions of the CGST Act, 2017 as applicable at the time of availment of such credit, it reversed the said credit even before the amendment to section 140 was notified and much before issuance of the SCN. Section 122 of the CGST, 2017 is applicable only when the input tax credit has been wrongly availed or utilised which is not the facts of the present case, since the credit of EC and SHEC was validly claimed as a transitional credit and it was only due to a retrospective amendment in the law that the credit was sought to be reversed. Therefore, penalty under section 122(2)(b) should not be levied. All the alleged violations in the SCN were incorrect and were appropriately factually and legally replied and it is clear lack of application of mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward of Education Cess, Secondary Higher Secondary Education Cess and KrishiKalyan Cess (KKC) through TRAN-1, is permissible under GST law or not ? (b) Whether liability of interest and penalty accrues when ITC of Cesses is reversed, or not ? (a) In respect of issue at Sr. No. (a) I find that :- 1. After 01.06.2015 provisions levying Education Cess (hereinafter referred as 'Ed. Cess' for sake of brevity) and Secondary and Higher Secondary Education Cess (hereinafter referred as 'SHE' for sake of brevity) on services were ceased by the Government. Before 01.06.2015 Ed. Cess and SHE could be utilised against the Output liability of Ed. Cess and SHE only and no cross utilisation of Cesses was allowed. 2. In this context, I would relied upon the decision of Hon'ble Madras High Court dt. 16.10.2020 in WA No.53 of 2020 in the case of Assistant Commissioner of CGST and Central Excise vs Sutherland Global Services Private Limited, wherein Hon'ble High Court has held that :- We found considerable force in the contention raised on behalf of the Revenue before us that credit of such Education Cess and Secondary and Higher Education Cess which could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975, would be allowed in terms of Explanation 3 to section 140, inserted vide sub-section (d) of section 28 of CGST Amendment Act, 2018 which shall become effective from the date the same is notified giving it retrospective effect. 5. By Reversing the Credit pertaining to Ed. Cess and SHE in GSTR-3B for the month of September-2018 does not mean that the appellant became so entitled to carry forward even a dead claim of unutilised Education Cess and Secondary and Higher Education Cess after 01.07.2017. Such Credit could be allowed only if it clearly falls within the definition of Eligible Duties or Eligible Taxes and Duties as defined in Explanations 1 and 2. On the contrary, Explanation 3 clearly excludes Cess to be so eligible for carry forward. Therefore, there is no iota of doubt that Cess of any kind except National Calamity Contingent Duty (NCCD), which was so specified in Explanations 1 and 2 specifically could be allowed to be carried forward. It may be noted here that this NCCD is allowed to be transitioned not as CENVAT credit, but because it is specifically included as E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is not tenable as all the contention put forth by the appellant have been discussed in detail in the above said judgement of Hon'ble High Court of Madras. Therefore, I do not find any point to retreat the same. (b) In respect of issue at Sr. No. (b) I find that :- 1. With regard to interest and penalty, I find that the intention of the Legislature was never to transition the CENVAT Credit pertaining to cesses for the fact that Explanation (3) to Section 140, which barres transition of any cesses, was made effective retrospectively w.e.f. 01.07.2017. Further, reversing the credit pertaining to Ed. Cess and SHE in GSTR-3B for the month of September-2018 does not mean that the appellant became so entitled to carry forward even a dead claim of unutilised Ed. Cess and SHE after 01.07.2017. Hence, once ineligible ITC has been availed interest liability according to Section 50 sticks to anyone. Section 50(3) of the CGST Act, 2017 clearly prescribes interest liability on such ITC @ 24%, which is also clarified by CBIC vide its Circular No.58/32/2018-GST dated 04.09.2018 that taxpayer may reverse the wrongly availed CENVAT credit under the existing law and inadmissible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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