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TMI Blog2022 (11) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred purely on the question of legality and jurisdiction of Respondent No.1 to initiate a proceeding under Section 73 (1) of the C.G.S.T. Act for transition of CENVAT Credit which was allegedly inadmissible under C.E.A. and Finance Act read with C.C.R. The show cause notice under which the instant adjudication proceedings were initiated is worded allege similar contraventions under the CEA, Finance Act, 1994 and the CCR as the previous show cause notices issued under the existing law against the petitioner relating to contravention of the C.E.A., Finance Act and C.C.R. - the contraventions which have been alleged and the proceedings which have been initiated under Section 73 (1) of the C.G.S.T. Act are in relation to violation of the C.E.A. and Finance Act read with C.C.R. The gist of the imputation is that the petitioner could not claim the CENVAT credit in lieu of invoices raised by its Bokna mines as both of them were independent entities. Similar was the imputation in respect of the previous show cause notices issued under the existing law which are pending adjudication before the learned CESTAT or the Commissioner (Appeals) for different periods and in some of which the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o divisions, Wire Rope Division and Steel Division. Steel Division is engaged in the manufacture of iron and steel products at its factory situated at Adityapur Industrial Area, Gamharia duly registered under the erstwhile Central Excise Act, 1944 (Hereinafter referred to as the C.E.A.) and Finance Act, 1994 (Hereinafter referred to as the Finance Act). The final products manufactured at the factory were dutiable under the Central Excise Act (C.E.A.) and are now taxable under Goods and Service Act. According to the petitioner, the iron ore required for manufacture of the final products were extracted from petitioner s captive iron ore mine situated at Bokna, Barajamda. Petitioner has got a site office at Bokna mines which receives the invoices issued under Rule 4 A of the Service Tax Rules, 1994 towards purchase of its input services received at the mines. For distributing credit of service tax on the said services to the Gamharia factory in accordance with Rule 7 read with Rule 2(m) of the CENVAT Credit Rules, 2004 (hereinafter referred to as C.C.R. 2004 ), the petitioner duly filed an application on 25th April, 2008 for registration of its Bokna Mines as an Input Service Distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Finance Act. The present issue relates to disallowance of the CENVAT credits amounting to Rs. 8,55,50,111/- pertaining to Bokna mines and credit amounting to Rs.15,98,697/- pertaining to Brinda Sesai mines in respect of which proceedings were initiated by issuance of show cause notice dated 13 th September, 2021 by the Joint Commissioner in Form GST-DRC-01 proposing recovery of transitioned CENVAT credit in terms of Section 73(1) of the C.G.S.T. Act along with interest and penalty. Prior to issuance of the notice, petitioner was served with a letter by Assistance Commissioner (Prevention) bearing No. 1720 dated 18th February, 2019 asking him to pay back the total amount of CENVAT credit of Rs. 15,19,17,690/- as per the break up indicated above pertaining to Bokna mines and Brinda Sesai mines. Petitioner had replied thereto on 2nd March, 2019. Thereafter, a notice in Form GST-DRC-01A dated 23rd July, 2021 was issued to which petitioner submitted its reply in Part B vide letter dated 26th August, 2021. Petitioner participated in the proceedings initiated under Section 73(1) and duly responded to the SCN vide letter dated 8th November, 2021 refuting all allegations. He was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid or not paid or erroneously refunded or where input tax credit has been wrongly availed or utilized. The present dispute relates to alleged wrongful availment of CENVAT credit. It therefore becomes imperative to understand the ambit and scheme of input tax credit under the GST laws. 5. As per the scheme of the C.G.S.T. Act under Section 2 (62) input tax means Central Tax, State Tax, Integrated Tax or Union Territory Tax charged on supply of goods or services or both by registered persons. These expressions have been defined under Sections 2(21), 2(104) and 2(58) of the C.G.S.T. Act respectively to mean tax levied under the C.G.S.T. Act, State Goods and Service Tax Act and the Integrated Goods and Service Tax Act as the case may be. Similarly, Section 2(63) of the C.G.S.T. Act defines input tax credit to mean the credit of input tax. Therefore, input tax credit is not CENVAT credit, i.e. the credit that had accrued under the erstwhile regime. Section 16 of the C.G.S.T. Act provides that a registered person shall be entitled to take credit of input tax charged on supply of goods, services or on both, which are used by him in the course or furtherance of business. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this context reliance is placed upon the case of Carona Ltd. vs. Parvathy Swaminathan sons reported in (2007) 8 SCC 559 para 27 and 28 thereof. Petitioner has also relied upon Raza Textiles Ltd. vs. Income Tax Officer, Rampur reported in (1973) 1 SCC 633 Para 3 and Calcutta Discount Co. Ltd. vs. Income Tax Officer, Companies District I Calcutta another reported in AIR 1961 SC 372 Para 26 to buttress his contention on lack of jurisdiction. 6. Learned counsel for the petitioner has also urged that respondent no. 1 is only vested with the power of verification of transitional credit and not determine its eligibility or availability. While Rule 117 of the C.G.S.T. Rules deals with procedural aspects of transitional provisions specified in Section 140 of the C.G.S.T. Act, Sub Rule 3 of Rule 117 states that amount of credit specified in the relevant form shall be credited to the E.C.L. of the applicant. Similarly, Rule 121 states that the amount credited under Rule 117 (3) shall be verified and if found improper, proceedings may be initiated under Section 73 or 74 of the C.G.S.T. Act as the case may be. It is submitted that the verification under Rule 121 is of the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in particular relied on the constitution Bench decision rendered in the case of Kedar Nath Singh v. State of Bihar reported in AIR 1962 Supreme Court 955, Para 27 in which the Apex Court has held that if the impugned provisions of a law come within the constitutional powers of the legislature by adopting one view of the words of the impugned Section or Act, the Court will take that view of the matter and limit its application accordingly in preference to the view which would make it unconstitutional or another view of the interpretation of the words in question. It is submitted that the legislature could not have conferred parallel jurisdiction under both the existing law i.e. C.E.A. or Finance Act and the present G.S.T. Act to enable the authorities to proceed on charges of irregular or improper availment of CENVAT Credit under the transitional provisions of Section 140. Learned counsel for the petitioner has provided a tabular chart of the total of nine show cause notices which were raised under the erstwhile laws which are pari materia to the impugned S.C.N. They are being furnished hereunder: Sl.No. SCN Period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ore mines of the petitioner and Kathotia captive coal mines of the petitioner. The present show cause notice which has led to passing of the order in original also alleges wrongful distribution of CENVAT Credit in terms of the rule 14 of the CENVAT Credit Rules, 2004. However, the proceedings for wrongful availment of CENVAT Credit has been initiated under Section 73 (1) of the C.G.S.T. Act instead of the relevant provisions of the C.E.A. and Finance Act read with Rule 14 of the C.C.R., 2004 and is without jurisdiction. Based on these submissions learned counsel for the petitioner has contended that the impugned proceeding being without jurisdiction and the order in original passed by the respondent no.1 being contrary to scheme of the C.G.S.T. Act are fit to be quashed in exercise of the powers under Article 226 of the Constitution of India by this Court as no determination on disputed questions of fact are required to be made to decide this legal issue. Learned counsel for the petitioner has relied upon the decision in Magadh Sugar Energy Ltd. vs. State of Bihar others reported in (2021) SCC online SC 801 para 25 to 27 . Therefore, the impugned order in original may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order in original has been passed after due opportunity of personal hearing and on consideration of the defence reply submitted by the noticee. Learned counsel for the petitioner has also referred to Rule 2 (m) of the CENVAT Credit Rules, 2004 which defines input service distributor. The definition lays down the criteria that input service distributor is an office of the manufacturer or producer of the final product or provider of output service which receives invoices for the purchase of input services. Therefore, iron ores excavated in Bokna mines and subsequently transported to the rail head for delivery to the petitioner s Gamharia plant would not amount to Bokna mines being treated as provider of output service or a manufacturer. In view of Rule 7 of the C.C.R., Bokna mines cannot distribute CENVAT Credit or service tax paid by them for such services. Learned counsel for the respondents has relied upon the provisions of Rule 142 (1) of the C.G.S.T. Rules, 2017, which provides that a proper officer shall serve, along with the notice issued under the relevant Sections indicated therein a summary thereof electronically in form GST DRC 01. Such notice was properly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit of CGST in the Electronic Credit Ledger by filing TRAN 1 for which explicit legal authority exists in Section 140 of the C.G.S.T. Act. Secondly, same CENVAT Credit cannot be availed as transitional credit twice. This can happen in situations such as availing CENVAT Credit as Transitional Credit through TRAN 1 and also through return in form GSTR 3B or availing same credit twice through two different tables of Form TRAN 1. The other circular also enclosed to the written note relied upon by the learned counsel for the respondent issued by C.B.E.C. is dated 23th February, 2018 bearing no. 33/07/2018-GST (Annexure C). Learned counsel for the respondent has referred to the directions issued by the C.B.E.C. under Section 168 of the C.G.S.T. Act regarding non-transition of CENVAT Credit under section 140 of the C.G.S.T. Act or non utilization thereof in certain cases. Para 2 of the instant circular provides that where in relation to a certain CENVAT Credit pertaining to which a show cause notice was issued under Rule 14 of the CENVAT Credit rules, 2004, which has been adjudicated and where in the last adjudication order or the last order in appeal as it existed on 1st July, 2017, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not require entering into any question of disputed facts. The primary issue relates to the jurisdiction of Respondent No.1 to initiate proceedings under the C.G.S.T. Act for alleged contravention of C.E.A. and Finance Act, 1994 read with C.C.R., 2004. In this regard it is profitable to refer to the case of Ma gadh Sugar Energy Ltd. vs. State of Bihar others reported in 2021 SCC Online Supreme Court 801, para 25 to 27, 31 and 32. The Apex Court has after dealing with the precedents on the question of maintainability of the writ petition under Article 226 of the Constitution of India in the presence of an alternative statutory remedy held as under: 25. While a High Court would normally not exercise its writ jurisdiction under Article 226 of the Constitution if an effective and efficacious alternate remedy is available, the existence of an alternate remedy does not by itself bar the High Court from exercising its jurisdiction in certain contingencies. This principle has been crystallized by this Court in Whirpool Corporation v. Registrar of Trademarks, Mumbai and Harbanslal Sahni v. Indian Oil Corporation Ltd. Recently, in Radha Krishan Industries v. State of Himachal P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of their jurisdiction. This Court observed: 23. Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, something going to the root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute. It was noted by this Court in L. Hirday Narain v. ITO [(1970) 2 SCC 355: AIR 1971 SC 33] that if the High Court had entertained a petition despite availability of alternative remedy and heard the parties on merits it would be ordinarily unjustifiable for the High Court to dismiss the same on the ground of non-exhaustion of statutory remedies; unless the High Court finds that factual disputes are involved and it would not be desirable to deal with them in a writ petition. 27. The above principle was reiterated by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt to interfere in exercise of its jurisdiction. This issue is no longer res integra and has been settled by a catena of judgments of this Court, which we find entirely unnecessary to refer to in detail (emphasis supplied) 31. The test that is to be applied for the determination of a question of law is whether the rights of the parties before the court can be determined without reference to the factual scenario. In this case, the High Court was entrusted with the determination of the meaning of the phrases used in Section 3 of the Act to determine if the supply of electricity by the appellant would fall within its ambit. Unlike a dispute on the execution of a promissory note or a plea of adverse possession, there is no adjudication on facts required here. There is also no dispute on the nature of the transaction involved. 32. The issues raised by the appellant are questions of law which require, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor; and whether the first respondent has the legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the appointed day, furnished by him under the existing law [within such time and] 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. Section 174. Repeal and saving. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1995), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 ( 40 of 1978), and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal. 16. Section 140 relates to transitional arrangements for input tax credit and is provided under Chapter XX which relates to transitional provisions. Section 139 provides for migration of existing tax payers i.e. every person registered under any of the existing laws. Section 140 provides that a registered person other than a person opting to pay tax under Section 10, shall be entitled to take in his E.C.L., 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 date, i.e. 1st July, 2017, furnished by him under the existing law in such manner as may be prescribed. Transitional provisions have a purpose. When one legislative system ends and another begins it is considered necessary by the legislature to enact special provisions for the circumstance which exists when that legislation came into force. As the learned author Craies has observed in his treaties On Legislation legislation does not necessarily have effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the C.G.S.T. Act, the registered person shall not be allowed to take credit of those CENVAT Credit. The circumstances in which no registered person shall be entitled to take credit of any input tax in respect of any supply of good or services or both are provided under Section 16 (2) of the C.G.S.T. Act under Chapter V Input Tax Credit , which is quoted hereunder. SECTION 16. Eligibility and conditions for taking input tax credit.- (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or [xxx] debit note pertains or furnishing of the relevant annual return, whichever is earlier: [PROVIDED that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.] 18. The enumerated conditions under which the registered person shall not be entitled to avail of the credit of input t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y availed or utilized for any reason, other than the reason of fraud or any willful misstatement or suppression of fact to evade tax (such contraventions are covered by Section 74 of the C.G.S.T. Act) asking him to explain as to why he should not pay the amount specified in the notice along with interest and under Section 50 and penalty thereupon . A perusal of the provisions of Section 73 of the CGST Act makes it clear that such a proceeding can be initiated for non-payment of any tax or short payment of such tax or for erroneous refund of such tax or for wrongly availing or utilizing the input tax credit which are available under the C.G.S.T. Act. Section 73 does not speak of CENVAT Credit as C.G.S.T. Act does not provide for CENVAT Credit rather the term has been subsumed in the expression input tax credit both relating to the supply of good or services. The assumption of jurisdiction by Respondent No. 1 to determine whether the CENVAT Credit was admissible under the existing law by invoking provisions of Section 73 of the C.G.S.T. Act was therefore not proper in the eye of law. 19. This leads us to the next question whether a registered person could transition inadmissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that on account of the new legislation the implementation of the G.S.T. regime could not be left to a realm of uncertainty. For a violation under the existing law, parallel proceedings could not be conducted under the existing law at the behest of jurisdictional officer and at the same time under the new law at the instance of another jurisdictional officer of the G.S.T. Act. It is in this conceptual background that the purport and construction of the repeal and saving provisions under Section 174 of the C.G.S.T. Act is to be understood. The existing Act, such as the Central Excise Act, 1944, the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Additional Duties of Excise (Goods of Special Importance Act, 1957), The Additional Duties of Excise (Textile and Textile Articles Act, 1978 and the Central Excise Tariff Act, 1985 were repealed under Subsection (1) of Section 174. However, the legislature provided that the repeal of the said Acts and the amendment of the Finance Act, 1994 to the extent as mentioned in sub section (1) or section 173 shall not (a) revive anything not in force or existing at the time of such amendment or repeal; or (b) affect the prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction is affected by the repeal of an Act, it is necessary to ascertain whether the transaction in question was completed when the Act was repealed. The present repeal and saving clause expressly engrafts that notwithstanding the repealing Act the repeal shall not affect any right or liability acquired accrued or incurred. In this regard it is appropriate to rely upon the opinion of the Apex Court as rendered in the case of State of Rajasthan vs. Mangilal Pindwal reported in (1996) 5 SCC 60 para 9 to 11 as under: 9. As pointed out by this Court, the process of a substitution of statutory provision consists of two steps; first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place. (See: Koteswar Vittal Kamath v. K. Rangappa Baliga Co. [(1969) 1 SCC 255 : (1969) 3 SCR 40] , SCR at p. 48.) In other words, the substitution of a provision results in repeal of the earlier provision and its replacement by the new provision. As regards repeal of a statute the law is thus stated in Sutherland on Statutory Construction: The effect of the repeal of a statute where neither a saving clause nor a general saving statute ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certainty not only in the minds of the ordinary citizen but also in the minds of the Tax authorities. In some cases a jurisdictional proper officer under the C.G.S.T. Act may initiate proceedings under the provisions of the C.G.S.T Act for such contravention. In other cases the competent jurisdictional officer may initiate proceedings under the existing law that is the C.E.A. and Finance Act for the same contravention in view of the repeal and saving provisions under Section 174 of the C.G.S.T. Act. Such a course cannot be countenanced in law. As such, we are of the considered view that the initiation of proceedings by respondent no. 1 under section 73 (1) of the C.G.S.T. Act, 2017 for alleged contravention of the C.E.A. and Finance Act, read with C.C.R. against the petitioner by filing TRAN 1 in terms of Section 140 of the C.G.S.T. Act for transition of CENVET Credit as being inadmissible under the existing law was beyond his jurisdiction. Consequently the Order in Original dated 30th March, 2022 passed by the respondent no. 1 being without jurisdiction cannot be sustained in the eye of law. The impugned adjudication proceedings and the order in original dated 30th March, 2022 are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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