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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 ..... n 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 Distributor under erstwhile Service T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue 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 13th 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 granted a personal hearing on 16t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 taken as credit shall be credited to the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amount specified in the relevant form under Rule 117(3) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 Demand Pending at Page No. of Writ Petition Compilation 1 V(72)(15) 39/APP/AD J/JSR/2009/1083, Dated 06.08.2009 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nergy Ltd. vs. State of Bihar & others reported in (2021) SCC online SC 801 para 25 to 27. Therefore, the impugned order in original may be quashed. Petitioner has no objection if such a proceeding can be initiated under the erstwhile C.E.A and the Finance Act for alleged contraventions. 9. Counter affidavit has been filed by the respondents inter alia taking the following stand: According to the respondents the appellant has an efficacious and alternative remedy against the order-in-original before the appellate authority under Section 107 of the CGST Act, 2017. On the question of jurisdiction it has been stated that the circular dated 9th February, 2018 permits the proper officer to adjudge disputes under Section 73/74 of the CGST Act in respect of central tax not paid or short paid or input tax credit or central tax wrongly availed or utilized. Therefore, he has not exceeded his jurisdiction. The plea of the petitioner that the instant show cause notice should have been kept in call book till final decision of the appeal by the learned CESTAT is not tenable as the adjudication proceedings are to be time bound in terms of Section 73 (10) the C.G.S.T. Act, 2017, i.e. the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued under the relevant Sections indicated therein a summary thereof electronically in form GST DRC 01. Such notice was properly served on the petitioner on 22nd September, 2021 with an acknowledgement. Section 169 of the C.G.S.T. Act, 2017 relating to service of notice has also been referred to. According to the respondents, as per provisions of Rule 3 (1) of the CCR, 2004, a manufacturer can avail credit of any input service received by manufacturer or provider of output services. A manufacturer can take credit of input services received by them but the invoices having not been issued in the name of the petitioner noticee and the services having been rendered by another independent entity it did not qualify input service for the petitioner noticee unit. Therefore, the credit availed by them was irregular and has rightly been held so by the impugned order-in-original. It is submitted that provision for transition of pre GST era credit of Central Excise and Service Tax are contained in Section 140 of the C.G.S.T. Act. The tax payer base of both Central and State has undergone change and got subsumed under G.S.T. Two fundamental principles were kept in sight while transitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been adjudicated and where in the last adjudication order or the last order in appeal as it existed on 1st July, 2017, it was held that such CENVAT Credit is not admissible, then such CENVAT Credit or "disputed Credit" credited to ECL in terms of Section 140 of the Act shall not be utilized by a registered taxable person to discharge his tax liability till the order in original or the order in appeal is in existence. 11. However, we may observe at this stage that in the first place the CENVAT Credit sought to be transitioned under Section 140 of the C.G.S.T. Act was never subjected to any adjudication order under the existing law that is the C.E.A. or the Finance Act. Secondly, the guidance note or the circular dated 23rd February, 2018 does not throw light on whether a proceeding under Section 73 of the C.G.S.T. Act can be initiated for transition of CENVAT Credit which is alleged to be inadmissible under the pre existing laws. 12. However, learned counsel for the respondent submits that since the petitioner has an alternative remedy of appeal under Section 107 of the C.G.S.T. Act he may be relegated to raise all these issues before the appellate authority. 13. We have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai and Harbanslal Sahni v. Indian Oil Corporation Ltd. Recently, in Radha Krishan Industries v. State of Himachal Pradesh a two judge Bench of this Court of which one of us was a part of (Justice DY Chandrachud) has summarized the principles governing the exercise of writ jurisdiction by the High Court in the presence of an alternate remedy. This Court has observed: "28. The principles of law which emerge are that: (i) The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well; (ii) The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person; (iii) Exceptions to the rule of alternate remedy arise where (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged; (iv) An alternate remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with them in a writ petition." 27. The above principle was reiterated by a three-judge Bench of this Court in Executive Engineer v. Seetaram Rice Mill. In that case, a show cause notice/provisional assessment order was issued to the assessee on the ground of an unauthorized use of electricity under Section 126(1) of the Electricity Act 2003 and a demand for payment of electricity charges was raised. The assessee contended that Section 126 was not applicable to it and challenged the jurisdiction of the taxing authorities to issue such a notice, before the High Court in its writ jurisdiction. The High Court entertained the writ petition. When the judgment of the High Court was appealed before this Court, it held that the High Court did not commit any error in exercising its jurisdiction in respect of the challenge raised on the jurisdiction of the revenue authorities. This Court made the following observations: "81. Should the courts determine on merits of the case or should they preferably answer the preliminary issue or jurisdictional issue arising in the facts of the case and remit the matter for consideration on merits by the competent authority? Again, it is somewhat difficu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributor; and whether the first respondent has the legislative competence to levy duty on the sale of electricity to an intermediary distributor in view of the decision of this Court in State of AP (supra). The question of whether the appellant is liable to file returns under Sections 6B(1) and 5A of the Act is directly related to the issue of whether the sale of electricity by the appellant to BSEB falls under the charging provisions of Section 3(1). The questions raised by the appellant can be adjudicated without delving into any factual dispute. Thus, the present matter is amenable to the writ jurisdiction of the High Court." 14. The Apex Court has laid down that 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. If there is no dispute on facts whether the action of the respondent was without jurisdiction or not can be examined in exercise of Article 226 of the Constitution of India. As such the presence of alternative remedy of appeal under Section 107 of the C.G.S.T. Act does not operate as a restriction to delve upon and decide the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( 40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed." (2) The repeal of the said Act and the amendment of the Finance Act 1994 (32 of 1994) (hereinafter referred to as "such amendment" or amended Act" as the case may be) to the extent mentioned in the 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 previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts: PROVIDED that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or (d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflected in respect of any offence or violation committed against the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iately after being passed or made. It may take effect under these circumstances: (1) Immediately upon being passed or made; (2) At a point in the future that is specified upon the legislation being passed or made, or that can be determined under criteria specified upon the legislation being passed or made; (3) Only if some future event occurs (which may be a real-world event or an event such as making an order-designed to commence the legislation); (4) with retrospective effect from a past time; or (5) not at a particular point in time, but in relation to things done or events occurring during a period specified upon the legislation being passed or made, with it being possible to specify either a single period for all purposes or different period for different purposes. 17. Transitional provisions, as the learned author has observed may be relatively unimportant in that by definition they effect few cases but they are extremely complicated and they can be important to the cases affected. The necessity for saving and transitional provisions is a consequence of the change in law, whether the change is caused by the new statute law or by the repeal, repeal and substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under Section 37;] (b) he has received the goods or services or both." [Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services-- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.] (c) subject to the provisions of [section 41 or Section 43A], the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: PROVIDED that wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 adjudicating authority does not hold that the transition of CENVAT Credit under Section 140 of the C.G.S.T. Act by the petitioner and relating to the period just before the appointed date i.e. 1st July, 2017 are not one which are inadmissible to be credited in terms of section 16 (2) of the C.G.S.T. Act. The Show cause notice itself alleges contravention of the C.E.A., Finance Act, 1994, read with C.C.R., 2004. As such, sub clause (i) of proviso to section 140 does not apply to the case of the petitioner at hand. It is neither the allegation against the petitioner that he had not furnished his returns required under the existing law for the period of six months immediately preceding the appointed date as per clause (ii) to the proviso to Section 140. In substance, the contraventions which have been alleged and the proceedings which have been initiated under Section 73 (1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct without any check or proceeding against him. We have to then advert to Section 174 of the C.G.S.T. Act to find the answer. Section 174 relates to repeal and saving and has been engrafted under the chapter XXI relating to Miscellaneous Provisions. Pursuant to the 101 Constitutional amendment, Articles 246 A, 269 A and 279 A were inserted and certain Articles like section 268 A were repealed. The amendment act brought drastic changes in the taxing powers of the Centre and the State. Certain other articles such as Article 248, 249, 250, 268, 269, 270, 271, 286 and 366 and 368 were amended. Besides that the 6th and the 7th schedules were also amended. Article 246 A provided for a federal fiscal mechanism. By this article the State legislatures are empowered to make laws regarding G.S.T. Tax imposed by the Union or by that State and to implement them in intra State trade. The Centre continues to have exclusive power to make G.S.T. laws regarding inter State trade. Both the union and states in India came to have simultaneous powers to make laws on the goods and services. Article 269 A deals with levy and collection of goods and service tax in the course of inter-State trade or commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts. Sub clause (e) of subsection 2 of Section 174 is relevant for purposes of the present case which are again reproduced hereunder: "(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;" 21. It provides that the repeal of the existing laws shall not affect any investigation, inquiry, verification (including Scrutiny and audit), assessment proceedings, adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to divest the right to proceed under the statute, which, except as to proceedings past and closed, is considered as if it had never existed." (Vol. I, para 2042, pp. 522-523) 10. Similarly in Crawford's Interpretation of Laws it has been said: "Effect of Repeal, Generally.- In the first place, an outright repeal will destroy the effectiveness of the repealed act in future and operate to destroy inchoate rights dependent on it, as a general rule. In many cases, however, where statutes are repealed, they continue to be the law of the period during which they were in force with reference to numerous matters." (pp. 640- 641) 11. The observations of Lord Tenterden and Tindal, C.J. referred in the above-mentioned passages in Craies on Statute Law also indicate that the principle that on repeal a statute is obliterated is subject to the exception that it exists in respect of transactions past and closed. To the same effect is the law laid down by this Court. (See: Qudrat Ullah v. Municipal Board [(1974) 1 SCC 202 : (1974) 2 SCR 530] , SCR at p. 539)" 22. Therefore, it is clear that the repeal of the existing laws upon coming of the G.S.T. law regime did not leave a vacuum as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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