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TMI Blog2025 (2) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... cility providing the manufacturers to claim credit of the duties paid on inputs as well as capital goods continued even after 01.07.2017 but with certain modifications. CGST Act contained transitional provision according to which unutilized CENVAT credit was eligible to be brought over to the GST regime. The statute made provisions to enable the assessee to avail the credit of duty paid on inputs which were in transit as on 01.07.2017. But under the CENVAT Credit Rules, 2017 which were framed by the Central Government by virtue of powers conferred upon it under Section 37 of the Central Excise Act, 1944, no facility has been provided to enable the assessee to claim credit of the excise duty paid on such capital goods. The word "capital goods" found its definition also in Rule 2(A) of the CENVAT Credit Rules, 2004. Sub-rule (1) of Rule '3' provided that the manufacturer or purchaser of final products are a provider of output service shall be allowed to claim credit of the CENVAT credit of the various duties specified in Clauses (i) to (xi) contained therein paid on any input or capital goods received in the factory of manufacturer of final product or by the provider of output servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital goods in transit, as established in RSPL Limited. The claim for transitional credit denied. The distinction between inputs and capital goods under the CGST Act was lawful and justified.
There are no error in the impugned orders - application dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... tal goods in transit. Respondent no. 4 requested the petitioner to reverse the said ineligible credit urgently under intimation to the office. 5. The petitioner submitted his response which did not satisfy respondent no. 4. By another communication dated 23.10.2019 (Annexure '4'), respondent no. 4 pointed out to the petitioner sub-section (2) of Section 140 of the CGST Act, 2017 read with Rule 117 of the CGST Act, 2017. He was of the opinion that by virtue of the explanation under Section 140(2) of the CGST Act, 2017, the unavailed CENVAT credit means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law. Respondent no. 4 expressed his opinion that under Section 140(2) of the CGST Act, 2017, transitional credit on the amount of Rs. 8,62,566/- is not available to the petitioner. The Order-in Original 6. A show-cause notice in prescribed form DRC-1 proposing recovery of credit amounting to Rs. 8,62,566/- was issued to the petitioner vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 9. Learned counsel for the petitioner has assailed the order-in-original (Annexure '6') and the Appellate Order (Annexure '7'). Once again, his submission is that the definition of the terms 'input' under Rule 2(g) of the CENVAT Credit Rules 2017 would take within its' fold the capital goods. It is submitted that both the authorities below have taken an erroneous view and have passed the impugned order under wrong notion of law. Submission on behalf of Union of India 10. The writ application has been contested by learned A.S.G. It is submitted that in the instant case, the core issue is as to whether or not the duty paid on excisable goods received in the factory premise after 30th of June, 2017 were eligible for seamless transmission for credit from the then existing law to GST law regime by way of "input" as defined in Rule 2(g) of the said CENVAT Credit Rule, 2017. It is his submission that in view of specific deletion of the definition of capital goods and introduction of absolutely new definition of input in the CENVAT Credit Rule, 2017 by superseding/rescinding the earlier CENVAT Credit Rule, 2004 which contained definition of capital goods, the petitioner would not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST statues (before 01.03.2017) and those which were brought with effect from 01.07.2017 under the GST regime in relation to credit of excise duty paid on inputs on capital goods. Prior to 01.07.2017, a manufacturer was entitled to claim CENVAT credit of duty paid by him on inputs as well as on the capital goods utilized in the manufacturing process, subject, however, to the conditions which were placed in the CENVAT Credit Rules, 2004. There is no difficulty in understanding that the facility providing the manufacturers to claim credit of the duties paid on inputs as well as capital goods continued even after 01.07.2017 but with certain modifications. CGST Act contained transitional provision according to which unutilized CENVAT credit was eligible to be brought over to the GST regime. The statute made provisions to enable the assessee to avail the credit of duty paid on inputs which were in transit as on 01.07.2017. But under the CENVAT Credit Rules, 2017 which were framed by the Central Government by virtue of powers conferred upon it under Section 37 of the Central Excise Act, 1944, no facility has been provided to enable the assessee to claim credit of the excise duty paid on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word 'input tax' has also been defined under Section 2(62) to mean the Central Tax, State Tax, Integrated Tax or Union Territory Tax charged on any supplier of goods or services or both made to a registered person and would include several taxes specified in Clauses (a) to (e) contained therein. Again the word 'input tax credit' is defined under Section 2(63) to mean the credit of input tax. The definitions mentioned above are being produced hereunder for a ready reference:- "2(19) "capital goods" means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business; 2(59) "input" means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; 2(62) "input tax" in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes (a) the integrated goods and services tax charged on import of goods, (b) the tax payable under the provisions of subsections (3) and (4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act. Explanation.-For the purposes of this sub-section, the expression "unavailed CENVAT credit" means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law. (3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semifinished or finished Substituted by Act 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has been paid by the supplier under the Substituted by Act 12 of 2020, S. 128(d), for "existing law" (w.e.f. 18-5-2020) [existing law, within such time and in such manner as may be prescribed], subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day: Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days: Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section. (6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished Substituted by Act 12 of 2020, S. 128(e), for "goods held in stock on the appointed day subject to" (w.e.f. 18-5-2020) [goods held in stock on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alised 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 Substituted by Act 12 of 2020, S. 128(h), for "credit can be reclaimed subject to" (w.e.f. 18-5-2020). [credit can be reclaimed within such time and in such manner as may be prescribed, 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. Explanation1. - For the purposes of Substituted by Act 31 of 2018, S. 28 for " sub-sections (3), (4)" (w.r.e.f. 1-7-2017) [sub-sections (1), (3), (4)] and (6), the expression "eligible duties" means - (i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); (ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Tariff Act, 1975 (51 of 1975).] This clause provides for transitional arrangements for carrying forward of input tax credit available under the existing law. (Notes on Clauses) 18. From the above discussions, it is evident that the GST regime also continued with the same facility, though in a different format. No distinction between duty paid on capital goods or inputs has been made under the GST Act. Sub-section (1) of Section 16 allowed every registered person, subject to conditions and restrictions as may be prescribed to take credit of input tax charged on any supply of goods or services or both to him. The word 'input tax' has been defined to mean various taxes charged on any supply of goods or services or both to a registered person. A reading of subsection (3) of Section 16 makes it crystal clear that it provides for claim of depreciation of tax component of the cost of capital goods or plant and machinery under the Income Tax Act, 1961 and if such claim has been made by a registered person, the input tax credit on such tax component would not be allowed. Sub-section (1) and (2) of Section 17 pertain to restriction of the tax credit when the goods or servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion unlawful? As noted, the fulcrum of the petitioner's argument was that this makes an artificial distinction between capital goods and inputs which has no rational relation to the purpose sought to be achieved. The subsidiary contention of the petitioner was that there is no reason why such distinction should have been made. On the other hand, the respondents had argued that granting of credit on the duty paid is in the nature of concession. For valid reason, law can always be framed not granting such concession in certain cases. 19. The legislature, as we have noted, made a clear and conscious demarcation between capital goods and inputs when it comes to availing credit of the duties paid on the goods which are in transit. When the entire tax structure was being replaced by the GST provisions, there would arise a need for making transitional arrangements. Chapter XX of the CGST Act, as noted, contains transition provisions. Section 140 contained in the said chapter makes detailed provisions for transitional arrangements for input tax credit. Subject to contentions and in the manner as may be prescribed, the unused tax credit would be migrated to the GST regime. This secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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