Transitional GST credit classification upheld for inputs and capital goods, with no vested right to credit in transit.

Section 140 of the CGST Act validly distinguished between inputs and capital goods for transitional credit, allowing credit for inputs received after the appointed day while not extending the same facility to capital goods in transit. The Court held that tax credit is a legislative concession subject to statutory conditions, and in economic legislation the classification was not arbitrary merely because it created hardship or imperfectly treated comparable items. The challenge under Articles 14 and 19(1)(g) therefore failed, and no vested right was shown because credit on capital goods arose only on receipt of the goods.

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Issues: Whether the denial of transitional credit of excise duty on capital goods in transit on the appointed day, while allowing transitional credit for inputs in transit, was violative of Articles 14 and 19(1)(g) of the Constitution of India and whether it took away any vested right to credit.

Analysis: The transition from the pre-GST regime to the GST regime was governed by the transitional credit scheme in Chapter XX of the CGST Act, particularly section 140. The statutory scheme continued credit migration for unutilized CENVAT credit and expressly allowed credit of duty paid on inputs received after the appointed day, but it did not create a similar facility for capital goods received after the appointed day though duty had been paid earlier. The distinction between inputs and capital goods had already been recognised in earlier indirect tax regimes, and tax credit operates as a concession subject to legislative conditions. In matters of economic legislation, the legislature enjoys wider latitude, and a classification will not fail merely because it is imperfect or results in hardship. The petitioner also could not establish that the provision deprived it of any accrued or vested right, because credit on capital goods arose only upon receipt of the goods.

Conclusion: The distinction drawn by section 140 between inputs and capital goods was held to be valid and not arbitrary, and the challenge under Articles 14 and 19(1)(g) failed.

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