2021 (7) TMI 1 - Commissioner - GST

Appeal rejected, Education Cess not offset against GST Liability. Clear legislative intent excludes transition.

The appeal was rejected, and the impugned Order-in-Original was upheld. The appellant was not entitled to carry forward and set off unutilized Education ... Transitional arrangements for input tax credit under Section 140(1) of the CGST Act, 2017 - Concept of eligible duties and scope of Explanation 1/Explanation 2 to Section 140 - Explanation 3 to Section 140 - exclusion of cesses from transition - Furnishing of Form GST TRAN-1 and Rule 117 of the CGST Rules, 2017 - Distinction between cess and tax/duty; cesses not subsumed under GST - Input tax credit as concession not a vested right - CBIC Circular No.87/06/2019-GST - administrative clarification on transition of cessesTransitional arrangements for input tax credit under Section 140(1) of the CGST Act, 2017 - Explanation 3 to Section 140 - exclusion of cesses from transition - Furnishing of Form GST TRAN-1 and Rule 117 of the CGST Rules, 2017 - Distinction between cess and tax/duty; cesses not subsumed under GST - Input tax credit as concession not a vested right - CBIC Circular No.87/06/2019-GST - administrative clarification on transition of cesses - Carry forward of Education Cess, Secondary & Higher Education Cess and Krishi Kalyan Cess through TRAN-1 into the GST regime is not permissible. - HELD THAT: - The adjudicating authority examined Section 140(1) read with its Explanations and Rule 117 TRAN-1 and concluded that transition of unutilised cesses cannot be allowed. Explanation 3 to Section 140 expressly excludes any cess not specified in Explanations 1 or 2 from being treated as eligible for transition. The three cesses claimed were not specified in Explanation 1 or 2 and therefore fall within the exclusion. The authority held that these cesses were not subsumed within the GST levy and had become dead claims (for Education Cess and SHE Cess after their discontinuance) prior to the appointed day; consequently they could not be carried forward as ITC against GST liabilities. The order also applied the principle that input tax credit is a statutory concession which the legislature may curtail by conditions; entitlement to carry forward credit is therefore subject to the specific terms of Section 140 and its explanations. The authority further relied on the statutory scheme, Rule 117 (TRAN-1 requirements), and the legislative/administrative intent reflected in Explanation 3 and the CBIC Circular which recognises that cesses not specified in the Explanations are not to be transitioned. For these reasons the claim to carry forward the impugned cesses was rejected and the demand, interest and penalty in the impugned order were sustained. [Paras 7, 8]Appeal dismissed; impugned Order-in-Original confirmed and carry forward of the specified cesses through TRAN-1 held not permissible.Final Conclusion: The appeal is rejected; the Commissioner's Order-in-Original confirming recovery of the carried forward cesses (Education Cess, SHE Cess and Krishi Kalyan Cess), payment of interest and imposition of penalty is upheld. Issues Involved:1. Whether the carried forward of Education Cess, Secondary & Higher Secondary Education Cess, and Krishi Kalyan Cess (KKC) through TRAN-1 is permissible under GST law.Detailed Analysis:1. Carried Forward of Cess under GST Law:The primary issue for consideration was the permissibility of carrying forward Education Cess, Secondary & Higher Secondary Education Cess, and Krishi Kalyan Cess (KKC) through TRAN-1 under GST law. The judgment concluded that the appellant was not entitled to carry forward these cesses as Input Tax Credit (ITC) against the Output GST Liability after 01.07.2017. It was emphasized that the set-off and adjustments could only be allowed if they fell within the definition of “Eligible Duties” or “Eligible Taxes and Duties” as defined in Explanations 1 and 2 of Section 140 of the CGST Act. Explanation 3 explicitly excluded cesses from being eligible for carry forward and set-off.2. Dead Claim of Unutilized Cess:The judgment found that the credit of Education Cess and Secondary and Higher Education Cess, which could not be utilized against the Output Education Cess and Secondary and Higher Education Cess Liability before the Finance Act, 2015, became a dead claim in 2015. Therefore, there was no question of allowing a carry forward and set-off after a gap of two years against the Output GST Liability from 01.07.2017.3. Nature of CENVAT Credit:It was stated that CENVAT credit or Input Tax Credit under the GST Regime is a concession and a facility, not a vested right. The transition and carry forward of the Input Tax Credit of taxes and duties paid under earlier Indirect Tax Regimes were subject to conditions specified in Section 140 of the CGST Act. The unutilized Education Cess and Secondary and Higher Education Cess in the hands of the appellant had become dead CENVAT Credit claims in 2015, thus there was no question of carrying them forward and setting them off against Output GST Liability post 01.07.2017.4. Distinction Between Cess and Tax:The judgment highlighted the distinction between cess and tax. Cess, such as Education Cess and KKC, is levied for specific purposes (e.g., education enhancement, agriculture advancement) and is not a general tax or duty. The GST Law did not subsume these cesses, and hence their transition into the GST regime was not permissible.5. Commodities Excluded from GST:The judgment noted that only six commodities were left out of the GST regime and continued to be covered by earlier existing laws of Excise Duty and VAT Law. The three types of cesses involved were not subsumed in the new GST Laws, and therefore, transitioning them into the GST regime and giving them credit against Output GST Liability was not possible.6. Statutory Provisions and Case Laws:The judgment referred to several statutory provisions and case laws to support its conclusions. It cited the CGST Amendment Act, 2018, and relevant circulars clarifying the non-inclusion of cesses in the definition of eligible duties. The judgment also referred to the decisions of the Hon’ble Supreme Court in cases like CCE Vs. Dai Ichi Karkaria Ltd., Eicher Motors Limited Vs. CCE, and Unicorn Industries vs UOI, which emphasized that additional levies like Education Cess and KKC do not take the color of basic levy and cannot be transitioned as CENVAT Credit under GST.Conclusion:The appeal was rejected, and the impugned Order-in-Original was upheld. The appellant was not entitled to carry forward and set off unutilized Education Cess, Secondary and Higher Education Cess, and Krishi Kalyan Cess against the GST Output Liability. The judgment emphasized that the statutory provisions and legislative intent were clear in excluding these cesses from being transitioned into the GST regime.