2021 (7) TMI 223 - HC - GST

Dismissal of writ petition on transfer of tax credit underscores need for compliance and proper documentation

MMD Heavy Machinery (India) Pvt. Ltd. Versus The Assistant Commissioner, The Additional Commissioner of GST, The Assistant Commissioner of CT, The Assistant Commissioner of CT, The Assistant Commissioner, The Chairman, Goods and Services Tax Network (East Wing), The Assistant Commissioner (State Tax)

The court dismissed the writ petition, denying the transfer or refund of unutilized input tax credit. The petitioner was advised to pursue remedies under ... Transfer of accumulated unutilized Input Tax Credit - shifting of factory from one state to another - Rule 10 of the CENVAT Credit Rules, 2004 - HELD THAT:- There are no transactions within the State of Tamil Nadu after 2016. The petitioner had no scope for utilizing the same. Sub-clause (ii) to first proviso to Section 140 of the Tamil Nadu General and Service Tax Act, 2017 makes it clear that a registered person shall not be allowed to take credit where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date - The credit would have survived for being transitioned under the Tamil Nadu Goods and Service Tax Act, 2017 provided the petitioner continued to have transactions in Tamil Nadu. It is confined to credit which was carried forward under any existing law or goods which were held in stock on the appointed date. The amount of input tax credit, even if it was lying unutilized as on 01.07.2017 cannot be transitioned to a new registration obtained after implementation of the respective Goods and Service Tax enactments to its Sri City Unit in Andhra Pradesh in the light of Section 25 (5) of the respective Goods and Service Tax Enactments - petitioner’s case also does not fall within the purview of Section 54 of the Tamil Nadu Goods and Service Tax Act, 2017 read with Chapter X of the Tamil Nadu Goods and Service Tax Rules, 2017. Refund of unutilized credit, it is permissible under Section 54(3) of the TNGST Act, 2017, only if such credit is lying unutilized at the end of the tax period. The prayer of the petitioner for either transfer or refund of such input tax which was credit lying utilized under TNVAT Act, 2006 does not arise - It is quite possible that the petitioner while removing the capital goods, work in progress and inputs had not discharged its liability under Rule 3(5) of the CENVAT Credit Rules, 2004. It would require for detailed examination by the concerned jurisdictional officer. Therefore, refund of input tax credit lying unutilized which has been transitioned by filing with Trans-1 after the implementation of Central Goods and Services Tax Act, 2017 under Section 54 of the Central Goods and Services Tax Act, 2017 as in the Section 54 of the the Tamil Nadu Goods and Services Tax Act, 2017 cannot be considered. There are no merits in this Writ Petition for either transfer of refund of input tax Credit (CENVAT Credit) which was transitioned by the petitioner by filing Trans-1 - petition dismissed. Issues Involved:1. Transfer of unutilized input tax credit (ITC) from Tamil Nadu to Andhra Pradesh.2. Refund of unutilized ITC under the Central Goods and Service Tax Act, 2017 (CGST Act).3. Compliance with Rule 10 of the CENVAT Credit Rules, 2004.4. Applicability of Section 54 of the CGST Act for refund claims.5. Verification of input tax credit carried forward in returns.Detailed Analysis:1. Transfer of Unutilized Input Tax Credit from Tamil Nadu to Andhra Pradesh:The petitioner sought to transfer unutilized ITC accumulated under the CENVAT Credit Rules, 2004, from its Chennai unit to its new unit in Sri City, Andhra Pradesh. The petitioner argued that this transfer should be allowed under Section 18(3) of the CGST Act, 2017, and Rule 41 of the CGST Rules, 2017. However, the court noted that Section 18(3) and Rule 41 do not contemplate transfers between units in different states unless there is a sale, merger, demerger, amalgamation, lease, or transfer of business. The court also emphasized that separate state-wise registrations under Section 25 of the CGST Act treat each unit as distinct persons, thereby disallowing the transfer of credits between states.2. Refund of Unutilized ITC under the CGST Act:The petitioner alternatively sought a refund of the unutilized ITC. The court highlighted that refunds under Section 54 of the CGST Act are permissible only in specific circumstances, such as zero-rated supplies or inverted duty structures. The court found that the petitioner’s case did not fall within these specified circumstances. Additionally, the petitioner did not follow the prescribed manner and form for claiming refunds, nor did it comply with the limitation periods under Section 54.3. Compliance with Rule 10 of the CENVAT Credit Rules, 2004:The petitioner had shifted its factory from Chennai to Andhra Pradesh in June 2016 but did not comply with Rule 10 of the CENVAT Credit Rules, 2004, which mandates the transfer of stock and capital goods along with the factory to the new site. The petitioner’s failure to follow this procedure precluded the automatic transfer of the CENVAT credit. The court noted that the petitioner, being a seasoned assessee, should have been aware of these requirements and acted accordingly at the time of shifting.4. Applicability of Section 54 of the CGST Act for Refund Claims:The court reiterated that Section 54 of the CGST Act provides for refunds only under certain conditions and within specific time frames. The petitioner’s claim for a refund of unutilized ITC did not meet these conditions. The court also noted that the petitioner had not utilized the available options under the Central Excise Rules, 2002, such as claiming rebates or refunds for exported goods.5. Verification of Input Tax Credit Carried Forward in Returns:The court emphasized the need for proper verification of the input tax credit carried forward in the petitioner’s returns. The petitioner had claimed credit balances in its returns, but the court found discrepancies and irregularities in the petitioner’s filings, including the failure to declare export clearances in ER-1 returns and the non-compliance with Rule 10 of the CENVAT Credit Rules, 2004. The court directed the jurisdictional officer to examine the correctness of the input tax credit claims and pass appropriate orders within three months.Conclusion:The court dismissed the writ petition, denying the transfer or refund of the unutilized input tax credit. The petitioner was advised to pursue remedies under the Central Excise Act and Rules and then approach the authorities under the GST enactments for any potential refunds. The court’s decision underscored the importance of compliance with statutory provisions and proper documentation for claiming tax credits and refunds.