2022 (3) TMI 544 - HC - GST

CENVAT credit claims allowed for post-GST transition payments using Section 142(3) under Doctrine of Necessity

The HC allowed petitions by way of remand regarding CENVAT credit claims made after the GST transition cutoff date. Petitioners paid service tax on ... Refund of CENVAT Credit by way of cash - transitional credit - Doctrine of Necessity - Payment of service tax on reverse charge on 30.12.2017 which was otherwise eligible for Cenvat Credit - HELD THAT:- When the GST regime has come into effect from 01.07.2017, under which, the erstwhile tax legislation governing the field hitherto since has been repealed or extinguished, necessarily the Legislature had to bring transitional provisions which they have done so. Accordingly, Sections 140 to 142 have been brought under GST Act wherein Section 140 has been provided as 'Transitional arrangements for input tax credit'. For the purpose of claiming the input tax credit under the GST regime also which otherwise accrued under the erstwhile regime on 30.06.2017 mainly this transitional provision under Section 140 has been made, where, as has been quoted herein above, the registered person is entitled to take Cenvat credit in his electronic credit ledger carried forward in the return relating to the period ending with the day immediately preceding the appointed day. Though there was a balance in the credit insofar as the petitioners' case is concerned, as on 30.06.2017, for which the petitioners respectively made applications invoking Section 140(1) of the Act and such a credit has been carried forward under that Section. However, insofar the present claim made in these three cases are concerned, these credits were not available as on 30.06.2017, because, admittedly, these payments had been made only in the respective dates mentioned above in December 2017 and May 2018 - Once that payment has been made after the cut off date for making TRAN-1 application whether those amount/credit can be sought for to carry forward to the GST regime by making an application once again under Section 140(1) is the question. Merely because, the transitional provision has come into effect from 01.07.2017 and under Section 140(1) of the Act, the persons like the petitioners can make a claim only in respect of the credit which is already accrued as on 30.06.2017 and these credit had come into the account of the petitioners only subsequently, for which, claim under Section 140(1) could not have been made, the chance of making such an application to seek the refund or otherwise of such a credit which has subsequently accrued in the account of the petitioners, cannot be denied - this Court feels that, in these kind of special situations, for which, the provision if not Section 142(3), no other eligible provision is available. Therefore, this Court feels that, since it is a dire necessity, as these kind of situation necessarily to be met with by the Legislation, for which, these transitional provision has been brought in in the Statute Book, there can be no impediment for invoking Section 142(3) of the Act by invoking the “Doctrine of Necessity”. Since the language used in Section 142(3) of the Act is refund claim, the petitioner has made application for refund claim. However, under the erstwhile law, since the petitioners are not entitled to get any refund claim and their eligibility is confined only by taking the credit under Cenvat Credit Rules, beyond which, the relief cannot be stretched upon. The petitioners application atleast could have been considered by the respondents under Section 142(3) of the Act for the purpose of taking the credit and such credit could have been considered and allowed for carrying forward in the electronic credit ledger of the GST regime which is nothing but a different route than Section 140 and that is the only possibility for dealing with these kind of applications. Hence, this Court has no hesitation to hold that, the reasons stated by the respondents in these cases in passing the orders impugned to reject the claim made by the petitioners are not tenable or these reasons would not stand in the legal scrutiny. The matters are remitted back to the respondents for reconsideration - Petition allowed by way of remand. Issues Involved:1. Eligibility for Cenvat credit under the erstwhile regime.2. Transition to GST regime and claim of Input Tax Credit (ITC).3. Applicability of Section 140(1) of the GST Act.4. Applicability of Section 142(3) of the GST Act.5. Doctrine of Necessity in the context of transitional provisions.6. Rejection of refund claims by the respondents.Detailed Analysis:Eligibility for Cenvat Credit under the Erstwhile Regime:The petitioner, engaged in providing construction services, paid service tax under reverse charge for royalty payments to the Government of Tamil Nadu for mining stones. The petitioner claimed this as an input service credit under the erstwhile Cenvat Credit Rules, 2004. The service tax was paid for the period from 01.04.2016 to 31.07.2017.Transition to GST Regime and Claim of Input Tax Credit (ITC):With the introduction of GST on 01.07.2017, the petitioner could not claim the transitional credit for the service tax paid after this date. The petitioner paid the service tax only in December 2017, and the transitional credit claim period had expired by 27.12.2017. The petitioner sought to transfer this credit to the GST regime, which was denied by the respondents.Applicability of Section 140(1) of the GST Act:Section 140(1) allows a registered person to carry forward Cenvat credit to the GST regime. However, this provision was applicable only to credits accrued before 01.07.2017. Since the petitioner paid the service tax after this date, they could not file GST TRAN-1 to claim this credit under Section 140(1).Applicability of Section 142(3) of the GST Act:Section 142(3) allows for the refund of any amount of Cenvat credit, duty, tax, or interest paid under the existing law. The petitioner argued that their claim should be considered under this section for refund or credit transfer. The respondents, however, rejected the claim stating that there was no provision in the new regime to allow such refund or credit transfer.Doctrine of Necessity in the Context of Transitional Provisions:The court invoked the Doctrine of Necessity to address the peculiar situation faced by the petitioner. It held that Section 142(3) could be applied to allow the petitioner to carry forward the accrued credit to the GST regime, even though it was not explicitly provided for under the new regime. The court noted that denying the petitioner this relief would render them remediless.Rejection of Refund Claims by the Respondents:The respondents rejected the refund claims on the grounds that there was no provision in the new regime to allow the refund of input tax credit in cash or credit in the electronic ledger. The court found this reasoning untenable, given the peculiar circumstances and the legal provisions discussed.Judgment:The court set aside the impugned orders and remitted the matters back to the respondents for reconsideration under Section 142(3) of the CGST Act, 2017. The applications should be considered for carrying forward the accrued credit to the electronic credit ledger of the GST regime, not for refund in cash. The respondents were directed to pass necessary orders within six weeks, providing an opportunity for the petitioners to be heard.Conclusion:The court's judgment provided a resolution for the petitioners to carry forward their accrued Cenvat credit to the GST regime under the Doctrine of Necessity, ensuring they were not left without a remedy due to the transitional provisions.