2022 (8) TMI 976 - HC - GST

CGST Act Challenge: Jurisdictional Dispute Over Tax Credit Validity Halts Penalty Recovery Proceedings

The HC examined the jurisdictional challenge to the Adjudicating Authority's power under CGST Act, 2017 to disallow CENVAT Credit from the previous ... Disallowance of CENVAT Credit, carried forward by filing TRAN-1 - Section 140 of CGST Act, 2017 - HELD THAT:- There is a distinction between CENVAT Credit carried forward from the previous regime and the Input Tax Credit specifically mentioned in Section 73 of the CGST Act. Based on these submissions, the very jurisdiction of the Adjudicating Authority under CGST Act, 2017 in disallowing the CENVAT Credit available to the petitioner, has been questioned. It is submitted that the proceeding being without jurisdiction any recovery of tax or penalty pursuant thereto would be improper in the eye of law. Learned counsel for the Respondent CGST Mr. Amit Kumar has opposed the prayer. He has referred to the wordings of Section 73 of CGST Act, 2017 wherein the proper officer is empowered to initiate proceeding for wrongful availment or utilization of Input Tax Credit. However, he seeks and is allowed three weeks’ time to file counter affidavit. One week time thereafter is allowed to the petitioner to file reply, if so advised. List the case on 15.09.2022. Issues:Jurisdiction of Adjudicating Authority under CGST Act, 2017 to disallow CENVAT Credit carried forward from the previous regime.Analysis:The judgment involves a challenge to the jurisdiction of the Adjudicating Authority under the CGST Act, 2017 regarding the disallowance of CENVAT Credit carried forward by the petitioner from the pre-GST regime. The petitioner's counsel argued that the Adjudicating Authority wrongly assumed jurisdiction under Section 73 of the Act to decide on the irregular CENVAT Credit availment. Reference was made to pending litigations and stays on tax recovery amounts, highlighting the ongoing legal proceedings related to the issue. The counsel emphasized the distinction between CENVAT Credit and Input Tax Credit, questioning the authority's jurisdiction based on the specific provisions of the CGST Act. Various legal precedents were cited to support the argument that the Adjudicating Authority lacked the power to adjudicate on CENVAT Credit matters, as it pertains to the pre-GST era.The petitioner sought an interim stay on the tax and penalty recovery adjudicated by the Adjudicating Authority, contending that the proceedings lacked jurisdiction, making any subsequent recovery improper in the eyes of the law. The counsel asserted that a writ petition challenging the authority's jurisdiction would be maintainable in this case. On the other hand, the Respondent representing the CGST opposed the petitioner's prayer, citing the provisions of Section 73 of the CGST Act, 2017 that empower the proper officer to initiate proceedings for wrongful availment or utilization of Input Tax Credit. The Respondent was granted three weeks to file a counter affidavit, with an additional week given to the petitioner for a reply.The court scheduled the case for further hearing on a specified date and directed that no coercive steps should be taken against the petitioner regarding the Order-in-Original passed by the Adjudicating Authority until the next hearing. Both parties were instructed to provide written notes, compilations of decisions, and relevant legal provisions they intended to rely on, at least three days before the next hearing date.