Transitional tax credit claims tied to past CENVAT violations: s.73 CGST proceedings rejected as lacking jurisdiction, order quashed.

The dominant issue was whether proceedings under s.73 CGST Act could be initiated to deny transitional credit where the alleged inadmissibility related to CENVAT credit under the repealed Central Excise/Finance Act read with the CENVAT Credit Rules. The HC held that the alleged contraventions pertained to the "existing law" regime, and s.174 CGST Act preserves the power to institute proceedings for such inchoate rights under the earlier statutes; permitting adjudication under CGST for past CENVAT violations would create legal uncertainty and amount to lack of jurisdiction. Consequently, the impugned adjudication and order-in-original under s.73(9) CGST Act were quashed.

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Issues Involved:
1. Jurisdiction of the adjudicating authority under the CGST Act, 2017.
2. Validity of the proceedings initiated under Section 73 of the CGST Act, 2017.
3. Applicability of Section 174 of the CGST Act, 2017.
4. Transition of CENVAT Credit under Section 140 of the CGST Act, 2017.

Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority under the CGST Act, 2017:
The petitioner challenged the jurisdiction of the respondent No. 1, Additional Commissioner, CGST & Excise, Jamshedpur, to decide upon the availment of CENVAT credit by the petitioner under the pre-GST regime. The petitioner argued that proceedings for wrongful availment of CENVAT Credit should have been initiated under the erstwhile Central Excise Act and Finance Act, not under the CGST Act. The court noted that the impugned order related to availment of CENVAT Credit allegedly inadmissible under the Central Excise Act and Finance Act read with CENVAT Credit Rules, 2004. It was determined that the adjudicating authority did not have jurisdiction under the CGST Act to decide on the availment of CENVAT Credit accrued under the previous regime.

2. Validity of the Proceedings Initiated under Section 73 of the CGST Act, 2017:
The petitioner contended that the proceedings under Section 73 of the CGST Act were initiated for alleged wrongful availment of CENVAT Credit, which should have been dealt with under the pre-GST laws. The court examined the provisions of Section 73 of the CGST Act, which deals with cases of tax not paid, short paid, or input tax credit wrongly availed or utilized. The court concluded that Section 73 of the CGST Act does not cover CENVAT Credit, which was part of the erstwhile regime. Therefore, the initiation of proceedings under Section 73 of the CGST Act was beyond the jurisdiction of the adjudicating authority.

3. Applicability of Section 174 of the CGST Act, 2017:
The court analyzed Section 174 of the CGST Act, which deals with the repeal and saving provisions. It was noted that the repeal of the existing laws (Central Excise Act, Finance Act, etc.) did not affect any investigation, inquiry, verification, assessment proceedings, adjudication, or other legal proceedings for recovery of arrears or remedy in respect of any duty, tax, surcharge, penalty, fine, interest, etc. The court emphasized that legal proceedings for inchoate rights could be continued under the existing laws as if they had not been repealed. Therefore, proceedings for wrongful availment of CENVAT Credit could still be initiated under the erstwhile laws.

4. Transition of CENVAT Credit under Section 140 of the CGST Act, 2017:
The court examined the provisions of Section 140 of the CGST Act, which allows for the transition of CENVAT Credit from the pre-GST regime to the GST regime. The petitioner argued that the CENVAT Credit transitioned under Section 140 was not inadmissible under the CGST Act. The court noted that the conditions under which a registered person is not entitled to take credit of any input tax are specified in Section 16(2) of the CGST Act. It was found that the show cause notice and the impugned order did not allege any contravention under Section 16(2) of the CGST Act but rather under the erstwhile laws. Consequently, the court held that the proceedings for transition of CENVAT Credit alleged to be inadmissible should be conducted under the existing laws, not under the CGST Act.

Conclusion:
The court quashed the impugned adjudication proceedings and the order in original dated 30th March, 2022, as being without jurisdiction. The respondent authorities were given the liberty to initiate proceedings under the provisions of the existing laws, i.e., Central Excise Act, 1944, Finance Act, 1994 read with CENVAT Credit Rules, 2004, against the petitioner for the relevant tax period in accordance with the law.

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