2023 (7) TMI 1004 - HC - GST

Current management not liable for transitional credit before resolution plan approval under tax rules

M/s ESL Steel Limited Versus Principal Commissioner, Central Goods & Services Tax & Central Excise at Central Revenue Building, 5A, Main Road, Doranda, Ranchi, Additional Commissioner, Central Goods & Services Tax & Central Excise, Superintendent, Good & Services Tax & Central Excise

The HC upheld that the current management was not liable for transitional credit relating to the period before the resolution plan approval date, as it ... Irregular availment of transitional credit - current management was a taxpayer, or not, during the period of procurement of inputs or capital goods as availed in the TRAN-1 - obligation of past, on a new management - dues prior to the date when resolution plan was approved - HELD THAT:- After going through the relevant portion of the impugned order it can be safely held that the adjudicating authority was correct in holding that as the Apex Court in the case of Ghanshyam Mishra and Sons Private Ltd. [2021 (4) TMI 613 - SUPREME COURT] was of the view that the current management was not a taxpayer for the period prior to 04.06.2018. i.e., the date of change of management and therefore the liability of the earlier management should not be shifted to the current management. Likewise, the credit available to the earlier management will also not be available to the current management as the current management was not a taxpayer during the period of procurement of inputs or capital goods as availed in the TRAN-1 filed on 30.11.2022. Nevertheless, at the last portion of the order it misdirected itself in holding that the whole amount taken as transitional credit is liable to be recovered along with applicable interest and penalties. This part of the order is certainly against the ratio of the judgments passed by the Hon’ble Apex Court in the case of Ghanshyam Mishra and Sons Private Ltd. as such, the same requires interference. The petitioner can also not take credit of the ITC of the earlier period i.e., prior to 17.04.2018 (Annexure-1); the date on which the National Company Law Tribunal has approved the resolution plan of the Petitioner. Hence, the petitioner is not entitled to claim of Rs. 92,13,412/- which has been claimed by the Petitioner as Transitional credit by filing new TRAN-1 in light of the Order passed by Hon’ble Supreme Court in the case of Union of India Vrs. Filco Trade Centre Put. Ltd. [2022 (7) TMI 1232 - SC ORDER]. Application allowed in part. Issues Involved:1. Legality of the Order-in-Original confirming the demand of Rs. 6,02,34,616/-.2. Validity of the Demand-cum-Notice to Show Cause.3. Entitlement to restoration of Form TRAN-1.4. Restraint on coercive action for realizing any amount.5. Any other appropriate relief.Summary:Issue 1: Legality of the Order-in-Original confirming the demand of Rs. 6,02,34,616/-The petitioner challenged the Order-in-Original dated 24.02.2023, which confirmed a demand of Rs. 6,02,34,616/- under Section 74(9) of the CGST Act, 2017, citing irregular availment of transitional credit during 2017-18. The petitioner argued that the order was illegal and arbitrary, passed without considering their show cause reply and the Supreme Court's judgment in Ghanshyam Mishra and Sons Private Ltd. v. Edelweiss Asset Reconstruction Company Ltd. The court observed that as per the Supreme Court's judgment, no recovery or proceeding can continue against the petitioner for dues prior to 17.04.2018, the date on which the National Company Law Tribunal approved the resolution plan. The court found that the adjudicating authority misdirected itself by holding that the whole amount taken as transitional credit was liable to be recovered along with interest and penalties. Consequently, the Order-in-Original was quashed and set aside.Issue 2: Validity of the Demand-cum-Notice to Show CauseThe petitioner received a Demand-cum-Notice to Show Cause dated 09.02.2023, directing them to explain why ITC amounting to Rs. 6,02,34,616/- should not be imposed. The court noted that the adjudicating authority correctly held that the current management was not a taxpayer for the period prior to 04.06.2018, and thus the liability of the earlier management should not be shifted to the current management. However, the court also held that the credit available to the earlier management would not be available to the current management.Issue 3: Entitlement to restoration of Form TRAN-1The petitioner sought a direction to restore Form TRAN-1, arguing that they were entitled to it under the facts and circumstances. The court held that the petitioner could not take credit of the ITC for the period prior to 17.04.2018, the date on which the National Company Law Tribunal approved the resolution plan. Hence, the petitioner was not entitled to claim Rs. 92,13,412/- as transitional credit by filing new TRAN-1.Issue 4: Restraint on coercive action for realizing any amountThe petitioner requested to restrain the respondents from taking any coercive action for realizing any amount pursuant to the Order-in-Original. The court quashed the Order-in-Original and all consequential orders, thus restraining any coercive action based on the quashed order.Issue 5: Any other appropriate reliefThe court partly allowed the writ application, granting relief by quashing the Order-in-Original but denying the petitioner's claim to transitional credit for the period prior to 17.04.2018. Any pending I.A. was also closed.Conclusion:The court quashed the Order-in-Original confirming the demand of Rs. 6,02,34,616/- but held that the petitioner could not claim transitional credit for the period prior to 17.04.2018. The petitioner's request for restoration of Form TRAN-1 was denied, and the writ application was partly allowed.