Registered person entitled to transition CENVAT credit to GST despite pending show-cause proceedings under Section 140(1)

The HC set aside the respondent's order disallowing transition of CENVAT credit to GST regime under Section 140(1) of CGST Act. The court held that a registered person is entitled to transition available CENVAT credit as of 30.06.2017 regardless of pending proceedings. The respondent's interpretation that ongoing show-cause notice under Central Excise Act bars credit transition was rejected. The court clarified that a show-cause notice alone does not prevent credit transition, though the decision does not determine ultimate credit eligibility. Pending proceedings to continue without influence from this order.

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Issues:
Transition of CENVAT credit to GST regime; Interpretation of Section-140(1) of CGST Act; Eligibility of petitioner for CENVAT credit; Disallowance of CENVAT credit by respondent; Show-cause notices and Orders under Central Excise Act and GST Act.

Analysis:
The petitioner, previously registered under the Central Excise Act, transitioned CENVAT credit to the GST regime, facing an audit objection and subsequent show-cause notices. The first show-cause notice was issued in 2019, leading to an Order of abeyance in 2021 due to CESTAT's favorable decision. However, a second show-cause notice in 2021 demanded repayment of CENVAT credit, interest, and penalty. The petitioner contested the disallowance, citing Section-140(1) of the CGST Act, claiming proper transition of credit. Respondents argued the ineligibility of the petitioner for credit transition under the GST Act.

The Court noted that the respondent's Order did not address the petitioner's eligibility for CENVAT credit but focused on the pending show-cause notice under the Central Excise Act. The respondent held that the credit transition was impermissible due to the ongoing enquiry on credit eligibility. The Court analyzed Section-140(1) of the CGST Act, emphasizing the entitlement of a registered person to transition CENVAT credit available as of 30.06.2017, regardless of pending proceedings. The respondent's interpretation of "eligible duties carried forward" was rejected, stating that a show-cause notice alone does not bar credit transition.

Consequently, the Court set aside the respondent's Order disallowing the transition of CENVAT credit, cautioning that the decision does not determine the ultimate eligibility of the petitioner for credit. The Court directed the pending proceedings to proceed without influence from this Order. No costs were awarded, and pending petitions were closed as a result of the judgment.

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