Transitional credit on pre-GST capital goods remains available despite nil prior availment, subject to dual-regime eligibility.
Section 140(2) permits transition of the entire unavailed CENVAT credit on pre-GST capital goods where the credit is admissible under both the earlier regime and GST, even if no part of that credit was previously availed. The provision does not impose a fifty per cent restriction merely because capital-goods credit was ordinarily availed in instalments. Clerical recording of only one invoice number in TRAN-1, where the entry relates to multiple underlying invoices, requires verification of those invoices rather than automatic denial; credit remains allowable if otherwise in order.
Issues: (i) Whether the entire unavailed CENVAT credit on pre-GST capital goods, where no credit had been availed in the erstwhile regime, could be transitioned through TRAN-1 under Section 140(2) of the Central Goods and Services Tax Act, 2017; (ii) Whether transitional credit of Rs. 1,54,400 relating to 81 invoices could be denied because TRAN-1 recorded only one invoice number owing to clerical oversight.
Issue (i): Whether the entire unavailed CENVAT credit on pre-GST capital goods, where no credit had been availed in the erstwhile regime, could be transitioned through TRAN-1 under Section 140(2) of the Central Goods and Services Tax Act, 2017.
Analysis: Section 140(2) permits transition of unavailed CENVAT credit on capital goods that was not carried forward under the existing law, provided it was admissible under both the existing and GST regimes. The Explanation defines unavailed credit as the aggregate eligible credit less the credit already availed. Rule 117(2)(a) requires disclosure of credit availed and credit yet to be availed, but does not require that some credit must previously have been availed. The provision does not restrict transitional credit to fifty per cent merely because capital-goods credit was ordinarily availed in instalments under the erstwhile regime.
Conclusion: The entire credit of Rs. 2,13,593 on the capital goods is allowable as transitional credit through TRAN-1.
Issue (ii): Whether transitional credit of Rs. 1,54,400 relating to 81 invoices could be denied because TRAN-1 recorded only one invoice number owing to clerical oversight.
Analysis: The entry recorded one invoice number, but that invoice contained an annexure referring to 81 invoices. The explanation that the aggregate credit of those invoices was entered against the first invoice number due to clerical oversight, coupled with the stated availability of all underlying invoices, warranted verification rather than denial without examination of the documents.
Conclusion: The claim of Rs. 1,54,400 shall be verified by the original authority on production of all 81 invoices and allowed if otherwise in order.
Final Conclusion: Full unavailed eligible credit on capital goods can transition notwithstanding nil prior availment, while the invoice-specific component remains subject to documentary verification.
Ratio Decidendi: Section 140(2) permits transition of the whole unavailed CENVAT credit on capital goods, including where no part was availed under the erstwhile law, if the credit is admissible under both regimes.