DISALLOWING TRAN1 CREDIT OF BSIII VEHICLES

[NAMAN DOKANIA]

The asessee who is a dealer of vehicles had a stock of BSIII vehicles on 30.06.2017 which he claimed inn TRAN-1 for eligible duties. And further he sold these vehicles back to manufacturer after 01.07.2017 by issuing a tax invoice.

Department is disallowing credit of BSIII Vehicle claimed in TRAN-1 by a dealer of vehicles stating that these vehicles were disabled to be sold by the supreme court and cannot be said to be' further supply of such vehicles'

Pls guide with any case law if possible..

[KASTURI SETHI]

Has the assessee sold the said vehicles despite restrictions imposed by the Supreme Court ? Pl. elaborate your query.

[Rajagopalan Ranganathan]

Siri,

In my opinion, since you have sold back the cars to the manufacturer under tax invoice the credit taken and utilization of the same for payment of tax when the cars are sold to the manufacture is correct. You have sold the car back to the manufacturer since Supreme Court has disable the cars to be sold to individual customers there no supply to consumers.

[KASTURI SETHI]

While selling the goods back to the manufacturer on a tax invoice, what description has been given on the invoice ?

The case is worth contesting.

[Ganeshan Kalyani]

I guess the supply took place because transitional provisional allowed the pre-GST purchase to be returned back to supplier only by considering as supply by raising tax invoice.

[Shilpi Jain]

Whether there is a Supply has to be seen from the point of view of gst. I the present case the sale has happened. Title to the goods has been transferred. So the reason why this was done is not necessary to be seen. The demand by dept can be contested.

[KASTURI SETHI]

I strongly agree with the views of Sh.Ganeshan Kalyani Ji and Madan Shilpi Jain.

[Ganeshan Kalyani]

Thank you Sri Kasturi Sir.

[Amit Agrawal]

Just a light-hearted argument/s for fun between fellow professionals:

If I remember correctly, Supreme Court has debarred these vehicles from getting registered with RTO and thereby, barring them from plying on road and not against selling these vehicles per se.

If this is true, then, one can buy these vehicles for other purposes, say, for decorative purpose or for exhibition or even as ancient items (remember: Old coins / currencies - which are no longer valid but enjoy premium in the market).

And if all this is true, whether classification of such vehicles will change (instead of highest rate of taxes with compensation cess, if any to much lower tax-rate). And whether querist had paid more taxes than required under law?

AI Summary

Transitional input tax credit: sale back to manufacturer may validate credit if tax invoice transfers title and constitutes supply. Whether TRAN-1 transitional input tax credit for BSIII vehicles is disallowable hinges on whether subsequent sale back to the manufacturer on a tax invoice constituted a transfer of title and a taxable supply; the department argues a court-imposed registration/use restriction precluded further supply, while advisers contend the tax invoice sale effected supply permitting credit utilization, making invoice description and factual transfer crucial to contesting the demand.