TaxTMI 
TaxTMI 
2021 (7) TMI 1
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....gaged in the manufacturing of Excisable goods i.e. VE Distributor Fuel Injection Pump, Components of VE Pump failing under Chapter heading No.84133010 and 73181500 respectively of Central Excise Tariff Act,1985. They appeared to have wrongly transferred Cenvat Credit of Educational Cess, Secondary & Higher Sec. Edu. Cess and KKC amounting to Rs. 42,02,615/- in Tran-1 Statement filed by them under GST. The irregular ITC so transferred appeared to be recoverable from them in terms of Section 74 of CGST Act, 2017 along with interest under Section 50(3) ibid. The appellant also appeared for penal action in terms of Section 122 of CGST Act, 2017 as per facts discussed as under: 2.2 The officer of Central Excise and Service tax Audit Commissionerate conducted audit of the records of the assessee. During the course of audit of their records, it was noticed that the assessee was having Closing Balance of Cenvat Credit of Educational Cess, Secondary Higher Sec. Edu. Cess & KKC total amounting to Rs. 42,02,615/- in its ER-l filed for the period June, 2017 and ST-3 return filed for April,20I7 to June, 20I7 and they had carried forward the same "in Trans-1 Statement" filed by them und....
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....and the amendment of the Finance Act, 1994 have been saved vide Section 174(2) of the Central Goods and Service Tax Act, 2017 and the provisions of the said repealed/amended Acts and the Rules made thereunder are enforceable for the purposes of demand of duty, interest, etc. and imposition of penalty under this notice. 4. Further, the adjudicating authority vide the impugned Order in Original No. 05/GST-DEM/CGST DIV-F/2020-21 dated 10.06.2020 has passed an order as under:- (i) Confirmed the demand of ITC/Credit amounting to Rs. 42,02,615/- carried forward in their TRAN-1 Statement and ordered to recover from M/s Bosch Limited, SP-663,RIICO Industrial Area, Sitapura, Jaipur-302001 in terms of Section 74 of the CGST Act, 2017. (ii) Ordered to pay interest at appropriate rates on the confirmed amount at S.No.(i) above, in terms of Section 50(3) of the CGST Act.2017. (iii) Imposed a penalty of Rs. 42,02,615/- on M/s Bosch Limited, SP- 663,RIICO Industrial Area, Sitapura, Jaipur-302001 in terms of Section 122 of the CGST Act, 2017. 5. Being aggrieved with the impugned order dated 10.06.2020, the appellant has filed appeal on....
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....ard in the return. The explanation to Chapter XX "Transitional Provisions" states that the term "Cenvat Credit" used in this chapter shall have the same meaning as assigned to them in the Central Excise Act, 1944 or the rules (i.e., Cenvat Credit Rules, 2004) made thereunder. In view of the aforesaid provisions, a registered person shall be eligible to carry forward the credit into the GST regime provided it cumulatively satisfies the following two conditions: (i) the amount being carried forward into the GST regime qualifies as eligible cenvat credit under the Cenvat Credit Rules, 2004; and (ii) the aforesaid amount is shown in the return filed immediately preceding the appointed day. Thus, on a co-joint reading of Section 140(1) and the aforesaid Explanation, it is evident that any credit which qualifies as eligible cenvat credit under the Cenvat Credit Rules, 2004 and shown in the return filed under erstwhile regime, shall be carried forward into the GST regime. The appellants submit that they have cumulatively satisfied both the aforesaid conditions for the reasons mentioned hereunder. Rule 3 of Cenvat Credit Rules, 2004 lists the taxes....
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....se duty (including Education Cess and SHE Cess) paid on inputs and capital goods as well as service tax (including Education Cess, SHE Cess and KKC) paid on input services, in terms of the provisions of Cenvat Credit Rules, 2004. It is submitted that this credit was legally and validly earned by the appellants. There- is no dispute on this aspect. W.e.f. 1.3.2015, the excisable goods were made exempt from payment of Education Cess and SHE Cess. W.e.f. 1.6.2015, Education Cess and' SHE Cess on taxable services was discontinued. However, there was no provision for lapsing of the cess credit lying in balance. KKC was leviable till the introduction of GST and there was no provision for lapsing of the said credit lying in balance as well, on introduction of GST. Therefore, prior to introduction of GST on 30.6.2017, the appellants were carrying forward the unutilized credit balance of Education Cess, SHE Cess and KKC in the Cenvat Credit register and ER- 1 returns filed with the department. The appellants submit that the cess credit qualified as eligible credit under the Cenvat Credit Rules, 2004 and the said credit was legally earned and there is no dispute in the old tax r....
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....). The appellants further submit that the expression "eligible duties" as defined does not include Education Cess, SHE Cess and KKC. Therefore, the absence of a specific mention of Education Cess, SHE Cess and KKC in the expression "eligible duties" will not have any bearing on the transfer of credit under Section 140(1). The Explanation 2 to Section 140 of the CGST Act provides a list of the duties which would be covered under the term "eligible duties and taxes". The relevant portion of Explanation 2 to Section 140 of the CGST Act reads as under: "Explanation''2:-For the purposes of sub-section (5,): the expression "eligible duties and taxes" means The appellants submit that Explanation 2 to Section 140 defines the expression "eligible duties and taxes" for the purposes of Section 140( 5) and hence, the same has to be read in the context of sub-section (5) of Section 140 of the CGST Act only. The said expression cannot be artificially imported for sub-sections (1) of Section 140 where the same is not mentioned at all. Hence, the definition of "eligible duties and taxes" provided in the Explanation 2 is not applicable for the credit availed in terms of Se....
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....se but excluding Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force. The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be." The appellant has cited following case laws in their defence:- Hon'ble Apex Court in the case of CCE Vs. Dai Ichi Karkaria Ltd.- 1999 (112) ELT 353. Eicher Motors Limited Vs. CCE - 1999 (106) ELT 3 (SC), Bajaj Auto Ltd. Vs. UOI -- 2019-T1OL-127-SC-CX TVS Motor Ltd. Vs. UOI- 2015 (323) ELT 57 (Kar.) SRD Nutrients Pvt.Ltd. Vs. CCE - 2017-TIOL-416-SC-CX TVS Motors Co. Ltd. Vs:. UOI-2015 (323) EL....
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....right can be curtailed and regulated by conditions for availing such right. It is clear from the Scheme of Section 140 of the GST Act that the transition and carry forward of the Input Tax Credit of the taxes and duties paid under the earlier Indirect Tax Regimes was subject to conditions and specifications given in Section 140 of the Act and unless specifically allowed. Such carry forward or set off could not be claimed by any implied intention or so called vested right theory. In my opinion, the unutilised Education Cess and Secondary and Higher Education Cess in the hands of the appellant had become dead CENVAT Credit claim in the year 2015 itself with these levies dropped by the Finance Act 2015 and therefore, there is no question of it being claimed as a right to be carried forward and set off after 01.07.2017 against Output GST Liability. 4. The fine distinction between Cess and Tax. Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess may have the colour of duty or tax at first blush per se, but is not tax or excise duty per se. Contrary to the levy of tax and duty which are compulsory exactions of money from the public for public purpose....
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....ondary and Higher Education Cess and Krishi Kalyan Cess was distinct and stand alone levies and their input credit even under the Cenvat Rules which were applicable mutatis mutandis did not permit any such cross Input Tax Credit, much less conferred a vested right; (b) Explanation 3 to Section 140 could not be applied in a restricted manner only to the specified Sub- sections of Section 140 of the Act mentioned in the Explanations 1 and 2 and as a tool of interpretation, Explanation 3 would apply to the entire Section 140 of the Act and since it excluded the Cess of any kind for the purpose of Section 140 of the Act, which is not specified therein, the transition, carry forward or adjustment of unutilized Cess of any kind other than specified Cess, viz. National Calamity Contingent Duty (NCCD), against Output GST liability could not arise. 8. For the aforesaid reasons, I am inclined to reject the appeal of the appellant and restore the impugned OIO and I hold that the appellant was not entitled to carry forward and set off of unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess against the GST Output Liability with reference to Sectio....
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....ting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law. (3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012- Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi- finished or finished goods held in stock on the appointed day subject to the following conditions, namely:-- (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for credit on such inputs under this Act; (iii) ....
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.... for a further period not exceeding thirty days: Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section. (6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:-- (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is not paying tax under section 10; (iii) the said registered person is eligible for input tax credit on such inputs under this Act; (iv) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and (v) such invoices or other prescribed documen....
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....ds of Special Importance) Act, 1957; (ii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975; (iii) he additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975; (iv) [....] (Omitted ibid) (v) he duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985; and (vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001) in respect of inputs held in stock and inputs contained in semi- finished or finished goods held in stock on the appointed day. 1. Substituted for "sub-sections (3), (4)" by the CGST (Amdt.) Act, 2018 (31 of 2018), dt.30.8.2018, w.r.e.f. 1-7- 2017. Explanation 2.-For the purposes of 3[sub-sections (1) and (5), the expression "eligible duties and taxes" means-- the additional duty leviable under sub-section....
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....rule (7) of rule 3 of the CENVAT Credit Rules, 2004. (2) Every declaration under sub-rule (1) shall- (a) in the case of a claim under sub-section (2) of section140, specify separately the following particulars in respect of every item of capital goods as on the appointed day- (i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and (ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day; (b) in the case of a claim under sub-section (3) or clause (b) of sub-section (4) or sub-section (6) or (8) of section 140, specify separately the details of stock held on the appointed day; (c) in the case of a claim under sub-section (5) of section 140, furnish the following details, namely: (i) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law; (ii) the description and value of the....
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....FORM GST TRAN 2by 31st March 2018, or within such period as extended by the Commissioner, on the recommendations of the Council, for each of the six tax periods during which the scheme is in operation indicating therein, the details of supplies of such goods effected during the tax period; (iii) The registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause(b) of sub-rule (2), submits a statement in FORM GST TRAN 2by 31st March 2018, or within such period as extended by the Commissioner, on the recommendations of the Council, for each of the six tax periods during which the scheme is in operation indicating therein, the details of supplies of such goods effected during the tax period; (iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal; and (v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person." 12. The Ministry of Finance, Department of Revenue (Central Board of Indirect Taxe....
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.... for amending the GST law which was uploaded in the public domain for comments. It is clear that the transition of credit of taxes paid under section 66B of the Finance Act, 1994 was never intended to be disallowed under section 140(1) and therefore no such remark was present in the document. (iii) Under tax statutes, the word "duties" is used interchangeably with the word "taxes" and in the present context, the two words should not be read in a disharmonious manner. 3.2 Thus, expression "eligible duties" in section 140(1) which are allowed to be transitioned would cover within its fold the duties which are listed as "eligible duties" at sl. no. (i) to (vii) of explanation 1, and "eligible duties and taxes" at sl. no. (i) to (viii) of explanation 2 to section 140, since the expression "eligible duties and taxes" has not been used elsewhere in the Act. 3.3 The expression "eligible duties" under section 140(1) does not in any way refer to the condition regarding goods in stock as referred to in Explanation 1 to section 140 or to the condition regarding inputs and input services in transit, as referred to in Explanation 2 to section 140. ....