TaxTMI 
TaxTMI 
2026 (8) TMI 985
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.... the mandatory pre-deposit required under Section 35F of the Central Excise Act, 1944, can be discharged by utilisation of CENVAT credit transitioned into the Goods and Services Tax regime under Section 140 of the Central Goods and Services Tax Act, 2017, and reflected in the Electronic Credit Ledger. 3. The petitioner is a proprietorship concern engaged in sorting, blending, processing and packing of tea for M/s Hindustan Unilever Limited. Under the erstwhile service tax regime, the petitioner had availed CENVAT credit on packing materials in accordance with the CENVAT Credit Rules, 2004. 4. Upon introduction of the Goods and Services Tax regime with effect from 01.07.2017, the petitioner, in compliance with Section 140 of the CGST Act, 2017, transitioned the unutilised CENVAT credit by filing Form GST TRAN-1. The transitioned credit was accepted by the Department and stood reflected in the Electronic Credit Ledger. 5. Pursuant to investigation, a Show Cause Notice was issued alleging irregular availment of CENVAT credit and suppression of taxable value. By Order-in-Original No. 04/2023-24 dated 27.12.2023, the Principal Commissioner confirmed the demands. Aggrieved there....
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....the Electronic Credit Ledger can be utilised only for payment of output tax under Section 49(4) of the CGST Act and that pre-deposit does not fall within the said category. Reliance was placed on various decisions of the Tribunal following the said Instruction. 11. Section 35F of the Central Excise Act, 1944, as made applicable to service tax matters by virtue of section 83 of the Finance Act,1994, requires the appellant to deposit a prescribed percentage of the duty or penalty as a condition for entertaining the appeal. The provision does not prescribe any exclusive mode of payment. It neither mandates payment in cash nor prohibits utilisation of available credit. Bare text of which is reproduced below: "Section 35F of the Central Excise Act, 1944 "Section 35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.- The tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal- (i) under sub-section (1) of section 35, unless the appellant has deposited seven and a half per cent. Of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty i....
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.... the vested rights of taxpayers in the unutilised CENVAT credit. The transition of credit into the Electronic Credit Ledger did not create a new credit, it merely preserved the existing credit in a different form. The legislative intent was continuity and not extinguishment of the rights attached to such credit. The said relevant provision reads as under: "140. Transitional arrangements for input tax credit.- (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed ....
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....he CGST regime is not a valid mode of payment for making a pre-deposit under Section 35(F) of the Excise Act, 1944, read with Section 83 of the Finance Act, 1994. These instructions were issued on 28th October, 2022 and in M/s Saphire Cables & Services Pvt. Ltd. & Ors., the appeals were filed prior to these instructions. Hence, according to Mr. Tyagi the same is distinguishable. 26. The short question for consideration-is whether CENVAT credit can now be utilised for the purpose of making pre-deposit or not. In the opinion of this Court, CENVAT credit has been recognised under Section 140 of the CGST Act for the purpose of transitioning to the electronic ledger. After the GST regime has been put in place, there is no rationale on the basis of which it can be held that DRC-03 payment cannot be utilized for the purpose of making pre-deposit. 27. Rule 142 of the CGST Rules is clear that payments can be made through DRC-03 of any tax, interest or penalty. Pre-deposit is nothing but an advance deposit of the demanded amount, which in this case would be tax, interest or penalty." 18. The CBIC Instruction dated 28.10.2022 was issued to prescribe an administrative proc....