TMI Blog2019 (11) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be seen in this perspective and specifically in the light of the embargo placed by Rule 3(7)(b) as aforesaid. The Board could well have stated even at that juncture that the credit lapsed, but did not choose to do so. A certain amount of planning and strategizing is undertaken by an assessee bearing in mind the credits and concessions available as well as liabilities imposed by a taxing Statute at any given point in time. The credit available in regard to EC, SHEC and KKC are no different. In strategising and conducting its business, the assessee would certainly have taken into account that credit was available for set-off against output tax liability. Such credit accumulated has not been stated to have lapsed. The impugned action of the assessing authority in rejecting the claim has however the consequence of insertion of a Rule/Regulation to this effect, is impermissible. The revenue has not made out any bar for the transitioning of EC, SHEC and KKC into the GST regime and the petitioner satisfies all conditions both under sub-section (1) and (8) of section 140. The embargo placed by Rule 3(7)(b) is long gone with the introduction of GST. Certainly the powers-that-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia (STPI) and one (1) unit in a Domestic Tariff Area (DTA). 3.In the era prior to levy of goods and service tax (in short GST) the petitioner was assessed to service tax and was availing CENVAT credit on inputs, capital goods and input services, utilizing the same against payment of service tax liability. 4. Vide Finance Act 2004, Parliament introduced the levy of Education Cess and, vide Finance Act 2007, the levy of Secondary and Higher Education Cess. The CENVAT Credit Rules 2004, (in short Rules) enabled a manufacturer of final products or a provider of output services to avail CENVAT credit in respect of EC and SHEC against duty levied on excisable goods or taxable services in terms of Rules 3(1)(vi), (via), (x) and (x-a) thereof. The Rules specifically provided that once availed, the utilization thereof shall be only as against payment of EC or SHEC respectively. 5. While this was so, the levy of EC and SHEC on taxable services was abolished vide Finance Act 2015, with effect from 01.06.2017. Notification No.14/2015-CE exempted all goods falling within the first schedule to the Central Excise Tariff Act from the levy of EC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uties] 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 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 date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed. (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, (32 of 1994), but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,- (a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and (b) the amount of CENVAT 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, relating to such exempted goods or services, in accordance with the provisions of sub-section (3). (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed: Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier: Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law. (9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service tax leviable under section 66-B of the Finance Act, 1994 (32 of 1994), in respect of inputs and input services received on or after the appointed day. [Explanation 3.- For removal of doubts, it is hereby clarified that the expression eligible duties and taxes excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975).] 10.The scheme of transition of credit as set out under the Act has been referred to by both Mr.Raghavan Ramabadran, learned counsel appearing for the petitioner as well as Ms.Aparna Nandakumar, learned counsel appearing for the Revenue, in some detail. 11. In the present case, the petitioner followed the procedure for carrying forward CENVAT credit availed under the erstwhile regime, set out in terms of Rule 117 of the Central Goods and Service Tax (CGST) Rules, 2017 (in short Rules). The Rules provide that every person entitled to input tax credit under Section 140 shall submit a declaration electronically in Form GST Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to defeat a legitimate, statutory right. 15. The petitioner relies on the following cases: (1) Union of India v. Ind-Swift Laboratories Ltd . (2012 (25) STR 184) (2) Eicher Motors Ltd. V. Union of India ((1999) 106 ELT 3) (3) SML Isuzu Ltd. V. Union of India ((2016) 340 ELT 643) (4) Commissioner of C. Ex., Bolpur v. Ratan Melting Wire Industries ((2008) 231 ELT 22) (5) J.K.Lakshmi Cement Ltd. v. Commercial Tax Officer, Pali ((2018) 14 GSTL 497) (6) Commissioner of Central Excise, Bhopal v. Minwool Rock Fibres Ltd ((2012) 278 ELT 581) 16. A counter has been filed by the Revenue reiterating the rationale of the impugned order and stating that the claims of the petitioner for transition of EC, SHEC and KKC are not tenable in law. The Revenue points out that though the right to input tax credit is a statutory right it may not be claimed by the assessee as a vested right and it is only when all conditions under statute are complied with in full that the petitioner may claim utilisation of ITC. 17. In the present case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Model GST Outline of the Model GST 5.25. Keeping in mind the recommendations of the task force, we outline the design and modalities of a model GST law. Such a model GST would not distinguish between goods and services. It should be levied at a single positive rate on all goods and services. Exports should be zero-rated. Tax compliance costs should be low and tax credits should be available seamlessly across tax jurisdictions. The other design and operational modalities of a model GST are outlined below..... 19. The taxes that had been subsumed were many and included among others, Central excise, Additional excise, Additional Customs Duty, all Central and State surcharges and cesses, Value Added Tax, Central Sales Tax, Entry Tax, Luxury Tax, Taxes on lottery, Entertainment Tax, Purchase Tax, State Excise Duties, Stamp Duty, Taxes on vehicles, Tax on goods and passengers, Taxes and duties on electricity as well as service tax. While integrating the taxes, the intention of the Government was evidently to provide a seamless model for transitioning of all credits hitherto availed of by an assessee under the erstwhile VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment of Revenue) Central Board of Excise Customs, New Delhi Subject: Utilization of accumulated Cenvat credit restricted in terms of erstwhile Rule 6(3)(c) of Cenvat Credit Rules, 2004 Regarding. Kindly refer to your letter C.No. 715/Hqrs/Audit/08 dated 20-11-2008 on the subject mentioned above wherein the issue of utilization of accumulated Cenvat credit has been raised. The matter has been examined and the following points emerged during its consideration. Prior to 1-4-2008 [before the amendment in Rule 6(3)] the option available to the taxpayer, under rule 6(3), was that, he was allowed to utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service. However, there was no restriction in taking Cenvat credit and also there was no provision about the periodic lapse of balance credit. This resulted in accumulation of credit in many cases. W.e.f. 1-4-2008, under the amended rule 6(3), the following options are available to the taxpayers not maintaining separate accounts; (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of duty on any excisable goods, whether cleared for home consumption or export. The proviso to the Rule clarified that such lapsing would not affect credit of duty, if any, in respect of inputs lying in stock or contained in finished products lying in stock on 16.03.1995. The Bench opined that Modvat Credit lying to the balance of an assessee represented a vested right accrued or acquired by the assessee. The right in respect of the credit had become absolute at that point when the input was used in the manufacturing of the final product. 26. The Bench stated that when, on the strength of the available Rules and Regulations, certain acts were carried out, all logical consequences must follow in sequence. If any alteration is brought about to this Scheme, then it would have a deleterious effect. The alteration of a credit scheme loses sight of fact that the provision for facility of credit is as good as tax paid till such time the taxes are adjusted on future goods on the basis of commitments made commercially by the assessee. Thus, altering a scheme of credit would affect the rights of the assessee. The impugned Rule was thus quashed, the Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and then withdrawn from 1st March, 2015 and 1st June 2015 for excisable goods and taxable services respectively, had been submitted and included in the excise duty and service tax, and therefore, the amount lying in the credit towards EC and SHE should be available for availing CENVAT credit. ........... The arguments stood rejected in the following terms: 16. The decision in the case of Eicher Motors Limited and Another (supra) is distinguishable, for in the said case, what was subject matter of challenge was Rule 57-F(4-A), which had stipulated that unutilized credit as on 16th March, 1995 lying with the manufacturers of tractors under Heading 87.01 or motor vehicles 87.02 and 87.04 or chassis of tractors or motor vehicles under Heading 87.06 shall lapse and shall not be allowed to be utilized for payment of duty on excisable goods. The proviso, however, had stipulated that nothing shall apply to the credit of duty, if any, in respect of inputs lying in stock or contained in finished products lying in stock as on 16th March, 1995, thereby creating an anomalous situation. Credit of tax paid on inputs and even finished products was available, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible to accept the contention that a vested right or claim existed and legal issue is covered against the respondents by the decision in Eicher Motors Limited and Another (supra) and Samtel India Limited (supra). The said decisions are distinguishable and inapplicable. 29. Reliance on the case of Cellular Operators Association of India (supra) does not advance the case of the revenue. The Division Bench in that case was concerned with a prayer for quashing Notification dated 29.10.2015 and for a direction that the credit accumulated on account of EC and SHEC be permitted to be utilised for payment of service tax on telecommunication services. The Bench, right at the outset, at paragraph 3, highlights the accepted and admitted case that benefit of EC and SHEC on inputs etc. could not have been utilised for payment of excise duty/service tax on the output, i.e., manufactured goods or taxable services . Thus the premise on which the Bench has proceeded is that cross utilisation of EC and SHEC as against excise duty or service tax was impermissible in the context of the provisions and rules extant then. 30. The claim of the petitioner before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had increased to 12%-14% and excise duty from 12% to 12.50%. Thus according to them since the cesses had been subsumed into the basic tax/duty rate, they should be allowed to set off the accumulated credit of EC and SHEC against the same. 32. This argument was rejected by the Division Bench, that held, after analysing the judgments of the Supreme Court in the case of i) Hingir-Rampur Coal Company Limited and Others versus State of Orissa and Others, ((1961) 2 SCR 537) , ii) B.K. Industries and Others versus Union of India and Others, (1993 Supp (3) SCC 621) , iii) Shashikant Laxman Kale and Another versus Union of India and Another, ((1990) 4 SCC 366) , iv) Tarlochan Singh Flora versus Wakom (Heathrow) Ltd., ([2006] EWCA Civ 1103, Brooke LJ), that though cess may be of the nature of tax and not a fee, it would not be proper to treat either of the cesses as excise duty or service tax. The two cesses on the one hand and excise duty and service tax on the other were always to be treated as different and separate and cross utilisation was, according to the Bench, never permitted. Thus the use of the word subsumed by the then Finance Minister, upon which great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll effect and meaning. 38. The revenue has placed reliance upon the conclusions of the Supreme Court in the cases of (i) Jayam and Co. vs. Assistant Commissioner and Ors. (AIR 2016 SC 4443) and (ii) ALD Automotive Pvt. Ltd. V. The Commercial Tax Officer and Others (AIR 2018 SC 5235), to state that the grant of ITC cannot be sought for as a right by an assessee and no such right vests in an assessee. 39. There is a material distinction between the cases relied upon by the revenue and the case before me. In Jayam and Company and ALD Automotive Pvt. Ltd. (supra), the Court was concerned with a claim of Input Tax Credit (ITC) by an assessee. It is in this context that the Benches state that the grant of ITC is a concession which is not admissible to all kinds of sales. Specified transactions are alone entitled to the benefit of ITC on specified situations and that too, upon satisfaction of conditions imposed. Thus no vested right could be claimed by an assessee in that regard. 40. In the present case, the situation is entirely different. The assessee only avails utilization of the credit accumulated, particularly since there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transitioned, except if specifically barred. The other two conditions under section 140(8) are that the credit should be admissible as ITC and that credit is freely transferrable inter se the units under centralised registration. These conditions also do not stand in the way of the claim of the petitioner. 44. Thus, in my view, the revenue has not made out any bar for the transitioning of EC, SHEC and KKC into the GST regime and the petitioner satisfies all conditions both under sub-section (1) and (8) of section 140. The embargo placed by Rule 3(7)(b) is long gone with the introduction of GST. Certainly the powers-that-be are conscious of these factors in drafting the new legislation and the specific provision in question i.e., Section 140. 45. Reliance placed by Ms.Nandakumar upon the decision in the case of Union of India and others. V. Uttam Steel Ltd. ((2015) 13 SCC 209) does not impress. In Uttam Steel (supra) a Division Bench of the Supreme Court considered a claim for rebate. Originally and as per prevailing law, an assessee was required to file a claim for rebate within six months from the date of shipment. Admittedly, the claims were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In section 140 of the principal Act, with effect from the 1st day of July, 2017, (a) in sub-section (1), after the letters and word CENVAT credit , the words of eligible duties shall be inserted and shall always be deemed to have been inserted; (b) in the Explanation 1- (i) for the word, brackets and figures sub-sections (3), (4) , the word, brackets and figures sub-sections (1), (3), (4) shall be substituted and shall always be deemed to have been substituted; (ii) clause (iv) shall be omitted and shall always be deemed to have been omitted; (c) in the Explanation 2- (i) for the word, brackets and figure sub-section (5) , the words, brackets and figures sub-sections (1) and (5) shall be substituted and shall always be deemed to have been substituted; (ii) clause (iv) shall be omitted and shall always be deemed to have been omitted; (d) after Explanation 2 as so amended, the following Explanation shall be inserted and shall always be deemed to have been inserted, namely:- Explanation 3.-For removal of doubts, it is hereby clarified that the expression eligible duties and taxes excludes any cess which has not been specified in Explanation 1 or Expla ..... 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