TMI Blog2021 (7) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... wed to be transitioned not as CENVAT credit, but because it is specifically included as Eligible Duties in Explanations 1 and 2 of Section 140 of the Act. The credit of such Education Cess and Secondary and Higher Education Cess which could not be utilised against the Output Education Cess and Secondary and Higher Education Cess Liability, while the said impost was in force prior to Finance Act, 2015, became a dead claim in the year 2015 itself and therefore, there was no question of allowing a carry forward and set off after a gap of two years against the Output GST Liability with effect from 01.07.2017. 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 - it can be stated that while Cess is collected from the person on whom such liability is fixed to meet a particular kind of expenditure incurred by the Government and its collection and expenditure is dedicated to that pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Tariff Act,1985. They appeared to have wrongly transferred Cenvat Credit of Educational Cess, Secondary Higher Sec. Edu. Cess and KKC amounting to ₹ 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 ₹ 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 under GST, which is not admissible as per Section l40 of CGST Act, 2017. Therefore, the appellant was required to reverse the wrongly availed Cenvat Credit amounting to ₹ 42,02,615/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 ₹ 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 ₹ 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 the following grounds which are summarized as under: The portion of the impugned Order-in-Original dated 10.6.2020 passed by the Assistant Commissioner (CGST),Division F, Jaipur, to the extent it is against the appellants, is incorrect in law as well as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eunder. 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/cess/duties which are regarded as Cenvat credit and are eligible for utilization against output liabilities. The relevant portion of the Rule 3 of Cenvat Credit Rules, 2004 is reproduced hereunder for ready reference: RULE 3. CENVAT credit . - (1) A manufacturer or producer of final p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 regimes regarding the eligibility of such credit. It is submitted that the cess credit validly formed part of the Cenvat credit balance of the appellants, prior to introduction of GST. Hence, once the credit is validly taken, its benefit cannot be denied to the appellants. Section 140(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit 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 Section 140(1). Explanation 3 to Section 140 which was notified vide Notification No.2/2019-Central Tax dated 29.1.2019 (retrospectively amending Section 140 w.e.f. 1.7.2017) reads as under: Explanation 3.- For removal of doubts, it is hereby clarified that the expression eligible duties and taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) ELT 57 (Kar.) 6. Personal hearing in the instant case in virtual mode through video conference was held on 24.03.2021. Sh.Harish R, Authorized Representative of the appellant appeared for personal hearing. During personal hearing he reiterated the grounds of appeal and explained the case in details. In view of the submission, he requested for early decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 purposes enforceable by law and is not payment for services rendered, the cess is levied with a quid pro quo element for services rendered. In an illustrative way, it can be stated that while Cess is collected from the person on whom such liability is fixed to meet a particular kind of expenditure incurred by the Government and its collection and expenditure is dedicated to that particular object or purpose of imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation, 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 Section 140 of the CGST Act, 2017. 9. Before coming to the reasons for my aforesaid conclusion, let us discuss the relevant provisions of the relevant enactments involved in the present matter to understand the issue in a better manner. 10. Section 140 of the CGST Act, 2017, which is most crucial for this case and which provides for the transitional arrangement for Input Tax Credit is quoted below for ready reference: Transitional arrangements for input tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler 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) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and (v) the supplier of services is not eligible for any abatement under this Act: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 documents were issued not earlier than twelve months immediately preceding the appointed day. (7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day. (8) Where a registered person having centralised registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 (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 (1) of section 3 of the Customs Tariff Act, 1975. (i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of special Importance) Act, 1957 (ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975; (iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975; (iv) [ ] (v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985; (vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985; (vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001; and (viii) the service tax leviable under section 66B of the Finance Act, 1994,in respect of inputs and input services received on or after the appointed day. [Explanation 3 For removal of doubts, it is hereby clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the existing law; (ii) the description and value of the goods or services; (iii) the quantity in case of goods and the unit or unit quantity code thereof; (iv) the amount of eligible taxes and duties or, as the case may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services; and (v) the date on which the receipt of goods or services is entered in the books of account of the recipient. (3) The amount of credit specified in the application in FORM GST TRAN-1 shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT2 on the common portal. (4) (a) (i) A registered person who was not under the existing law shall, in accordance with the proviso to sub- section (3) of section 140, be allowed to avail of input tax credit on goods (on which the duty of central excise or, as the case may be, additional duties of customs under sub- section (1) of section 3 of the Customs Tariff Act, 1975, is leviable) held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty. (ii) The input tax credit referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019-GST on 02nd January, 2019 addressed to all Chief Commissioners and other Authorities clarifying the said provisions of CGST Amendment Act, 2018. The said Circular is also found to be relevant and therefore, it is quoted in extend so below : Circular No. 87/06/2019-GST Dated 2nd January, 2019 F. No. 267/80/2018-CX.8 Government of India Ministry of Finance Department of Revenue (Central Board of Indirect Taxes and Customs) New Delhi To The Principal Chief Commissioners/ Chief Commissioners/Principal Commissioners/ Commissioner of Central Tax (All) The Principal Director Generals/ Director Generals (All) Sub: Central Goods and Services Tax (Amendment) Act, 2018- Clarification regarding section 140(1) of the CGST Act, 2017-reg. Attention is invited to sub-section (a) of section 28 of the CGST (Amendment) Act, 2018 (No. 31 of 2018) which provides that section 140(1) of the CGST Act, 2017 be amended with retrospective effect to allow transition of CENVAT credit under the existing law viz. Central Excise and Service Tax law, only in respect of eligible duties . In this regard, doubts have been expressed as to whether the expression eligible duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment) Act, 2018 which link Explanation 1 and Explanation 2 of section 140 to section 140(1). This would ensure that the credit allowed to be transitioned under section 140(1) is not linked to credit of goods in stock, as provided under Explanation 1, and credit of goods and services in transit, as provided under Explanation 2. However, the duties and taxes for which transition is allowed shall be governed by para 3.2 above. 5. No transition of credit of cesses, including cess which is collected as additional duty of customs under subsection (1) of section 3 of the Customs Tariff Act, 1975, would be allowed in terms of Explanation 3 to section 140 , inserted vide sub-section (d) of section 28 of CGST Amendment Act, 2018 which shall become effective from the date the same is notified giving it retrospective effect. Trade may be suitably informed and difficulty, if any, in the implementation of this circular may be brought to the notice of the Board. Yours faithfully, (KUMAR VIVEK) OSD (CX.3/8) 12. Further, It is submitted that the term duty does not include additional duties such as Education cess, Secondary and Higher Education Cess, NCCD etc. thus u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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