Andhra Pradesh High Court - Amravati
Kcl Limited vs The Joint Commissioner on 13 November, 2024
Author: R. Raghunandan Rao
Bench: R Raghunandan Rao
APHC010494202023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3508]
(Special Original Jurisdiction)
WEDNESDAY, THE THIRTEENTH DAY OF NOVEMBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO
THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM
WRIT PETITION NO: 26636/2023
Between:
Kcl Limited ...PETITIONER
AND
The Joint Commissioner and Others ...RESPONDENT(S)
Counsel for the Petitioner:
1. LAKSHMI KUMARAN SRIDHARAN
Counsel for the Respondent(S):
1. DIVYA DATLA(CENTRAL GOVERNMENT COUNSEL)
2. SANTHI CHANDRA (Jr. Standing Counsel for CBIC)
The Court made the following Order: (per Hon'ble Sri Justice R. Raghunandan Rao)
Heard Sri C. Sumanth, learned counsel appearing for the
petitioner, Smt. S. Santhi Chandra, learned Senior Standing Counsel for the
respondents 1 to 3 and Smt. Divya Datla, learned counsel appearing for the
4th respondent.
2. The petitioner, which was earlier registered under the Central
Excise Act, 1944, had claimed a CENVAT credit of Rs.2,48,23,034/- as on
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30.06.2017. Subsequently, this CENVAT credit was transitioned to the GST
regime, when it came into force on 01.07.2017. It appears that an audit
objection was taken against the said CENVAT credit, to the extent of
Rs.1,39,31,604. On the basis of this audit objection, a show-cause notice was
issued to the petitioner, on 18.11.2019, to show-cause why the said CENVAT
credit should not be disallowed. The petitioner had filed a reply, on
26.08.2020, setting out the grounds as to why the said CENVAT credit should
be allowed. At that stage, an Order of abeyance, dated 17.02.2021 is said to
have been passed on the ground that the issues raised in this case had been
answered by the CESTAT in favour of the assessee and the same was
subjected to further appeal before this Court.
3. The petitioner, had however utilized the said CENVAT credit of
Rs.1,39,31,604 after it had been transitioned to the GST regime.
Subsequently, another show-cause notice, dated 26.07.2021 was issued,
under the Goods & Services Tax Act, 2017 [for the "the GST Act"] to show-
cause why the said CENVAT credit should not be disallowed and recovered
from the petitioner along with interest and the penalty. The petitioner had filed
its reply, on 08.04.2022. The 1st respondent after giving an opportunity of
hearing to the petitioner had passed Order dated 30.06.2023 disallowing the
transitioned CENVAT credit of Rs.1,39,31,604/- and demanded repayment of
the said amount. Apart from this, the 1st respondent had also sought payment
of interest under the provisions of Section-50 of the Central Goods & Services
Tax Act, 2017 [for the "the CGST Act"] along with a penalty of Rs.13,93,245/-.
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4. The petitioner being aggrieved by the said Order dated
30.06.2023, has approached this Court by way of the present Writ Petition.
5. The contention of the petitioner, before this Court, was that the
Order of the 1st respondent is not in accordance with the provisions of
Section-140(1) of the CGST Act and that in any event the CENVAT credit was
transitioned to the GST regime strictly in accordance with the provisions of
Section-140(1) of the CGST Act.
6. Smt. S. Santhi Chandra, learned Senior Standing Counsel for the
respondents 1 to 3 as well as Smt. Divya Datla, learned counsel appearing for
the 4th respondent would contend that the view taken by the 1st respondent as
to the ineligibility of the petitioner, for transitioning such CENVAT credit to the
GST regime is correct and in accordance with the provisions of the GST Act.
7. A reading of the show-cause notice as well as the Impugned
Order, dated 30.06.2023, issued by the 1st respondent, shows that the 1st
respondent has not gone into the question of whether the petitioner was
eligible for grant of CENVAT credit or not. The 1st respondent, as can be seen
from the paragraph Nos.13.3 & 13.5 of his Order, has taken the view that the
pendency of the show-cause notice issued under the Central Excise Act,
1944, on 18.11.2019, would render the input tax credit ineligible for
transitioning to the GST regime.
8. The 1st respondent has specifically held that the show-cause
notice and the Orders are not on the question of whether the petitioner was
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entitled to claim the CENVAT credit of Rs.1,39,31,604/- and that the 1st
respondent was only considering the question of whether the transition of the
credit is admissible or not on account of the pending enquiry under the
CENVAT regime.
9. It appears that the 1st respondent, after framing this question, has
taken the view that the pendency of and enquiry, on the eligibility of the
petitioner to claim such CENVAT credit, is sufficient to hold that the transition
of credit under Section-140(1) of CGST Act is not permissible as the said
provision stipulates that it is only eligible CENVAT credit that can be
transitioned.
10. Section-140(1) of the CGST Act reads as follows:-
"Section -140(1): 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 1[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 2[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 date; or
(iii) here the said amount of credit relates to goods manufactured and
cleared under such exemption notifications as are notified by the
Government."
11. This provision stipulates that a person shall be entitled to take in
his electronic credit ledger the amount of CENVAT credit available as on
30.06.2017. The CENVAT credit which was available to the petitioner as on
30.06.2017 was Rs.2,48,23,034/-. The petitioner was entitled to utilize this
credit under the CENVAT regime even during the pendency of the
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proceedings initiated under the show-cause notice dated 18.11.2019. It may
also be noted that as on the date of transition, that is 01.07.2017, there was
no show-cause notice or any doubt raised against the claim of the petitioner
for availing of such CENVAT credit.
12. Smt. S. Santhi Chandra, learned Senior Standing Counsel for the
respondents 1 to 3 would contend that the words "of eligible duties carried
forward" would mean only such duty/credit which is un-disputed and which is
not under any cloud or dispute, and as such, the transition of the CENVAT
credit of Rs.1,39,31,604/-, which was under a dispute or a cloud could not
have been made. She would also submit that the show-cause notice does not
amount to a duplication of Judgment.
13. This contention cannot be accepted as mere issuance of a show-
cause notice which is subsequently kept in abeyance, cannot disentitle the
petitioner from claiming the transition of the available CENVAT credit as on
30.06.2017 to the GST regime.
14. In the circumstances, this Writ Petition is disposed of setting
aside the Impugned Order of the 1st respondent dated 30.06.2023 bearing
DIN.No.20230655YL000000A330.
15. This Court would also caution that this Order shall not be treated
as a finding on the ultimate eligibility of the petitioner to claim the CENVAT
credit as the proceedings under the show-cause notice dated 18.11.2019 are
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still pending and the said proceedings shall be taken up, without being
influenced, in any manner, by this Order. There shall be no order as to costs.
As a sequel, pending miscellaneous petitions, if any, shall stand
closed.
________________________
R. RAGHUNANDAN RAO, J.
______________________________
MAHESWARA RAO KUNCHEAM, J
BSM/KPV
HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO
AND
THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM
W.P No.26636 OF 2023
(per Hon'ble Sri Justice R. Raghunandan Rao)
Date:13.11.2024
BSM/KPV
