High Court of Meghalaya
M/S Green Valliey Industries Ltd. vs . Union Of India & Ors on 19 October, 2022
Serial No. 4
Regular List
HIGH COURT OF MEGHALAYA
AT SHILLONG
WP (C) No.287/2022 with
MC (WPC) No. 139/2022
Date of Order: 19.10.2022
M/s Green Valliey Industries Ltd. Vs. Union of India & ors
M/s Green Valliey Industries Ltd. Vs. Union of India & ors
Coram:
Hon'ble Mr. Justice Sanjib Banerjee, Chief Justice
Hon'ble Mr. Justice W. Diengdoh, Judge
Appearance:
For the Petitioner : Mr. A. Kanodia, Adv with
Ms. M. Agarwal, Adv
For the Respondents : Dr. N. Mozika, DSGI with
Ms. S. Rumthao, Adv
i) Whether approved for Yes
reporting in Law journals etc.:
ii) Whether approved for publication Yes/No
in press:
JUDGMENT: (per the Hon'ble, the Chief Justice) (Oral)
The petitioning assessee relies on a judgment of this Court
delivered on May 19, 2022 in WP (C) No.86 of 2022 (The Commissioner
of GST v. Amrit Cement Limited) to assail an appellate order of July 14,
2021 passed in connection with a show-cause notice dated July 31, 2019.
2. The matter pertains to the transitional period of switching over
from the previous sales tax regime to the GST regime. In the discussion in
Amrit Cement Limited, Section 140 of the Central Goods and Services Tax
Act, 2017 fell for consideration and the cenvat credit claimed by the assesse
was allowed in terms of the appellate order upon noticing, inter alia, Rule
117 of the Central Goods and Services Tax Rules, 2017 pertaining to
"eligible duties and taxes".
3. On behalf of the Department, it is submitted that the impugned
appellate order dealt with the entire claim of Rs.6,86,73,062/- in two parts:
the first pertained to the cenvat credit of Rs.6,55,99,154/- and the second
pertained to a credit of Rs.30,73,908/- that had been availed through
TRAN-1. The Department submits, in particular, that the sum of
Rs.30,73,908/- claimed by way of TRAN-1 was completely impermissible
and there is no error in the adjudication in such regard reflected at
paragraph 11 of the impugned appellate order.
4. As to the remainder of the claim of the cenvat credit of
Rs.6,55,99,154/-, the Department does not admit that the petitioning
assessee is entitled to the same, but puts forth the same grounds as noticed
in Amrit Cement Limited to resist such part of the claim. Since the entirety
of the Department's argument was recorded in detail in such regard in
Amrit Cement Limited and repelled, the Department's submission in this
case that the cenvat credit limit claimed by the assessee to the extent of
Rs.6,55,99,154/- has been rightly negated by the appellate order, cannot be
accepted. Accordingly, the petitioner herein is found entitled to the cenvat
credit limit of Rs.6,55,99,154/-.
5. As to the claim of Rs.30,73,908/-, paragraph 3.5 of the show-
cause notice of July 31, 2019 claimed that out of the total credit of
Rs.6,86,73,064/- on account of the reverse charge mechanism availed by
the assessee in its return of June, 2017, the admissible credit was
Rs.30,73,908/-, which was the payment made by the assessee in June, 2017.
The show-cause notice went on to reason that since the refund claim made
by the assessee for the month of June, 2017 was to the extent of
Rs.2,17,30,566/- and not the balance amount of Rs.30,73,908/- that was
also available, in terms of the exemption notification No.20/2007 issued by
the Central Excise authorities on April 25, 2007, the assessee was deemed
to have abandoned such part of the claim. Indeed, the Department points
out that the refund claim of Rs.2,17,30,566/- was honoured and the assessee
has no grievance in such regard.
6. Section 140 of the Act of 2017 permits a cenvat credit to be
carried forward except in three situations which are expressly indicated in
the provision. These three situations are covered by the proviso to the
substantive provision. The credit would not be available when it is not
admissible as per the input tax credit under the Act or where returns have
not been furnished within time or where the amount of credit relates to good
manufactured and cleared under any exemption notification as may have
been notified.
7. In this case, it is the admitted position that in terms of the
exemption notification of April 25, 2007, the entirety of the credit available
to an assessee ought to have been availed and the refund claim ought to
have been restricted to the additional amount paid in cash, if excise duty
was exempted. Thus, on a reading of the relevant notification, it would be
apparent that no credit could be carried forward after making a refund claim
as the entirety of the credit would have been adjusted in course of making
the claim for refund.
8. This is exactly what the appellate authority held at paragraph 11
of the impugned order of July 14, 2021.
9. The appellate authority noticed that the assessee had sought a
cash refund of Rs.2,17,30,566/- for the month of June, 2017 and had
obtained the same. The appellate authority observed that the mandatory
pre-condition of the notification of April 25, 2007 was that "the assessee
first exhaust the entire credit available to them and discharge their
remaining duty liability by cash and subsequently avail the benefit of
exemption by way of refund of the amount paid in cash only pertaining to
the period to which the refund relates".
10. Clearly, the petitioning assessee in this case ought to have
included in its refund claim of June, 2017, the additional amount of
Rs.30,73,908/- which it subsequently sought to carry forward in its TRAN-
1. When an exemption is granted, it is to be seen as an exception to the
general rule. Exemptions may be granted hedged with conditions. Since it
is a benefit which is specially conferred to a person or a class of persons,
the benefit has to be taken with the conditions and not severed therefrom.
The benefit of exemption in this case was that the entirety of the credit
available would first be adjusted before the balance paid by way of cash
and refund sought only of the cash payment. In the assessee not availing of
the entirety of the credit due to it on June 30, 2017, it was not entitled to
make a further claim in such regard and is deemed in law to have abandoned
such available credit.
11. As a consequence, the amount of Rs.30,73,908/- could no longer
be carried forward in the TRAN-1 that was submitted at a subsequent stage.
12. There is no doubt that the assessee did not avail of the credit
amounting to Rs.30,73,908/- and in equity may be entitled to the same.
However, equitable principles do no come into play when it is an exemption
provision that is sought to be enforced, particularly when the conditions
attached to the exemption are not adhered to.
13. The assessee's claim for the amount of Rs.30,73,908/- cannot be
accepted and, to such extent, the show-cause notice and the impugned
appellate order are found to be in order and unassailable.
14. However, the assessee submits that since the larger part of the
claim has been allowed following the dictum in Amrit Cement Limited, the
100 per cent penalty imposed by the Department should also go.
15. There is no doubt that since the larger part of the claim in excess
of Rs.6 crore has been upheld in favour of the assessee, the imposition of
penalty for the corresponding amount will no longer apply. But the issue
now arises as to whether the 100 per cent penalty imposed for the remainder
of the claim, to the extent of Rs.30,73,908/-, should also be interfered with.
16. The assessee refers to Sections 73 and 74 of the Act of 2017. The
assessee brings out the distinction between Section 73 and the strict
applicability of Section 74 when there is an attempt by the assessee to
defraud the revenue by making any misrepresentation or by suppression of
material facts. The assessee submits that apart from the fact than an amount
in excess of Rs.30 lakh would be a loss to the assessee, there was no attempt
by the assessee to mislead the Department or suppress any material facts in
making the claim for the amount of Rs.30,73,908/- in the TRAN-1 filed by
the assessee. The assessee suggests that since it was a huge sum which had
been lost to the assessee, the assessee merely invoked the discretion of the
Department in allowing the claim at a later stage since the assessee had not
availed of it, whether by mistake or oversight, at the time of claiming refund
for the month of June, 2017.
17. Though the Department vehemently objects to the conduct of the
assessee to not be regarded as fraudulent, in this case, it appears that the
assessee has been seriously hurt in losing a sum of Rs.30,73,908/- that it
was otherwise legitimately entitled to receive. It is not necessary to go into
the circumstances in which such claim had not been made, once it is evident
that if the claim for refund had not being made at the appropriate time, it
could not be carried forward. However, nothing in the subsequent act of the
assessee in incorporating the amount in TRAN-1 would amount to the
element of mens rea on its part that is the underlying essence of Section 74
of the Act of 2017.
18. Since the claim of the assessee to the extent of Rs.6,55,99,154/-
has been upheld, no question arises of any penalty or interest or other
charge being imposed in respect of such amount. The penalty on the
balance amount would not be covered under Section 74 of the Act since
there was no attempt to defraud the revenue or mislead it or any suppression
of material facts. Indeed, since there is no failure to pay any amount, in the
strict sense, in this case as the show-cause notice only pertained to a claim
that had been made to which the assessee was not entitled, this would not
be an appropriate case for imposing any penalty.
19. Nonetheless, to the extent that the claim was made and the claim
could not have been made in terms of the notification of April 25, 2007 in
respect of the sum of Rs.30,73,908/-, the interest imposed by the appellate
order limited to such sum is not interfered with.
20. If, as a consequence of this order, any money is payable by the
assessee to the Department in respect of the matters covered herein, such
payment should be made within 30 days from date, failing which the
consequences will follow in accordance with law. It is recorded that the
assessee claims that no further payment is required to be made.
21. Accordingly, WP (C) No.287 of 2022 is allowed by setting aside
the appellate order dated July 14, 2021 to the extent that it disallowed the
petitioning assessee's claim of Rs.6,55,99,154/- and by upholding the
appellate order to the extent that it rejected the balance claim of
Rs.30,73,908/-. Further, the penalty imposed by the appellate order is set
aside in its entirety.
22. MC (WPC) No.139 of 2022 is disposed of.
23. There will be no order as to costs.
(W. Diengdoh) (Sanjib Banerjee)
Judge Chief Justice
Meghalaya
19.10.2022
"Lam DR-PS"
