Dispute Arising Out Of Erstwhile Central Excise Act Has To Be Dealt With Under Its Provisions And Not Under GST: Jharkhand High Court

The Jharkhand High Court has held that the initiation of proceedings by the department under section 73 (1) of the CGST Act, 2017 for alleged contravention of the Central Excise Act (C.E.A.) and Finance Act against the petitioner in terms of Section 140 of the CGST Act for the transition of CENVAT Credit as being inadmissible under GST was beyond his jurisdiction.

The division bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan has observed that if proceedings for the transition of CENVAT credit alleged to be inadmissible are permitted to be carried out under the CGST Act, it may lead to uncertainty not only in the minds of the ordinary citizen but also in the minds of the tax authorities. In some cases, a jurisdictional proper officer under the CGST Act may initiate proceedings under the provisions of the CGST Act for contravention. In other cases, the competent jurisdictional officer may initiate proceedings under the existing law, which is the Central Excise Act, 1944 (C.E.A.) and Finance Act, for the same contravention in view of the repeal and saving provisions under Section 174 of the CGST Act. Such a course cannot be countenanced by law.

The petitioner/assessee is a company that operates in two divisions, the wire rope division, and the steel division. Steel Division is engaged in the manufacture of iron and steel products at its factory situated at Adityapur Industrial Area, Gamharia, duly registered under the erstwhile C.E.A. and Finance Act, 1994. The final products manufactured at the factory were dutiable under the CEA and are now taxable under the Goods and Services Act. According to the petitioner, the iron ore required for the manufacture of the final products was extracted from the petitioner's captive iron ore mine situated at Bokna, Barajamda.

The petitioner has a site office at Bokna mines, which receives the invoices issued under Rule 4 A of the Service Tax Rules, 1994, towards the purchase of its input services received at the mines.

The petitioner submitted that Bokna mines and Brinda-Sesai mines have maintained proper records and regularly filed periodic returns in Form ST-3.

On the implementation of GST, the petitioner was allotted GST registration for all business places under the Steel Division. The Gamharia factory was disclosed as a principal place of business, whereas both mines were disclosed as additional places of business.

In terms of the provisions of Section 140 of the CGST Act read with Rule 117 of the CGST Rules, 2017, the petitioner filed a TRAN-1 form to carry forward the amount of CENVAT credit from the return relating to the period ending with the day immediately preceding the appointed date, i.e., July 1, 2017, under the pre-GST regime.

The sum was included in CENVAT credit on account of input service invoices received at Bokna mines and input service invoices received at Brinda-Sesai mines. The petitioner also transferred CENVAT credit by declaring it in Column 7A(1) of TRAN-1 Form in terms of Section 140(5) of the CGST Act read with Rule 117 of the CGST Rules, which inter alia included CENVAT credit of service tax on account of input services received at Bokna mines on or after July 1, 2017, but the service in respect of which was paid by the petitioner under the Finance Act.

The petitioner has challenged the adjudication proceedings initiated under Section 73 of the CGST Act, 2017. The department has disallowed the CENVAT credit carried forward by the petitioner by filing TRAN-1, in terms of Section 140 of the CGST Act, 2017.

The petitioner contended that Section 174 of the CGST Act reserves the rights accruing under the erstwhile legislation. In other words, any dispute arising out of the erstwhile legislation has to be dealt with under the provisions of the legislation and not under the GST laws. The legislature could not have conferred parallel jurisdiction under both the existing law (the C.E.A. or Finance Act) and the present G.S.T. Act to enable the authorities to proceed on charges of irregular or improper availment of CENVAT Credit under the transitional provisions of Section 140.

The department submitted that since the petitioner has an alternative remedy of appeal under Section 107 of the CGST Act, he may be relegated to raising all the issues before the appellate authority.

The court has held that the repeal of the existing laws upon the coming of the G.S.T. law regime did not leave a vacuum as to past transactions that were not closed. The repeal and saving clause (e) under Section 174(1) of the CGST Act allowed legal proceedings to be instituted in respect of inchoate rights, except for rights under past and closed transactions.

"The repeal of the existing laws shall not affect any investigation, inquiry, verification (including Scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment as aforesaid and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed," the court noted.

The court has quashed the adjudication proceedings.

Case Title: M/s Usha Martin Limited Versus Additional Commissioner

Citation: W.P.(T) No. 3055 of 2022

Date: 10.11.2022

Counsel For Petitioner: Advocates Sujit Ghosh, Joybrata Misra, Ashray Behura, Shubham Gautam

Counsel For Respondent: Advocates Amit Kumar, Ashish Kr. Shekhar

Citation: 2022 LiveLaw (Jha) 93  

Click Here To Read Order