The Punjab and Haryana High Court has held that GST authorities cannot invoke Section 74 of the Central Goods and Services Tax Act, 2017, to determine the admissibility of CENVAT credit availed under the erstwhile Service Tax regime merely because the credit was subsequently transitioned into the GST framework.
The Division Bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rajesh Gaur allowed a writ petition filed by Mukut House Developers Pvt. Ltd., following the Jharkhand High Court’s ruling in Usha Martin Ltd. v. Additional Commissioner, Central GST and Excise, Jamshedpur and Others.
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The central issue before the High Court concerned the jurisdiction of GST authorities to reopen and question legacy CENVAT credit. The petitioner had availed the credit under the pre-GST indirect tax regime and later transitioned it into GST. Proceedings were initiated under Section 74 of the CGST Act on allegations relating to the credit’s original admissibility under the erstwhile law.
Section 74 permits the determination of tax that has not been paid, has been short-paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised due to fraud, wilful misstatement or suppression of facts. The dispute, however, was whether this provision could be extended to examine the legitimacy of credit originally availed under the earlier Service Tax and CENVAT framework.
Appearing for the petitioner, advocates Nazuk Singhal and Himanshu Gupta submitted that the controversy was fully covered by the Jharkhand High Court’s decision in Usha Martin. Junior Standing Counsel Ridhi Bansal appeared for the Union of India, while Additional Advocate General Saurabh Kapoor represented the State of Punjab.
The petitioner sought final disposal of the case in accordance with the ruling in Usha Martin Ltd. v. Additional Commissioner, Central GST and Excise, Jamshedpur and Others.
In Usha Martin, the Jharkhand High Court had ruled that authorities exercising powers under the CGST Act could not assume jurisdiction to determine whether CENVAT credit had been validly availed under the erstwhile indirect tax regime. Any challenge to the admissibility of such credit was required to be initiated under the law governing the period in which the credit was originally availed.
The mere transition of legacy credit into the electronic credit ledger under the GST regime would not authorise GST officers to reopen its original admissibility by invoking the provisions of the CGST Act. Questions relating to the legality of credit availed before the introduction of GST must be examined under the relevant provisions of the Finance Act, 1994, the Central Excise Act, 1944, and the CENVAT Credit Rules, as applicable.
The Punjab and Haryana High Court also took note of the petitioner’s submission that the Special Leave Petition filed against the Usha Martin judgment had been dismissed by the Supreme Court on April 17, 2026.
“Once that be the position, we are of the view that the present petition also deserves to be allowed for the reasons recorded in Usha Martin,” the High Court observed.
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