SCN under Section 73 for Verification of a Transitional Credit Cannot be Issued by GST Authority: Jharkhand High Court

The Jharkhand High Court ruled that SCN under Section 73 for the verification of a transitional credit cannot be issued by the GST authority.

Background 

By the adjudication proceedings initiated under Section 73 of the C.G.S.T. Act, 2017, the respondent Additional Commissioner, C.G.S.T. & Excise, Jamshedpur has disallowed the CENVAT credit carried forward by the petitioner by filing TRAN-1, in terms of Section 140 of the C.G.S.T. Act, 2017 by order.

Arguments 

Advocate Sujit Ghosh, appearing for the petitioner, raised the question of lack of jurisdiction of the adjudicating authority to decide upon the availment of CENVAT credit by the petitioner under the pre goods and service tax regime.

He submitted that the proceedings for recovery of tax and penalty to the tune of Rs.5.46 crores and Rs. 3.06 crores relating to the period February, 2010 to March, 2011 and April, 2011 to September, 2011 is pending before the CESTAT, Kolkata.

He further submitted that Section 73 of the C.G.S.T. Act deals with cases where tax has been short paid or not paid or erroneously refunded or where input tax credit has been wrongly availed or utilized.

The respondents submitted that the appellant has an efficacious and alternative remedy against the order-in-original before the appellate authority under Section 107 of the CGST Act, 2017.

On the question of jurisdiction he stated that the circular permits the proper officer to adjudge disputes under Section 73/74 of the CGST Act in respect of central tax not paid or short paid or input tax credit or central tax wrongly availed or utilized. Therefore, he has not exceeded his jurisdiction. 

Decision 

The division bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan observed that a perusal of the provisions of Section 73 of the CGST Act makes it clear that such a proceeding can be initiated for non-payment of any tax or short payment of such tax or for erroneous refund of such tax or for wrongly availing or utilizing the input tax credit which are available under the C.G.S.T. Act. 

The court said that Section 73 does not speak of CENVAT Credit as C.G.S.T. Act does not provide for CENVAT Credit rather the term has been subsumed in the expression input tax credit both relating to the supply of goods or services. 

It was further observed that the assumption of jurisdiction by Respondent to determine whether the CENVAT Credit was admissible under the existing law by invoking provisions of Section 73 of the C.G.S.T. Act was therefore not proper in the eye of law. 

“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 which were not closed. The repeal and saving clause (e) under Section 174(1) of the C.G.S.T. Act allowed such legal proceedings to be instituted in respect of inchoate rights except rights under transactions which were past and closed” the court said. 

The court held that the initiation of proceedings by respondent under section 73 (1) of the C.G.S.T. Act, 2017 for alleged contravention of the C.E.A. and Finance Act, read with C.C.R. against the petitioner by filing TRAN 1 in terms of Section 140 of the C.G.S.T. Act for transition of CENVET Credit as being inadmissible under the existing law was beyond his jurisdiction.

Case title: M/s Usha Martin Limited v/s Additional Commissioner, Central GST and Excise, Excise, Jamshedpur

Citation: W.P.(T) No. 3055 of 2022 

Date: 10.11.2022 

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