M/s. Magna Automotive India Private Ltd. VS Commissioner Of GST And Central Excise

The petitioner has contested an order issued by the first Appellate Authority on March 29, 2019, arguing that no Tribunal has been established under Section 112 of the Goods and Service Tax Act, 2017. The case revolves around the petitioner’s assertion of being eligible for input tax credit (ITC) concerning specific imports of capital goods.

The petitioner’s argument, as presented by their legal counsel, highlights that no credit was initially claimed during the relevant period. Additionally, with the integration of the Customs Act, 1962 into the GST regime effective from July 1, 2017, the petitioner failed to request the transition of such credit under the GST Act.

Instead of claiming credit, the petitioner submitted an application for refund through a manual revision of an excise return on April 12, 2018, seeking reimbursement for the credit they believed they were entitled to. Subsequently, a show-cause notice was issued to the petitioner, to which they responded. Ultimately, an order-in-original was issued on December 12, 2018, rejecting the refund claimed by the petitioner.

The petitioner, dissatisfied with the order denying their refund claim, pursued a first appeal. During this appeal process, the petitioner introduced an alternative argument concerning the transition of credit. This alternative claim was acknowledged by the first appellate authority as noted in paragraph 4 of the order.

However, despite the presentation of this alternate claim, the authority ultimately rejected it, stating that there is no legal provision for allowing such transition. Notably, there was no reference made to Section 140(2), which permits the transition of CENVAT credit in relation to capital goods not carried forward in a return filed under the previous law.

Section 140(2) of the Goods and Service Tax Act, along with its explanation, outlines the entitlement of a registered person to claim credit of unavailed CENVAT credit pertaining to capital goods. This credit should not have been carried forward in a return filed under the previous law and must be claimed within the specified time and manner. However, certain conditions apply, such as the admissibility of the credit under both the previous law and the GST Act.

Despite the existence of this provision, the authority’s decision did not consider it, leading to the rejection of the petitioner’s claim for transition of credit.

The revenue’s position is that transition of credit can only be permitted if the petitioner had claimed a portion of the credit at the relevant time. This stance is elucidated in the Guidance Note for CGST Transition Credit dated March 14, 2018, which clarifies that unavailed credit on capital goods can only be claimed if the taxpayer had initially claimed some portion of the credit. The note indicates that the table capturing details of unavailed credit of capital goods is intended for taxpayers who have already availed a portion of CENVAT credit on capital goods and now intend to claim the remaining credit.

In essence, it is considered a precondition for claiming unavailed credit on capital goods that the taxpayer must have initially claimed at least a portion of the credit. However, in the present case, the petitioner did not make any claim at all during the relevant period.

Despite this, as the Assessing Authority did not have the opportunity to address the claim of transitional credit since it was raised for the first time during the appeal process, the petitioner is granted an opportunity to make a claim before the Assessing Authority. The Authority is instructed to dispose of the claim within two weeks from the date of receipt, after providing a hearing to the petitioner. This decision offers the petitioner a chance to present their case regarding transitional credit before the proper authority.

In the current circumstances, the challenged order is not overturned. However, it is explicitly clarified that the Authority tasked with handling the request for transition, if and when it is made, must adopt an independent standpoint. This means that the Authority should not feel constrained by the conclusions reached by the Appellate Authority or by any preliminary observations made in the present order. This directive underscores the importance of an unbiased assessment of the petitioner’s claim for transition, allowing for a fair and impartial consideration of all relevant factors without being influenced by previous determinations. By emphasizing the need for an independent evaluation, the order aims to ensure that the petitioner’s claim is thoroughly and objectively reviewed, free from any undue influence.

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