HERO MOTOCORP LTD. VS. UNION OF INDIA & ORS.

The principal grievance of the petitioner centers on the respondents/revenue’s actions to recover accumulated credit that was transitioned by the petitioner in accordance with Section 140 of the Central Goods & Services Tax Act, 2017 (referred to as the “Act”) concerning Input Service Distribution (ISD). The petitioner, who serves as an Input Service Distributor, is duly registered with the respondents/revenue. The writ petition challenges a communication, specifically the letter dated 04.02.2019, in which the petitioner’s request for the allowance of credit of unutilized ISD was rejected. It is pertinent to note that this communication was issued by respondent no. 4. In addition to this, the petitioner also contests the instructions dated 05.02.2017, issued by respondent no. 3, which explicitly prohibit ISDs from transitioning accumulated unutilized CENVAT credit.

The learned counsel for the petitioner argues that the issue at hand has already been addressed by several significant judgments. These judgments include: the judgment dated 23.08.2022, rendered by the Bombay High Court in W.P. No. 109/2020, titled Unichem Laboratories Limited v. Union of India and 4 Ors.; the judgment dated 29.08.2022, rendered by the Bombay High Court in W.P. No. 2168/2021, titled Colgate Palmolive (I) Limited v. Union of India & Ors.; and the judgment dated 11.02.2022, rendered by the Gujarat High Court in R/Special Application No. 9151/2021, titled Bodal Chemicals Ltd. v. Union of India, 2022 SCC OnLine Guj 297. These cases are highlighted by the petitioner’s counsel to support their contention that the current issue is not unique and has been judicially addressed and resolved in favor of the petitioners in those instances.

Mr. Harpreet Singh, representing the respondents, acknowledged the need to review these judgments thoroughly and has agreed to return with further instructions upon examination of these precedents. This statement from the respondents’ counsel indicates a potential reassessment of the stance taken by the revenue authorities, contingent upon the findings from these judgments.

The court has taken note of the submissions made by both parties and has listed the matter for further hearing on 10.10.2022. In preparation for this hearing, the counsel for the petitioner is directed to file a concise two-page note summarizing the issues raised in the writ petition. This note is expected to outline the key legal arguments and the relevance of the cited judgments to the petitioner’s case, thereby assisting the court in comprehensively understanding the petitioner’s position.

The implications of this case are significant for Input Service Distributors like the petitioner, as the outcome could set a precedent for how accumulated unutilized CENVAT credit is treated under the Act. The petitioner’s contention hinges on the constitutional and statutory interpretation of the Act, particularly Section 140, and its application to ISDs. The resolution of this matter will provide clarity on the transitional provisions concerning tax credits and the rights of registered entities under the GST regime. The petitioner’s reliance on prior judgments suggests a well-founded belief that the current legal framework supports their claim for the allowance of transitioned credit. Thus, the forthcoming hearing and subsequent judgment are awaited with keen interest by all stakeholders involved in the GST framework, as it will have broader implications on tax compliance and credit utilization practices.

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