Interest claim on delayed transitional CENVAT credit not automatic and requires adjudication by tax authorities

M/s Console Shipping Services India Pvt. Ltd. v. Union of India & Ors.,
Delhi High Court, W.P.(C) 6318/2021,
Section 140 read with Section 56 of the CGST Act, 2017,
Category: Transitional Credit / Interest on ITC,
Judgment dated 31 January 2024

Facts

The petitioner, a registered taxable person under the pre-GST regime, had accumulated CENVAT credit under the Central Excise law. Upon transition to GST, the petitioner sought to carry forward an amount of ₹13,94,961/- as CENVAT credit along with ₹8,98,763/- representing interest already paid, by reflecting the same in the Electronic Credit Ledger through GSTR-3B returns. The grievance arose on account of delay and partial denial by the department in allowing such transitional credit during the migration phase from the erstwhile regime to GST, compelling the petitioner to invoke writ jurisdiction seeking a direction to permit carry forward of credit along with consequential interest (paras 1–2).

Questions before the Court

The lis before the Court eventually narrowed down to a singular legal issue, namely whether the petitioner was entitled, as a matter of right, to interest on the delayed carry forward of admittedly eligible CENVAT credit under Section 140 of the CGST Act, particularly when such credit was allowed during the pendency of the writ petition (paras 3–4).

Observations of the Court

The Court noted that during pendency of the writ proceedings, the department had granted CENVAT credit of ₹10,36,932/- to the petitioner, while the balance amount of ₹3,57,477/- stood rejected as ineligible input tax credit. The Bench observed that the surviving controversy pertained solely to the claim of interest on the delayed availment of the admitted credit amount.

The respondents contended that the transitional credit mechanism under Section 140 operates in a distinct statutory field and does not automatically attract interest under Section 56 of the CGST Act, which is confined to delayed refunds. The Court found merit in the submission that interest is not payable as a matter of course and requires examination of facts and statutory conditions by the proper officer (paras 4–5).

Judgment / Verdict

Instead of relegating the petitioner to file a fresh application, the Delhi High Court disposed of the writ petition by directing the respondents to treat the writ petition itself as a formal representation seeking interest on the alleged delayed carry forward of CENVAT credit. The Court mandated that a reasoned speaking order be passed by the department within four weeks, clarifying that the petitioner would be at liberty to pursue further statutory remedies if aggrieved by the decision. The Court consciously refrained from adjudicating entitlement to interest on merits, leaving the issue open for administrative determination in accordance with law (paras 5–6).

Between the Fine Lines – Practical Takeaway for Trade and Industry

This ruling underscores that while transitional CENVAT credit may be substantively protected, interest on delayed availment is not automatic under GST. Taxpayers must be prepared for adjudication and cannot mechanically invoke Section 56 in transitional credit cases. Procedural compliance and timely representation remain critical, particularly where delays arise during system migration or administrative scrutiny.

Cases Referred – Summary Table

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