Procedure for transition of CENVAT Credit due to change in tax regime.

Case Details:

Issue- In the above case, the petitioner has challenged the objections raised in show cause notice with regard to transition and distribution of CENVAT Credit by Input Service Distributor (ISD) of the balance of Service Tax/Excise Duty as on 30th June 2017. Petitioner had filed the declaration in Form GST TRAN-1 for transitioning the credit of Rs.13,69,01,936/- under Section 140 of the CGST Act within the prescribed time and in the prescribed manner. The transition of the aforesaid CENVAT credit was also permitted and the above said balance was credited to the Electronic Credit Ledger of the ISD registration on the GST portal. Petitioner issued invoices to transfer such transitional credit to its other units and disclosed the said transfer to the recipient units through Column 9 of Table 8 in Form GST TRAN-1. Basis the same, the respective units availed the input tax credit in its Electronic Credit Ledger by disclosing the respective amount of ISD Credit transferred in its returns filed under GST in Form GSTR-3B. A show cause notice was issued to petitioner alleging that (a) the petitioner has wrongly transitioned balance of transitional credit in form GSTR-1 as ISD is not eligible to carry forward its balance  credit to electronic credit ledger under Section 140(1) of the CGST; (b) Migration of ISD registration from the existing law to the GST regime as an ISD is prohibited under GST; (c)  the ISD has transitioned credit with respect to invoices which were not received by it prior to 30th June, 2017. Petitioner claimed that the entire dispute only pertains to procedure for transition of the said CENVAT credit.

Held- It was held that as per directions made by Hon’ble Apex Court in the case of Union of India & Another v. Filco Trade Centre Pvt. Ltd. & Another 2022 (7) TMI 1232 directed the respondent to open the common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months, i.e., with effect from 1st September 2022 to 31st October 2022.  Accordingly, Petitioner’s recipient units can file revised declaration in Form GST TRAN-1 either electronically or manually (where electronically is not possible), for taking the credit already distributed to them by the ISD registration of Petitioner by issuing invoices. Once, such a revised declaration is filed by the concerned recipient units of Petitioner, the credit already taken by the said units shall be treated to have been taken validly on the date on which it was originally taken. However, no further credit based on revised declaration in Form TRAN-1 shall be claimed by Petitioner, as the said filing is purely for regularizing the earlier action of transition and distribution of CENVAT credit by the ISD registration of Petitioner. If the said credit again reflected in Electronic Credit Ledger of the recipient units, the recipient unit shall make a debit entry in Electronic Credit Ledger to the extent such credit has already been claimed earlier. Once, the credit taken by the respective units is regularized by filing revised electronic or manual declaration (as the case may be) in Form GST TRAN-1, the credit balance shown in Electronic Credit Ledger of Petitioner being the balance of ISD credit transitioned shall be deemed to have lapsed/deleted. Thus, Respondent authority was directed not to proceed to adjudicate the above impugned show cause notice issued to petitioner.