Maithan Steel and Power Limited Vs Satyajit Singh (GSTAT Kolkata)
Summary: The Goods and Services Tax Appellate Tribunal, Kolkata Bench, held that CGST authorities lacked jurisdiction to recover allegedly inadmissible CENVAT credit originating under the erstwhile tax regime by initiating proceedings under Section 73 of the CGST Act, 2017. Maithan Steel and Power Limited had transitioned ₹14,26,661 through Form GST TRAN-1 for two units, while the Department relied on original June 2017 ER-1 returns reflecting ₹4,61,533 and disputed the excess ₹9,65,128. An additional ₹3,52,678 of capital-goods credit was also challenged, taking the original demand to ₹13,17,806 with interest and penalty.
The taxpayer asserted that revised ER-1 returns had been manually submitted and acknowledged on 14 July 2017, and that capital-goods credit was not previously availed. The adjudicating authority rejected the manually filed revisions and confirmed the demand. The First Appellate Authority granted relief for the capital-goods component but upheld the balance. Before the Tribunal, the appellant contended that questions about entitlement under the previous Central Excise and CENVAT framework could be examined only under the former laws, preserved by Section 174(2)(e). The Revenue relied on Rule 121 of the CGST Rules to support verification and recovery of wrongly transitioned credit under Sections 73 and 74.
Addressing jurisdiction as a threshold issue, the Tribunal followed the Jharkhand High Court in Usha Martin Limited and the binding Calcutta High Court decision in Kunjal Synergies Private Limited. It found that the Revenue had not explained how the controlling High Court authorities were distinguishable. The proceedings under Section 73 were therefore held unsustainable for inherent lack of jurisdiction. The impugned appellate order was set aside, and the taxpayer’s appeal was allowed without costs. The Tribunal did not independently determine the substantive eligibility of the disputed pre-GST credit.
Cases Discussed
- Johnson Matthey Chemicals India Pvt. Ltd. v. Union of India — 2025 (7) TMI 627; Bombay High Court; cited by appellant
- Jekson Vision Private Limited v. Union of India — 2022 (9) TMI 1670; Gujarat High Court; cited by appellant
- Paharpur Cooling Towers Ltd. v. Union of India — 2019 (12) TMI 462; Calcutta High Court; cited by appellant
- Adfert Technologies Private Limited v. Union of India — 2020 (32) G.S.T.L. 726 (P&H); cited by appellant
- Mahindra & Mahindra — 2022 (10) TMI 212; Bombay High Court; cited by appellant
- Usha Martin Limited v. Additional Commissioner, Central GST and Excise — (2022) 145 taxmann.com 224 (Jharkhand); relied upon and followed
- Tata Unistore v. Commissioner, CGST & Ex., Navi Mumbai Commissionerate — 2026 (8) TMI 139; GSTAT Thane; cited by appellant
- The District Collector v. P. Gunavathi & Ors. — SLP(C) No. 4702/2024; Supreme Court, 20 July 2026; cited on jurisdiction
- Kiran Singh v. Chaman Paswan — (1955) 1 SCR 117; AIR 1954 SC 340; Supreme Court; cited on jurisdiction
- Harshad Chiman Lal Modi v. DLF Universal — AIR 2005 SC 4446; Supreme Court; cited on subject-matter jurisdiction
- Kunjal Synergies Private Limited v. Assistant Commissioner of CGST & CX — MAT 2333 of 2023; Calcutta High Court; relied upon and followed
FULL TEXT OF THE ORDER OF GSTAT KOLKATA
This appeal has been filed u/s 112(1) of CGST Act,2017 by Maithan steel and Power Limited (GSTIN19AADCM1188M1Z0), 1, Chittaranjan Road, Salanpur, Paschim Bardhaman, West Bengal, 713357, against the order (Order No: 90/BOL -GST /2024-25 Dated: 12.06.2024) of the First Appellate Authority. i.e. Additional Commissioner, Additional Commissioner of CGST & CX Siliguri Appeals Commissionerate, Siliguri. in respect of the period 01/07/2017 – 31/03/2018.
[2] FACTS IN BRIEF
[2.1] Cenvat credit which has been transitioned by the taxpayer to GST is the subject matter of the instant appeal.
[2.2] It emerges from the Show cause -cum -Demand Notice (C. No. V(44)06/Adj/GST/MSPL/R-III/ASN_11/21-22 dated 20/12/2021) issued by the Assistant Commissioner, Asansol Division that during the scrutiny of FORM GST TRAN-1 which contains a declaration of the taxpayer under Section 140(1) and Section 140(2) of CGST Act,2017, it was noticed that
i. The taxpayer carried forward Cenvat credit to the tune of Rs.4,26,573/- & Rs. 10,00,088/- respectively in Column 5(a) Sl. No. 1 of the TRAN-1 against Registration No. AADCM1188MXM001 (Unit-I) & AADCM1188MXM002 (Unit-II) under existing law, and
ii. The taxpayer declared to have taken transitional input tax credit of unavailed CENVAT credit in respect of capital goods under the existing law, amounting to Rs.9,34,793/- in FORM GST TRAN-1 [Column 11 of Table 6(a)] against Registration No. AADCM1188MXM001 (Unit-I) & AADCN1188MXM002 (Unit-II) under existing law.(2.1 of SCN cum Demand Notice)
[3] Regarding (i) above, the Revenue alleged that in the monthly return ER-1 of June, 2017 for Unit-I Cenvat credit lying in the account credit at the end of June,2017 was NIL and for Unit-II, Cenvat credit lying in the account credit at the end of June,2017 in ER-1 was Rs.4,61,533. But the taxpayer carried forward an amount of Rs.14,26,661 (Rs.4,26,573+Rs.10,00,088) as transitional credit of Cenvat credit of eligible duties. According to the Revenue, prima facie the taxpayer availed excess transitional ITC of Rs.9,65,128 (14,26,661-461,533).
4. Regarding (ii) above, the Revenue took the view that as per Section 140(2) of CGST Act,2017, column 11 of Table 6(a) was to be used by a taxpayer to take in his electronic credit ledger, amount of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day. In the column 11 of Table 6(a) of the TRAN -1, the taxpayer claimed unavailed CENVAT credit of Rs. 9,34,793/- and also uploaded a list of invoices. Invoices issued prior to April,2017 involved Cenvat credit of only Rs.3,52,678/-.
5. Assistant Commissioner, Asansol Division issued a Show cause -cum – Demand Notice on 20/12/2021 containing the above findings. Therein he observed “It appears inexplicable that 50% Cenvat credit on capital goods, relating to invoices issued prior to April’2017, are now being claimed as unavailed cenvat credit, which had not been availed in full during pre-GST regime by the said taxable person which is beyond the conventional practice of trade…”( para 2.4). It was also alleged that de relevant documents” for verification of the claim, he did not submit relevant documents for verification of the transitional input tax credit so availed/taken in Form GST Tran-1. The Show cause -cum -Demand Notice dated 20/12/2021 asked the taxpayer to show cause as to why “total transitional credit of input tax of Rs.13.17.806 [Rs.9,65,128 availed in Column 11 of Table 5(a) and Rs.3,52,678 Column 11 of Table 6(a) of FORM TRAN -1] and subsequently utilised for payment of output tax, should not be .demanded from them in terms of Section 73(1) of CGST Act,2017…”
6. The Appellant filed a reply to the SCN wherein he submitted that the Appellant had filed a revised ER-1 return manually on 14.07.2017 submitted before and acknowledged by the jurisdictional office of the Superintendent, i.e., within the same month of filing the original ER-1 returns, on the basis of which the Appellant has correctly availed the transitional credit of Rs. 14,26,661/-. As regards the demand on credit availed on capital goods, the Appellant submitted that such credit was not availed in the erstwhile regime and therefore, in accordance with Section 140(2) of the CGST Act, 2017, the Appellant has correctly availed such credit of Rs. 3,52,678/-
7. In the O-I-O( No.02/MSPL/R-III/GST/ASN-II/23-24 dated. 12.10.2023, the Assistant Commissioner, CGST & Excise, Asansol-II division rejected his submission of having filed revised ER-1 manually with the observation “the same should be filed through the system which they failed to file in proper time. Ignorance of law and procedure cannot be taken into consideration in a quasi-judicial procedure.”( para 6.6)
8. The taxpayer’s claim of not having availed Cenvat credit against invoices issued prior to April, 2017 was also rejected because “the list of invoices uploaded …had not been reflected in ER-1 return for the concerned period.”
9. The taxpayer had objected to the validity of SCN as DRC-01 and DRC-01A was not issued. The Adjudicating Authority rejected the objection on the ground that Rule 142 of the CGST Rules was inserted by Notification No. 16/2019 -CT dated 29.03.2019 while the issues involved in the present case pertain to 201617 and 2017-18. Moreover, the use of ‘may’ in Rule 142(1A) of CGST Rules, 2017 makes it clear that it is not mandatory to issue DRC-01 and DRC-01A before the service of notice.
10. So, the Assistant Commissioner, CGST & Excise, Asansol-II division confirmed demand of tax to the tune of Rs. 13,17,806 alongwith interest and penalty.
11. Aggrieved by the O-I-O, an appeal was filed by the appellant on 02.02.2024. The Appellate Authority held as under :-
“ 5.5 I find that the appellant has submitted their revised returns ER-1 returns manually on14.07.2017 to the Superintendent, CGST, Raghunathpur Range, Purulia for Unit I and the Superintendent, CGST, Range-III, Asansol-Il Division, Asansol for Unit II. The revised ER-1 return filed manually with the Department indicated eligible ITC of Rs.1,4,26,661/-, cumulatively for both Units I & II.
5.6 I find that adjudicating authority has observed that eligible credit balance as per ER-1 for June 2077 was Rs 451,533/ at the time of initiation of scrutiny of TRAN-1 . I find that there is no dispute regarding the above mentioned amount. I find that though the appellant filed revised return manually but same was not getting reflected in the system. I also observe that appellant has failed to indicate which of the provisions enabled them to file revised return and procedure thereof. I find that adjudicating authority has rightly rejected the excess availment of transitional credit.
5.7 Further as far as credit of amount of Rs. 3,52,678/ – in table 6a of TRAN-L is concerned ,I find that demand of same is based on suspicion that the credit for the same has already been taken in the erstwhile regime in the first quarter of the subsequent financial year, i.e., 201718. However, there is no corroboration for the same in the SCN. I find force in the arguments forwarded by appellant and also from the ER-1 reconciliation submitted by them that rest 50% of the credit was not availed by them in first quarter of 2017-18.”
13. So the First Appellate Authority gave the taxpayer partial relief by setting aside the demand in respect of availment and utilisation of transitional input tax credit in respect of capital goods and utilization of transitional input tax credit in respect of capital goods amounting to Rs. 3,52,678 in Form GST TRAN-I through Column 11 of table 6(a). Hence the taxpayer has filed this appeal u/s 112(3) of CGST Act,2017.
14. GROUNDS OF APPEAL IN GSTAT
SYNOPSIS OF PRELIMINARY GROUNDS
A. The Impugned Order is non-speaking and has been issued on the same lines as the underlying SCN without considering the submission of the Appellant.
B. The entire proceedings should be dropped on the sole ground that the underlying SCN has not been issued in accordance with the provisions of Rule 142 of the CGST Rules and thus, the same is liable to be quashed.
SUBMISSIONS ON MERITS
C. Provisions of the CGST Act cannot be invoked to demand and recover transitional credit.
D. The appellant has correctly taken transitional credit vide from GST Tran-1 in accordance with the provisions of Section 140 of the CGST Act.
E. Procedural infirmities cannot be a ground to deny a substantial benefit.
F. Denial of credit to the appellant in the present case is violative of Article 265 and Article 300A of the Constitution of India.
G. Interest is not chargeable and penalty is not imposable.
The major grounds in the appeal have also been elaborated as follows
I. It is a settled position of law that transitional credit availed through TRAN-1 cannot be denied solely for the reason that the assessees have filed the returns in the erstwhile regime manually and not electronically. Reliance is placed on the decision of the Hon’ble Bombay High Court in the case of M/s. Johnson Matthey Chemicals India Pvt. Ltd. v. Union of India -2025 (7) TMI 627— and of the Hon’ble Gujarat High Court in Jekson Vision Private Limited v. Union of India — 2022 (9) TMI 1670– and of the Hon’ble Calcutta High Court in M/s. Paharpur Cooling Towers Ltd. v. Union of India & Ors. – 2019 (12) TMI 462
II. Hon’ble High Court of Punjab & Haryana in the case of Adfert Technologies Private Limited v. Union of India – 2020 (32) G.S.T.L 726 (P&H) held that transitional credit being a vested right ought not to be denied merely due to procedural lapses.
III. Therefore, the Appellant has rightly availed the transitional credit on the basis of revised ER-1 returns filed manually. Therefore, the impugned Order is liable to be set aside.
IV. Without prejudice to the above submission, it is submitted that the provisions of the GST law cannot be invoked to demand transitional credit. This is because, as per Section 2(62) and 2(63) of the CGST Act, 2017 “input tax credit” means credit of IGST, CGST, SGST, UTGST only and does not include transitional credit within its ambit. Reliance is placed on the decision of Mahindra & Mahindra, 2022 (10) TMI 212 – Bombay High Court. Such dispute ought to have been raised in the erstwhile regime. Reliance is placed on the case of Usha Martin Ltd. v. Additional Commissioner, CGST & Excise & Ors. – 2022 (11) TМІ 1266. This is also in light of the provisions of the CGST Act, 2017, which protect any adjudication proceedings which can be initiated under the erstwhile law for recovery of arrears under the erstwhile law.
V. Without prejudice, eligibility to avail Cenvat credit of the erstwhile regime cannot be disputed by way of proceedings under Section 73 of the CGST Act, 2017. Section 174(2)(e) of the CGST Act, 2017 ensures that the repeal of erstwhile laws does not invalidate pending or future legal action, and the same can be constituted as if such Acts have not been amended or repealed. Therefore, the Department ought to have issued a notice under Section 11A of the Central Excise Act, 1944 for disputing the eligibility of erstwhile Cenvat credit. Reliance is placed on the decision of Hon’ble Jharkhand High Court in the case of M/s. Usha Martin Limited v. Additional Commissioner, Central GST & Excise & Ors. – 2022 (11) TMI 1266 – Jharkhand High Court, wherein it was held so. Recently, in an analogous situation, the Hon’ble GSTAT Thane, in the case of Tata Unistore v. Commissioner, CGST & Ex., Navi Mumbai Commissionerate – 2026 (8) TMI 139 – GSTAT Thane, held that CGST authorities does not have the power to reassess the correctness of CENVAT credit availed under the erstwhile laws, and the proceedings ought to be instituted under the erstwhile law as per the savings clause. The said decision is squarely applicable to the Appellant.
[15] CROSS OBJECTION FILED BY THE REVENUE
In its rebuttal of the challenge to the jurisdiction, the Revenue contended as under :-
I) The Appellant’s contention that Section 73 cannot be invoked for recovery of wrongly availed transitional credit is legally untenable. Rule 121 of the CGST Rules specifically provides that the amount credited under the transitional-credit mechanism may be verified and proceedings under Section 73 or Section 74 may be initiated in respect of credit wrongly availed. Thus, the statutory scheme expressly contemplates recovery of wrongly availed transitional credit through proceedings under Section 73/74. The Appellant’s attempt to distinguish “transitional credit” from “input tax credit” for the purpose of defeating Section 73 is overly technical and ignores the specific transitional machinery created under Chapter XX of the CGST Act read with the Rules. Section 140 creates the entitlement to transitional credit subject to fulfilment of prescribed conditions. It does not create an unconditional or indefeasible right to every amount declared by a taxpayer in TRAN-1. The Appellant’s reliance upon Section 2(62) and Section 2(63) is misplaced because those definitions cannot be read so as to render Rule 121 completely ineffective. The decision in Commercial Steel Engineering Corporation relied upon by the Appellant is distinguishable on its facts and cannot be treated as laying down a universal proposition that no wrongly transitioned credit can ever be recovered under the GST law. The CBIC Circular relied upon by the Appellant regarding refund of transitional credit deals with the computation of “Net ITC” for refund purposes and does not decide the question of recovery of wrongly transitioned credit under Rule 121. The Appellant’s contention that the dispute exclusively pertains to the erstwhile Central Excise regime is also incorrect. The present proceedings concern the wrongful transition and availment of credit in the GST regime, and therefore the GST authorities are competent to verify the credit transitioned through TRAN-1. The decision in M/s Usha Martin s distinguishable because the facts and legal issue involved therein were different from the present dispute concerning the statutory verification of transitional credit. The Appellant’s challenge to the vires of Rule 121 is itself misconceived. Rule 121 a machinery provision framed to give effect to the transitional-credit provisions and cannot be declared inapplicable merely because the Appellant disputes its operation. The power to make rules under Section 164 is sufficiently wide to prescribe the manner in which transitional credit is to be verified and consequential proceedings are to be initiated. The Appellant’s reliance on the general principle that rules cannot override parent statute is not disputed. However, Rule 121 does not override Section 140.
[12] It has been held by the Hon’ble Supreme Court in the judgement delivered on July, 20,2026 in THE DISTRICT COLLECTOR Vs P. GUNAVATHI & ORS ( arising out of S.L.P( Civil) No. 4702/2024)
“13. It is well settled that in a legal proceeding whenever a jurisdictional issue arises for consideration, the authorities cannot proceed further without addressing and determining the same.” Hence we shall first deal with the jurisdictional issue.
[17] JURISDICTION OF THE CGST AUTHORITIES
17.1 One of the grounds of the present appeal is that “eligibility to avail Cenvat credit of the erstwhile regime cannot be disputed by way of proceedings under Section 73 of the CGST Act, 2017.” So at the outset, we shall deal with this challenge to the jurisdiction of the CGST authorities. In Kiran Singh v. Chaman Paswan, (1955) 1 SCR , the Hon’ble Supreme Court declared;
“It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity and that its invalidity could be set up whenever and it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties.”
17.2 In Harshad Chiman Lal Modi vs DLF Universal (AIR 2005 SC 4446), the Hon’ble Supreme Court observed :
“The jurisdiction of a court may be classified into several categories. The important categories are (i) Territorial or local jurisdiction; (ii) Pecuniary jurisdiction; and (iii) Jurisdiction over the subject matter. So far as territorial and pecuniary jurisdictions are concerned, objection to such jurisdiction has to be taken at the earliest possible opportunity and in any case at or before settlement of issues. The law is well settled on the point that if such objection is not taken at the earliest, it cannot be allowed to be taken at a subsequent stage. Jurisdiction as to subject matter, however, is totally distinct and stands on a different footing. Where a court has no jurisdiction over the subject matter of the suit by reason of any limitation imposed by statute, charter or commission, it cannot take up the cause or matter. An order passed by a court having no jurisdiction is a nullity.” (italics added)
18. Having discussed the critical importance of the issue of jurisdiction over the subject matter , we now turn to the judgement of the Hon’ble Jharkhand High Court in M/s Usha Martin Limited vs Additional Commissioner, Central GST and Excise (2022) 145 taxmann.com224( Jharkhand), which has been so strongly relied upon by the appellant. The Hon’ble High Court dealt with the question of legality and jurisdiction of a CGST officer to initiate a proceeding under Section 73 (1) of the C.G.S.T. Act for transition of CENVAT Credit which was allegedly inadmissible under Central Excise Act and Finance Act read with Cenvat Credit Rules.
19. The Hon’ble Division Bench held :
“ 15. From the conspectus of facts borne from record two questions emerge for answer in the present writ petition.
(i), whether the initiation of proceedings under Section 73 (1) of the C.G.S.T. Act in the facts and circumstances of the case was within jurisdiction of the Respondent No.1 or not;
(ii) whether in view of Section 174 of the C.G.S.T. Act, such a proceeding for availment of alleged inadmissible CENVAT Credit could have been initiated under C.E.A. and Finance Act read with C.C.R. or not. For proper appreciation the provision of Section 140 (1) and Section 174 of the C.G.S.T. Act are quoted hereunder
18. The enumerated conditions under which the registered person shall not be entitled to avail of the credit of input tax are not one which are applicable to the case of the present petitioner. The show cause notice under which the instant adjudication proceedings were initiated is worded allege similar contraventions under the CEA, Finance Act, 1994 and the CCR as the previous show cause notices issued under the existing law against the petitioner relating to contravention of the C.E.A., Finance Act and C.C.R.. The adjudicating authority does not hold that the transition of CENVAT Credit under Section 140 of the C.G.S.T. Act by the petitioner and relating to the period just before the appointed date i.e. 1st July, 2017 are not one which are inadmissible to be credited in terms of section 16 (2) of the C.G.S.T. Act. The Show cause notice itself alleges contravention of the C.E.A., Finance Act, 1994, read with C.C.R., 2004. As such, sub clause (i) of proviso to section 140 does not apply to the case of the petitioner at hand. It is neither the allegation against the petitioner that he had not furnished his returns required under the existing law for the period of six months immediately preceding the appointed date as per clause (ii) to the proviso to Section 140. In substance, the contraventions which have been alleged and the proceedings which have been initiated under Section 73 (1) of the C.G.S.T. Act are in relation to violation of the C.E.A. and Finance Act read with C.C.R. The gist of the imputation is that the petitioner could not claim the CENVAT credit in lieu of invoices raised by its Bokna mines as both of them were independent entities. Similar was the imputation in respect of the previous show cause notices issued under the existing law which are pending adjudication before the learned CESTAT or the Commissioner (Appeals) for different periods and in some of which the petitioner has already got a stay by the learned CESTAT. Whether the CENVAT credit under the existing law were admissible to be availed and transitioned by the petitioner was not an issue lying within the jurisdiction of the C.G.S.T authorities to be proceeded against and determined under the relevant provisions of Section 73 of the C.G.S.T. Act which provides as under:
“Under Section 73 of the C.G.S.T. Act a proper Officer may require a registered person to show cause in case it is found that he has not paid any tax or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized for any reason, other than the reason of fraud or any willful misstatement or suppression of fact to evade tax (such contraventions are covered by Section 74 of the C.G.S.T. Act) asking him to explain as to why he should not pay the amount specified in the notice along with interest and under Section 50 and penalty thereupon”.
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. 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 good or services. The assumption of jurisdiction by Respondent No. 1 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.
19. This leads us to the next question whether a registered person could transition inadmissible CENVAT Credit of the existing regime to the G.S.T. regime under Section 140 of the C.G.S.T. Act without any check or proceeding against him. We have to then advert to Section 174 of the C.G.S.T. Act to find the answer. Section 174 relates to repeal and saving and has been engrafted under the chapter XXI relating to Miscellaneous Provisions………
20.……….as is obvious, the new regime had to make provisions for the transactions which remained inchoate under the existing law. It is also a well settled legal position that on account of the new legislation the implementation of the G.S.T. regime could not be left to a realm of uncertainty. For a violation under the existing law, parallel proceedings could not be conducted under the existing law at the behest of jurisdictional officer and at the same time under the new law at the instance of another jurisdictional officer of the G.S.T. Act. It is in this conceptual background that the purport and construction of the repeal and saving provisions under Section 174 of the C.G.S.T. Act is to be understood. The existing Act, such as the Central Excise Act, 1944, the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Additional Duties of Excise (Goods of Special Importance Act, 1957), The Additional Duties of Excise (Textile and Textile Articles Act, 1978 and the Central Excise Tariff Act, 1985 were repealed under Subsection (1) of Section 174. However, the legislature provided that the repeal of the said Acts and the amendment of the Finance Act, 1994 to the extent as mentioned in sub section (1) or section 173 shall not
a. revive anything not in force or existing at the time of such amendment or repeal; or
b. affect the previous operation of amended Act or repealed Acts or and orders or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts.
Sub clause (e) of subsection 2 of Section 174 is relevant for purposes of the present case which are again reproduced hereunder:
“(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;”
21. It provides that the repeal of the existing laws shall not affect any investigation, inquiry, verification (including Scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine , interest, right, privilege, obligation, liability, forfeiture or punishment as aforesaid and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed. In substance, investigations, inquiry, verification, assessment proceedings, adjudication proceedings, legal proceedings which were for recovery of arrears or remedy in respect of any such duty or tax etc., which were pending or such other legal proceedings or inchoate rights which were in existence on the appointed day, for them legal proceedings may be instituted, continued or enforced as if these Acts had not been so amended or repealed. To decide whether any particular transaction is affected by the repeal of an Act, it is necessary to ascertain whether the transaction in question was completed when the Act was repealed. The present repeal and saving clause expressly engrafts that notwithstanding the repealing Act the repeal shall not affect any right or liability acquired accrued or incurred.
22. Therefore, it is clear that the repeal of the existing laws upon 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.
Petitioners also admit that proceedings for availing CENVAT Credit which were allegedly inadmissible under the C.E.A., Finance Act, read with C.C.R., 2004 could have been initiated under the existing laws. It is also not in dispute that in respect of previous proceedings for such contravention the cases have been kept in call book and in some of them the learned CESTAT has stayed the recovery of the tax. The duty of the constitutional courts is to interpret the law and also to ensure that there is certainty about the law not only in the minds of the law enforcement agencies but also in the common person as to where he stands in the eye of law. If proceedings for transition of CENVAT Credit alleged to be inadmissible is permitted to be carried under the C.G.S.T. Act, it may lead to uncertainty not only in the minds of the ordinary citizen but also in the minds of the Tax authorities. In some cases, a jurisdictional proper officer under the C.G.S.T. Act may initiate proceedings under the provisions of the C.G.S.T Act for such contravention. In other cases, the competent jurisdictional officer may initiate proceedings under the existing law that is the C.E.A. and Finance Act for the same contravention in view of the repeal and saving provisions under Section 174 of the C.G.S.T. Act. Such a course cannot be countenanced in law. As such, we are of the considered view that the initiation of proceedings by respondent no. 1 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. Consequently, the Order in Original dated 30th March, 2022 passed by the respondent no. 1 being without jurisdiction cannot be sustained in the eye of law. The impugned adjudication proceedings and the order in original dated 30th March, 2022 are accordingly quashed.
23. However, respondent authorities are at liberty to initiate proceedings under the provisions of the existing law, i.e. C.E.A, 1944, Finance Act, 1994 read with C.C.R, 2004 against the petitioner for the relevant tax period in accordance with law.”
[20] Next, we shall discuss the judgement of the Hon’ble Division Bench of the Calcutta High Court in Kunjal Synergies Private Limited vs Assistant Commissioner of CGST &CX (MAT 2333 of 2023). The appellants were registered as an assessee under the earlier service tax regime as well as the Central Excise regime and they migrated to the GST regime with effect from 1st July, 2017 and were allowed to file TRAN 1 Form for carrying forward of closing balance of unavailed CENVAT credit of the erstwhile regime to the new GST regime and the same was filed by the appellants on 9th November, 2017. A division bench of the Hon’ble Calcutta High Court posed the question:
“8. the legal question to be answered in the instant case is whether the show-cause notice dated 18th September, 2023 issued under Section 73 of the CGST Act was within the jurisdiction of the authority alleging that there is an irregularity in the transitional credit of CGST availed under TRAN 1.
‘9. We need not labour much to find an answer to the above-mentioned query as identical issue was decided by the Hon’ble Division Bench of the High Court of Jharkhand in the case of Usha Martin Limited vs. Additional Commissioner, Central GST and Excise, Jamshedpur and Ors. reported in [2024] 124GSTR 396 (Jha.) : MANU/JH/1261/2022. In paragraph 9 of the said judgment, the contention raised by the Department has been noted and in fact, the learned Senior Standing Counsel appearing for the respondents/Department has made identical submission before us to sustain the impugned show-cause notice.”
[21] After referring to the judgement of the Hon’ble Jharkhand High Court (supra), the Division Bench of Calcutta High Court held:
‘15. Thus, while answering the question, it has to be considered whether the initiation of proceedings by the respondent no.1 therein under Section 73 of the CGST Act for alleged contravention of the Central Excise Act and Finance Act read with CENVAT Credit Rules against the petitioners therein by filing TRAN 1 in terms of Section 140 of the CGST Act for transition of CENVAT credit as being inadmissible under the existing law or beyond his jurisdiction. Accordingly, the adjudication proceeding, which was impugned in the said writ petition, was quashed. However, the respondent authorities were granted liberty to initiate proceedings under the provisions of the existing law i.e. Central Excise Act, 1944, Finance Act, 1944 read with CENVAT Credit Rules, 2004 against the petitioner therein for the relevant tax period in accordance with law.
18. In the light of the above discussions, we have no hesitation to hold that the impugned show-cause notice is without jurisdiction. In the result, the appeal is allowed along with the connected application (IA No. CAN 1 of 2023). The order passed by the learned Single Bench is set aside. Consequently, the writ petition is allowed and the impugned show-cause notice is quashed.
2. However, the respondent authorities are at liberty to initiate proceeding under the provisions of the then existing law i.e. the Finance Act, 1944 as amended from time to time read with CENVAT Credit Rules, 2004 against the appellants for the relevant tax period. However, such proceedings should be in accordance with law.”
[22] DECISION
[22.1] The order impugned in the appeal before this Tribunal is in respect of CENVAT credit which has been transitioned by the appellant in TRAN 1. The proceedings for recovery of the allegedly inadmissible Cenvat credit was initiated under section 73 of CGST Act,2017.
[22.2] Except a bald assertion in its cross objection “The decision in M/s Usha Martin Ltd. relied upon by the Appellant is distinguishable because the facts and legal issue involved therein were different from the present dispute concerning the statutory verification of transitional credit” , the Revenue has not demonstrated how the “legal issue involved therein were different from the present dispute concerning the statutory verification of transitional credit”( Cross Objection B.9)
[22.3] In our considered view, the legal issues involved in the instant appeal are squarely covered by the judgement of the Hon’ble Jharkhand High Court in M/s Usha Martin Limited vs Additional Commissioner, Central GST and Excise( 2022) 145 taxmann.com224( Jharkhand) and the binding decision of the Hon’ble Calcutta High Court in Kunjal Synergies Private Limited vs Assistant Commissioner of CGST &CX( MAT 2333 of 2023). Hence, the proceedings under the C.G.S.T. Act for recovery of allegedly inadmissible Cenvat credit are not legally sustainable due to the inherent lack of jurisdiction of the CGST authorities.
[22.4] We therefore set aside the impugned Appellate order and allow the appeal filed by the Appellant taxpayer. We make no order as to cost.
The Order is pronounced in the open court in presence of the parties. The same shall be uploaded at once and certified copies of the order be given to the parties.
