GST Authorities Lacked Jurisdiction Over TRAN-1 Transitional Credit Claims

Kunjal Synergies Private Limited & Anr Vs Assistant Commissioner of CGST & CX (Calcutta High Court)

The Calcutta High Court addressed an appeal against a single-judge order that directed the appellants, Kunjal Synergies Private Limited, to respond to a show-cause notice issued by the Assistant Commissioner of CGST & CX. This notice pertained to alleged irregularities in the transitional credit of Central Goods and Services Tax (CGST) availed through Form TRAN-1. The appellants contested the jurisdiction of the authority to issue this notice under Section 73 of the CGST Act, particularly because the proceedings originated in 2018 with continuous verification of their TRAN-1 claim without any prior demand raised.

The High Court, after hearing both parties, noted the factual background where Kunjal Synergies, engaged in trading and importing specific chemicals, had migrated to the GST regime and filed TRAN-1 in November 2017, carrying forward CENVAT credit from the previous service tax and central excise regime. The department had been engaging in a verification process since 2018, seeking documents and clarifications, without issuing any formal show-cause notice until the impugned one in September 2023. The appellants argued that initiating a demand after such prolonged communication and verification, without considering their submissions, was beyond the authority’s jurisdiction. Citing the precedent set by the Jharkhand High Court in Usha Martin Limited, which dealt with a similar issue, the Calcutta High Court emphasized that while writ petitions challenging show-cause notices are generally discouraged due to the availability of alternative remedies, an exception exists when the proceedings are wholly without jurisdiction. The court then examined Sections 140 and 174 of the CGST Act concerning transitional provisions and the repeal and saving clauses. It concluded that proceedings under the CGST Act for alleged contraventions of the previous Central Excise Act and Finance Act related to transitional credit claimed via TRAN-1 were indeed beyond the jurisdiction of the GST authorities. Consequently, the Calcutta High Court allowed the appeal, set aside the single-judge’s order, and quashed the show-cause notice. However, it granted liberty to the respondent authorities to initiate proceedings under the relevant provisions of the erstwhile Central Excise Act, 1944, and Finance Act, 1944, read with the CENVAT Credit Rules, 2004, for the relevant tax period, provided such actions are in accordance with the law.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT