SCN Quashed – Denial of ‘transitional credit’ of cesses on basis that Explanation 3 to Section 140 – Godrej & Boyce Mfg. Ltd. (Bombay High Court)
Ruling delivered recently by the Bombay High Court in case of Godrej & Boyce Mfg. Co. Ltd. (‘Petitioner’/’Godrej’).
Background of the Case:
The Petitioner had sought relief from the Bombay High Court on the issue that merely on the basis of Explanation 3 to Section 140, Revenue could not have issued the impugned show cause notice alleging that the petitioner has availed inadmissible transitional credit amounting to Rs. 3.83 crores comprising of Education Cess (Ed Cess), Secondary & Higher Education Cess (SHE Cess) and Personal Account Amounts (PLA) in their TRAN-1.
Contention by the Petitioner:
The petitioner’s contentions are as under:
- the transitional arrangement for taking Input Tax Credit in the cases of CESS has been taken away by a retrospective amendment. However, the petitioner claims that not only on the date of its issuance but even on the date this writ petition was presented, the amendment(s) referred to in the impugned notice had not come into force and, therefore, the impugned notice has been issued on an untenable legal premise; hence, it is without jurisdiction.”
- the respondent no.3 merely on the basis of Explanation 3, as introduced and brought into force, and without the amendments introduced in Explanations 1 and 2 to Section 140 being brought into force, could not have issued the impugned show cause notice and since the same suffers from a gross jurisdictional error.
- the amendments to Explanations 1 and 2 of Section 140 of the CGST Act have not been notified in terms of Section 1 (2) and, hence, sub-clauses (i) each of clauses (b) and (c), Section 28 of the Amending Act are still inoperative in law.
Department’s Contention
- That the impugned SCN has been issued by an officer who does have the jurisdiction to issue such notice hence, the Petitioner ought to be directed to raise all points that are available to it in defence for consideration of the said officer.
- Respondent also contended that the point urged by the Petitioner that the impugned show cause notice is not founded on any legal premises is a jurisdictional issue and such issue can even be urged by it for an adjudication by the Respondent.
Observations of the High Court
- Mere introduction of Explanation 3 to Section 140 and making it operational with effect from 01.02.2019, would not clothe the department with the power to issue a show cause notice on the premise that Education Cess, Higher Secondary Education Cess and PLA amounts are not included in Explanations 1 and 2 of Section 140;
- Explanation 3 seeks to clarify that the expression ‘eligible duties and taxes’, as distinguished from ‘eligible duties’, excludes any cess not specified in Explanations 1 and 2 and any cess collected as additional duty of customs. The expression ‘eligible duties and taxes’ appears in sub-section (5) of Section 140, whereas the expression used in subsection (1) thereof is ‘of eligible duties’.
- Explanation 3 does not have any application to sub-section (1) of Section 140.
- Parts of the amendments in Explanations 1 and 2 to Section 140 of the CGST Act sought to be introduced by sub-clauses (1) each of clauses (b) and (c) of Section 28 of the Amending Act are yet to be brought into force.
- Revenue could save the show cause notice even without the amendments in Explanations 1 and 2 to Section 140 or the grounds taken by the Revenue, it shall be at liberty to issue a fresh show cause notice.
Author Bio
