Case Law Details
Aditya Medisales Ltd. Vs State of Jharkhand (Jharkhand High Court)
The Hon’ble Jharkhand High Court in the case of Aditya Medisales Ltd. v. State of Jharkhand [W.P. (T) NO. 4338 OF 2022 dated October 9, 2023] held that the initiation of proceedings is bad in law, in as much as, in this case, only a summary of show cause notice vide Form DRC – 01 was served and not the proper show cause notice. Thus, the writ application stands allowed and therefore the recovery notice is set aside.
Facts:
Aditya Medisales Ltd. (“the Petitioner”) primarily deals in medicine and medicinal products through its depot in the State of Jharkhand. The Petitioner claimed a Transitional credit under Section 140 of the Jharkhand Goods and Services Tax, 2017 (“the JGST Act”). The Revenue Department (“the Respondent”) issued the summary of Show Cause Notices dated September 14, 2018, in Form GST DRC-01 for demand recovery of the Transitional Credit amount claimed by the Petitioner. On January 16, 2019, a summary of the order in Form DRC-07 (“the Impugned Order”) was received by the Petitioner. On being aggrieved by the Impugned Order, the Petitioner filed an appeal before the Joint Commissioner of State Tax (Appeal), Ranchi (“the Appellate Authority”) under Section of the JGST Act.
The Appellate Authority after hearing the Petitioner’s counsel and Departmental Officials, modified the Impugned Order dated January 16, 2019, and said that is self-explanatory and legally justifiable. Further, the Appellate Authority held that the transition of Input Tax Credit (“ITC”) was illegal and raised a demand with Interest and Penalty in Form GST APL-04 dated August 27, 2019 (“the Appellate Order”)
Thereafter, the Respondent issued a notice for recovery under Section 79 of the JGST Act in Form GST DRC-13 to the Petitioner’s bank, i.e., State Bank of India (“SBI”) on March 10, 2021, demanding payment of Rs. 19,69,441/-. SBI informed the Petitioner that its account had been put on hold. In the meantime, the Assessment Order for the Period 2016-17 was passed under the Value Added Tax, 2005 (“the VAT Act”), in which no discrepancy was found in the figures of purchases disclosed by the Petitioner.
Hence, the Petitioner filed a Writ Petition for the issuance of an appropriate writ/order/direction including a writ in the nature of certiorari quashing and setting aside the Appellate Order, the summary of show cause notices issued in Form GST DRC-01 dated October 29, 2018, and December 14, 2018, the Impugned Order, the notice issued under Section 79 in Form GST DRC-13 dated March 10, 2021, and mandamus to the SBI to release the Petitioner’s Bank Account to the extent of Rs. 19,69,441/- which has been kept on hold since March 19, 2021.
Issue:
Whether the transitional credit be denied by issuing the summary of the Show Cause Notice?
Held:
The Hon’ble Jharkhand High Court in the case of W.P. (T) NO. 4338 OF 2022 held as under:
- Observed that, the Impugned Order has been served upon the Petitioner and not the actual adjudication order. Also, the Appellate Order was perverse as it disallowed transitional credit on the ground that the Petitioner did not have possession of declarations in Form JVAT 410/411.
- Relied upon the judgements of Juhi Industries (P) Ltd. v. State of Jharkhand [P.(T) No. 1991 of 2021 With W.P.(T) No. 1984 of 2021] and NKAS Services Pvt. Ltd. v. State of Jharkhand [W.P.(T) No. 2444 of 2021], and held that the foundation of the proceeding in both the cases suffers from material irregularity and hence not sustainable, the entire proceedings had been set aside.
- Opined that, Assessing Officer for the purpose of transition of credit, is only required to verify the figures specified in the TRAN-1. Further, the maximum extent to which the Respondent can verify the genuineness of the transitional credit, is to see whether the transitional credit is admissible as credit under this Act, i.e., the JGST Act. Section 18(6) of the JVAT Act, does not contemplate production of JVAT 404 Forms as a mandatory condition for availing benefit of ITC. Undoubtedly, tax paid on purchases of medicine products/food products is admissible as tax under the JGST Act, more particularly because it does not fall within any of categories specified under section 17(5) of the JGST Act.
- Further Opined that, as per Section 142(8)(a) of the JGST Act, if any sum is found to be recoverable from a dealer in respect of assessment done under the JVAT Act, the same can be covered as an arrear of tax under the JGST Act. Thus, the interest of the revenue is already protected.
- Held that, under the garb of disallowing transitional credit, the Assessing Officer under the JGST Act cannot conduct an assessment of the returns filed under the JVAT Act. The initiation of proceedings is bad in law, since, in this case only a summary of show cause notice in DRC – 01 was served and not the proper show cause notice. Accordingly, the writ application stands allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
Heard learned counsel for the parties.
2. The instant Writ application has been preferred by the petitioner for following reliefs:-
(i) For the issuance of an appropriate writ/ order / direction including a writ in the nature of certiorari quashing and setting aside the appellate order dated 27.8.2019 (Annexure – 8) passed by the Joint Commissioner of State Taxes (Appeals), Ranchi Division, Ranchi and the consequential Summary of the Demand in Form GST APL-04 of even date, to the extent that the said appellate order seeks to deny the transitional credit of Rs. 23,86,069 claimed by the Petitioner on certain extraneous and procedural considerations, which have defeated the substantive rights of the Petitioner, as well as imposes penalty of Rs. 2,38,606.98 and interest of Rs. 5,72,656.76.
(ii) For the issuance of an appropriate writ/ order / direction including a writ in the nature of a certiorari, quashing and setting aside the summary of show cause notices dated 29.10.2018 (Annexure – 3) and 14.12.2018 (Annexure issued in Form GST DRC-01 in as much the same was not accompanied by a proper show cause notice under Section 73 of the JGST Act in terms of Rule 142(1)(a) of the JGST Rules, and further because it does not contain any particulars regarding the irregularity committed by the Petitioner to enable it to reply to the allegations contained therein.
(iii) For the issuance of an appropriate writ/ order / direction including a writ in the nature of a certiorari, quashing and setting aside the summary of the order dated 16.1.2019 issued in Form GST DRC-07 (Annexure 2) in as much as the same was not accompanied by a detailed order under Section 73 of the JGST Act setting out the basis for the decision and further because the passing of detailed order dated 16.01.2019 referred to in Form GST DRC-07 does not find any mention in the order sheet.
(iv) For the issuance of an appropriate writ/ order / direction including a writ in the nature of a certiorari, be not issued quashing and setting aside the notice issued under Section 79 in Form GST DRC-13 dated 10.3.2021 (Annexure – 10) as the same is thoroughly illegal and arbitrary and is based on an erroneous order.
(v) For the issuance of appropriate writ/ order / direction including a writ in the nature of a mandamus to the Respondent State Bank of India to release the Petitioner’s Bank Account to extent of Rs. 19,69,441 which has been kept on hold since 19.3.2021 as the same is beyond its authority and de hors the provisions of the JGST Act.
3. The case of the petitioner is that it primarily deals in medicine and medicinal products through its depot in the State of Jharkhand. Under the JVAT Act, more particularly under Section 9(2), tax on medicinal products could be levied at the first point of sale on the MRP thus, the Petitioner on purchase of the medicinal products, paid tax at the MRP. At the time of resale, the Petitioner could recover the tax paid from the buyer.
Upon coming into force of the Jharkhand Goods and Service Act, 2017 (hereinafter to be referred as JGST Act), the Petitioner transitioned credit amounting to Rs. 87,34,107/- in terms of Section 140(1) and 140(3) of the JGST Act. It is the case of the petitioner that u/s 140(1) transition can be claimed of that amount which is reflected as credit in the last return filed under the JVAT Act. This is reflected in Column 5(c) of TRAN – 1. The amount transitioned under this head was Rs. 6,39,335/-. Under Section 140(3) transition can be claimed in respect of goods that have suffered tax at the first point of sale and are held in stock. This is reflected in Column 7(c) of TRAN – 1. The amount transitioned under this head was Rs. 80,94,772/-.
Petitioner received a summary of order in Form DRC – 07 wherein it had been directed to pay Rs. 1,18,78,385.52/- which included Rs. 87,34,107/-(the entire amount of transitional credit), Rs. 8,73,410.70/- as penalty and Rs. 22,70,867,82/- as interest. The summary of order refers to an order dated 16.1.2019; however, no detailed order along with DRC – 07 was ever served to the Petitioner.
After receipt of the order, the Petitioner applied for the entire order sheet. A summary of notice in Form DRC-01 was issued for an amount of Rs. Rs.9,07,856/- (including Rs. 6,39,335/- as tax, Rs.2,04,587/- as Interest @ 24% and Rs.63,934/- as Penalty). The department on realizing that a computing mistake had been made, issued a revised DRC – 01 for an amount of Rs. 1,18,78,385/- (including Rs. 87,34,107/- as tax, Rs.22,70,867.82/- as Interest and Rs.8,73,410.70/- as Penalty). The Petitioner was only served a summary of show cause notices and not the show cause notices itself.
Petitioner preferred an appeal u/s 107 of the JGST Act after making the required pre deposit. During the course of hearing before the Ld. Appellate Authority, the Petitioner was required to furnish various details such as statement of stock as on the date of coming into force of the JGST Act, Form JVAT 410 / 411 for the period 2016 – 17 and 2017 – 18, Audit Report in Form JVAT 409 and sample purchases invoices etc.
The learned Appellate Authority while accepting the transition under Section 140(1), i.e., the amount claimed under column 5(c) of TRAN-1, has partially rejected the claim of the Petitioner in relation to the amount transitioned under column 7(c), i.e., u/s 140(3). Accordingly, it has held that the transition of Input Tax Credit amounting to Rs.23,86,069.85/- was illegal and raised a demand of Rs.31,97,333.59/- (including Interest amounting to Rs.5,72,656.76/- and Penalty amounting to Rs.2,38,606.98/-) in Form GST APL.
A Circular was issued by the Govt. of Jharkhand stating that period of limitation under Section 112 for filing an appeal to the Appellate Tribunal would be counted from the date that the president of such tribunal enters office. No such appointment has been made till date and therefore the limitation period for filing such appeal has not commenced.
Thereafter, the Respondent authorities issued a notice for recovery under Section 79 of the JGST Act in Form GST DRC-13 to the Petitioner’s bank, i.e., State Bank of India on 10.03.2021 demanding payment of Rs. 19,69,441/- (i.e., Rs.31,97,333.59/- determined in the Appellate Order – Rs. 12,27,892/- deposited as pre deposit during appeal). SBI informed the Petitioner that its account had been put on hold to the extent of Rs. 19,69,441/. The Petitioner wrote to the Respondent Department requesting that its bank account be released as it was considering filing an appeal before the Tribunal.
In the meantime, the Assessment Order for the period 2016-17 was passed under the VAT Act, in which no discrepancy was found in the figures of purchases disclosed by the Petitioner.
4. M. S. Mittal, Sr. Advocate assisted by Mr. Salona Mittal, learned for the petitioner made the following submissions:
(i) The initiation of proceeding is bad in law since only a summary of show cause notice in Form DRC-01 was served and not the proper show cause. In this regard he referred to the judgment passed by this Court in the case of Juhi Industries (P) Ltd. (W.P.T. No. 2444 of 2020).
(ii) Only a summary of order in Form DRC-07 dated 16.01.2019 has been served upon the petitioner and not the actual adjudication order.
(iii) The appellate order is also bad in law for the reason that the finding of the appellate court that transitional credit has been taken without having possession of declarations in Form JVAT 410/411 supporting the purchase invoices in terms of Section 140 (3)(iii) of the JGST Act is perverse, inasmuch as, Section 140 (3) (iii) stipulates that an Assessee must be in position of invoices or other supporting documents. Therefore, the invoices suffice the requirement of Section 140(3)(iii) and furnishing of JVAT 410/411 is not required under the Act.
(iv) The finding of the appellate court that the amount of purchases shown by the petitioner in its return and the details mention in JVAT 410/411 is not in consonance with online returns filed by the seller is also perverse, in view of the fact that the Assessing Officer for the purpose of transition of credit, is only required to verify the figures specified in the TRAN-1. Further from perusal of impugned appellate order it clearly transpires that the transitional credit has been disallowed not because of non-conformity with the conditions stipulated in Section 140 (3) but because of consideration which were the subject matter of assessment under JVAT Act. Further the maximum extents to which the respondent can verify the genuineness of the transitional credit is to see whether the transitional credit is admissible as credit under this Act, i.e., the JGST Act.
(v) The impugned appellate order is also bad in law as it holds that for the year 2016-17 the petitioner had shown excess purchases is in teeth of the assessment order for the very same year passed by the authorities under the JVAT Act.
Relying upon the aforesaid submissions learned counsel submits that the impugned show cause notice, adjudication order and also the appellate order passed by the Joint Commissioner of State Taxes (Appeals), Ranchi Division, Ranchi, be quashed and set aside.
5. Mr. A.K.Yadav, learned S.C.-I submits that the petitioner is a medicine trader and the petitioner has shown an amount of Rs 6,42,595.45/-as Input Tax Credit (ITC) for the first quarter for the financial year 2017-18, whereas, it had claimed an amount of Rs 6,39,335/- in Form GST TRAN-1 under the Jharkhand Goods and Services Act, 2017 (hereinafter mentioned as JGST Act) in column 5 (C) and the petitioner had further claimed an amount of Rs. 80,94,772/- as ITC in column 7 (C) in the said form.
He further submits that the concerned authority on receiving the petitioner’s form GST TRAN-1, vide letter issued through process no. 9444 dated 18.01.2018 requested the petitioner to appear along with the requisite documents on 25.01.2018 for asserting the said claim. Further, post to issuance of letter an e-mail was also sent to the petitioner on 23.01.2018.
Thereafter, the discrepancies in the documents made available to the concerned department vis-à-vis the claim of transitional ITC by the petitioner, the concerned authorities decided to issue show cause notice to the petitioner under section 73(1) of the JGST Act, in which the petitioner was asked to explain as to why the penalty and interest should not be imposed upon him under section 122 (2) R/W Section 50 (3) of the JGST Act. Accordingly vide process no. 1261 dated 02.02.2018, the authority issued the show cause notice to the petitioner and the petitioner was communicated the same vide e-mail dated 05.02.2018.
The authority having come across the inconsistency in the return filed by the petitioner under Jharkhand Value Added Tax, 2005 which was much related to the transitional ITC being claimed by the petitioner vide notice dated 02.04.2018 requested the petitioner to come along with the relevant Books of Account or any other documents for detailed examination. The same was e-mailed on 07.04.2018. Despite receiving the above notices’ i.e., GST DRC -01 and GST DRC- 02, the petitioner did not respond or produced any books of account or other documents for verification by the concerned authority due to which the authority had to proceed ex-parte and an order was passed under section 73 (9) on 16.01.2019 and also GST DRC-07 was issued to the petitioner.
Thereafter, the petitioner preferred an appeal before the Joint Commissioner of State Tax (Appeal) under section 107 of the JGST Act on being aggrieved by the order dated 16.01.2019 and demand notice issued under GST DRC-07. The Joint Commissioner of State Tax (Appeal) Ranchi after hearing the petitioner’s counsel and Departmental Officials, modified the order dated 16.01.2019 as detailed in order issued vide memo no.678 dated 27.08.2019 (Annexure 8 to the writ petition). The order of the Joint Commissioner is self-explanatory and legally justifiable. In view of the statement made it is apparent that the demand notice issued in Form GST APL-04 is legally payable by the petitioner. Also, it is categorically specified that the petitioner had utilized the ITC to set off its liabilities.
6. Mr. Ranjan Kumar, learned counsel for the respondent-Bank submits that the action of the respondent-Bank for holding the sum against the petitioner was in view of the several notices issued to the Bank and the answering respondent attached the bank account of the petitioner and it had acted in bona-fide manner and as such no relief can be granted to the petitioner as against this answering respondent.
7. Having heard learned counsel for the parties and after going through the averments in the respective affidavits and the documents annexed therein it appears that the main dispute involved in the instant writ application is in relation to the denial of transition of input tax from the erstwhile regime i.e., the Jharkhand Value Added Act, 2005 and the JGST Act, 2017.
From records it further appears that the initiation of proceedings is bad in law, inasmuch as, in this case only a summary of show cause notice in DRC – 01 was served and not the proper show cause notice. Admittedly, the Petitioner was only served a summary of show cause notice in Form DRC – 01 and not a proper show cause notice under Section 73 of the JGST Act. The issuance of a proper show cause notice is not evident from the order sheet. Neither the Respondents have brought on record any proper show cause notice in its counter affidavit.
In this regard, this Court in Juhi Industries (P) Ltd. versus State of Jharkhand, reported in 2022 SCC OnLine Jhar 816, by placing reliance upon NKAS Services Pvt. Ltd. v. State of Jharkhand, passed in W.P.(T) No. 2444 of 2021, has held that–
13. In view of the aforesaid facts and the settled preposition of law, the foundation of the proceeding in both the cases suffers from material irregularity and hence not sustainable being contrary to Section 74(1) of the JGST Act; thus, the subsequent proceedings/impugned Orders cannot sanctify the same. Though, the petitioner submitted their concise reply vide letter dated 11-102018; the respondent State cannot take benefit of the said action as summary of show cause notice cannot be considered as a show cause notice as mandated under Section 74(1) of the Act. The Respondent in their counter affidavit dated 07-09-2021 have stated that filing of concise reply by the petitioner proves that show-cause notice have been served upon them. As stated herein above, it is well settled that there is no estoppels against statute. A bonafide mistake or consent by the assesse cannot confer any jurisdiction upon the proper officer. The jurisdiction must flow from the statute itself. The rules of estoppels is rule of equity which has no role in matters of taxation.
14. In the case of UOI v. Madhumilan Syntex Pvt. Ltd. reported in (1988) 3 SCC 348 it is held by the Hon’ble Apex Court that power under the statute cannot be taken away by consent of the parties. In that case the Hon’ble Apex Court was seized with interpretation of Section 11A of the Central Excise Act, 1944 which is pari materia to Section 74 of the JGST Act, hence, the ratio of the said judgment would squarely apply to the these cases.
15. As we are of the considered view that the impugned show cause notice in both the cases does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice, the challenge is maintainable in exercise of writ jurisdiction of this Court. Accordingly, the summary of show-cause notices dated 14.09.2018 issued in Form GST DRC-01 at Annexure-4 (in both cases), the orders dated 25.02.2019 issued under section 74(9) of JGST Act (in both cases) and also the final orders dated 3.3.2021 passed after rectification at Annexure-11 (in both cases), are hereby quashed and set aside.
Further, this Court in the case of M/s. Dinanath Hotels Private Limited versus State of Jharkhand, reported in 2022 SCC OnLine Jhar 1552 has also categorically held that entire proceeding fails if the genesis is bad in law. Reference was made to thejudgment of the Hon’ble Apex Court in the case of State of Punjab v. Davinder Pal Singh Bhullar reported in (2011) 14 SCC 770.
At this stage, it is also necessary to observe that such a challenge can be raised even at this stage is also evident from the judgment passed by the Hon’ble Apex Court in State of Jharkhand v. Bihar Sponge Iron Ltd., 2021 SCC OnLine SC 997. In this case, the contention regarding irregularity in the notice had been taken for the first time before this Court and the entire proceedings had been set aside on the ground on irregular show cause notice itself. The Hon’ble Supreme Court confirming the order of this Court held as under –
4. The High Court, as per our understanding of the impugned judgment, allowed the writ petition on the finding reached by it that the show cause notice dated 13.05.2010 issued by the Assistant Commissioner of Commercial Taxes under Rule 58 of the Jharkhand Value Added Rules, 2006 was not in conformity with the provisions of the Act and Rules.
5. Having said that, it proceeded to conclude that all steps taken on the basis of such show cause notice stood effaced and set aside, including the order of penalty.
6. Significantly, the ground which appealed to the High Court was not raised by the respondent before the first authority or in the proceedings arising from the show cause notice upto the Tribunal. This plea was obviously taken before the High Court for the first time, on which the respondent succeeded.
7. The view taken by the High Court that the show cause notice was infirm and not in conformity with the Act and Rules does not require any interference.
8. It further appears that only a summary of order in Form DRC-07 dated 16.1.2019 was served upon the Petitioner and not the actual adjudication order itself. The Petitioner was only served with a DRC-07 dated 16.1.2019 and not a detailed order u/s 73(9) of the JGST Act. Nor has the basis of his decision as per Section 75(6) of the JGST Act been stated. Although DRC-01 mentions a detailed order being passed on 16.1.2019, the order sheet does not contain any reference of the same.
9. Now coming upon the appellate order, it appears that the appellate authority had disallowed purchase invoices amounting to Rs.77,350.44 and had also disallowed claim for Credit of food products amounting to Rs.11,47,823/. During course of hearing, learned counsel did not contested these two disallowances.
However, the disallowance on transitional credit which was taken by the petitioner without having possession of declarations in Form JVAT 410 / 411 supporting the purchase invoices in terms of Section 140(3)(iii) of the JGST Act amounting to Rs.3,02,985.10/- has been vehemently contested.
In this regard it is seen that Form 410/411 is issued under Rule 35(4) of the JVAT Rules, to the selling dealer when it sells goods under Section 9(2), i.e., recovers tax at MRP from the purchasing dealer. This Form is in addition to the invoice issued by the selling dealer. Section 140(3)(iii) of the Act stipulates that an Assessee must be in possession of “invoices or other supporting documents”. Therefore, invoices suffice the requirement of Section 140(3)(iii) and furnishing of JVAT 410/411 is not a requirement under Section 140(3)(iii). This Court in Brahmaputra Metallics v. State of Jharkhand, W.P.(T) No. 2775 of 2017, has held that JVAT 404 is not compulsory for the purpose of obtaining ITC. It was held that –
36. So far as the second issue regarding availability of benefit of ITC to the petitioner in absence of production of Statutory JVAT 404 Forms is concerned, it appears that from bare reading of Section- 18(6) of the JVAT Act, 2005 would reveal that ITC can be claimed by a dealer on production of tax invoices in original containing the prescribed particulars of sale evidencing the amount of tax paid. Further, said section contemplates that even for good and sufficient reasons to be recorded in writing where a dealer is prevented from furnishing tax invoices in original the prescribed authority may even then allow ITC by recording its reason. Thus, Section-18(6) of the JVAT Act, 2005 does not contemplate production of JVAT -404 Forms as a mandatory condition for availing benefit of ITC. However, Rule- 35(2) of the JVAT Rules, 2006 stipulates further condition of production of JVAT 404 Form as requirement for claiming benefit of ITC. To this extent, Rule- 35(2) of the JVAT Rules, 2006 is inconsistent with the provision of Section- 18(6) of the JVAT Act, 2005 and is required to be held directory in nature and not mandatory.
Thus, requirement of Form JVAT 410/4111 in support of these purchase invoices was / is not required under the JVAT Act or the JGST Act.
10. It further transpires that the Revenue had also disallowed the amount of purchases shown by the Petitioner on the ground that the details mentioned in JVAT 410 and 411 (i.e., details of inward supplies) is not in consonance with online returns i.e., JVAT 200 filed by its Sellers. In this regard the amount involved Rs. 8,57,911.31/-.
On this issue it is observed that the AO for the purpose of transition of credit is only required to verify the figures specified in the TRAN-1 and whether conditions under Section 140(3) are satisfied. From a perusal of the impugned appellate order it is evident that the transitional credit has been disallowed not because of non-conformity with condition stipulated in Section 140(3) but because of considerations which were the subject matter of assessment under JVAT Act. It is reiterated that the maximum extent to which the Revenue can verify the genuineness of the transitional credit is to see whether the transitional credit is admissible as credit under ‘this Act’, i.e., the JGST Act. Undoubtedly, tax paid on purchases of medicine products / food products is admissible as tax under JGST Act, more particularly because it does not fall within any of categories specified under Section 17(5) of the JGST Act.
Even otherwise, Section 174(2)(e) specifically provides that the repeal of the JVAT Act shall not affect any assessment proceedings / adjudication under the JVAT Act and that such proceedings shall be continued as if the JVAT Act has not been amended.
This aspect of the matter has been dealt with by this Court recently in M/s. Usha Martin Ltd. v. Addn. Comm., Central CGST, W.P.(T) No. 3055 of 2022, wherein it has been held that–
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.
…
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.
22. …
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.
11. This court has therefore clearly held that under the garb of disallowing transitional credit, the Assessing Officer under the JGST Act cannot conduct an assessment of the returns filed under the JVAT Act.
12. Before parting, it is necessary to indicate that in the present case, as assessment order for 2016-17 dated 31.5.2020 for the year 2016-17 has been passed wherein it has been categorically accepted by the Respondent Department that during the said Assessment year, the Petitioner has made a purchase of Medicine of Rs.67,56,17,903/- against which the petitioner has submitted 4 JVAT 410/411 amounting to Rs. 67,56,17,903/-, no discrepancy was found. Thus, the impugned appellate order is also perverse, inasmuch as, it held that for the year 2016-17 the Petitioner had shown excess purchases (as per Form JVAT 410/411); thus, the same is in teeth of the assessment order for the very same year passed by the Revenue under the JVAT Act.
13. It is also necessary to observe that under Section 142(8)(a) of the JGST Act, if any sum is found to be recoverable from a dealer in respect of assessment done under the existing law, i.e., the JVAT Act, the same can be covered as an arrear of tax under the JGST Act. Thus, the interest of the revenue is already protected. It appears that the actions of the Respondent Bank in holding the amount is invalid. There exists no such provision in the JGST Act which allows the Respondent Bank to put the Petitioner’s Bank Account on hold for such a substantial sum of money. Even if such power can be remotely traced to Section 83 of the JGST Act which allows for provisional attachment of bank account, then even in that case, the attachment of the bank account having exceeded a period of year, needs to be released.
14. Accordingly, the writ application stands allowed. Pending I.As., if any, are also disposed of. However, there shall be no orders as to cost.
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