GSTAT Chandigarh Allows Deltron ₹2.90 Lakh GST Credit, Rejects ₹6.99 Lakh Claim

The GST Appellate Tribunal (GSTAT), Chandigarh, has allowed Deltron to claim ₹2.90 lakh in transitional tax credit on capital goods received after GST came into force.

However, it rejected the company's claim for ₹6.99 lakh in credit on goods cleared for export before GST but exported after the new tax regime came into force.

A Bench comprising Judicial Member Jatinder Pal Singh and Technical Member Pradeep Kumar Goel partly allowed the appeal filed by Deltron, a division of Continental Device India Private Limited, against an order disallowing its transitional credit claim under the Central Goods and Services Tax (CGST) Act, 2017.

The company had claimed transitional credit of ₹9,89,849 in Form TRAN-1 after GST was introduced on July 1, 2017. This included ₹2,90,845 in duty paid on imported capital goods and ₹6,99,004 in central excise duty paid on goods meant for export.

The capital goods were imported before GST began but reached the company's factory on July 8, 2017. The company argued that it was entitled to the credit under Section 140(2) of the CGST Act because the goods were received after GST came into force and the remaining credit had not been claimed under the earlier tax regime.

The second claim related to goods that the company had dispatched for export on June 29, 2017, after paying central excise duty. However, the goods were exported after GST was introduced, and the company had to pay IGST at the time of export.

It argued that it should be allowed transitional credit for the central excise duty already paid on these goods.

The department rejected the entire credit claim and demanded the amount along with interest and a penalty of ₹98,985. The company's appeal before the appellate authority was also dismissed, following which it approached the Tribunal.

On the credit relating to capital goods, the Tribunal held that the claim was admissible under Section 140(2) of the CGST Act. It noted that the provision allows credit of unavailed CENVAT credit on capital goods that was not carried forward in the return filed under the earlier law.

The Tribunal explained that Section 140(2) does not restrict the credit to only 50% of the total credit on capital goods. It also referred to the Central Board of Indirect Taxes and Customs' clarification stating that credit could be claimed under the GST regime where capital goods purchased under the earlier law were received after July 1, 2017, subject to the applicable conditions.

Since the company had fulfilled the requirements of Section 140(2) and furnished the necessary details in Form TRAN-1, the Tribunal held that there was no reason to disallow the credit of ₹2,90,845.

However, the Tribunal rejected the claim for ₹6,99,004 relating to the exported goods. It observed that Table 7(a) of Form TRAN-1 deals with transitional credit on inputs and that Section 140 does not contain a provision allowing credit of central excise duty paid on goods cleared for export before July 1, 2017, but actually exported after that date.

"It is also relevant to mention that under the existing law, i.e. Central Excise law, CENVAT credit was allowed on capital goods in two parts: while fifty per cent of total credit was allowed to be taken in the year in which the capital goods were received, credit of the remaining fifty per cent was allowed in subsequent year(s)", it said.

It also rejected the company's argument that its accrued rights under the earlier tax regime were protected by Section 174(2) of the CGST Act. The Tribunal held that the right to claim transitional credit arose under the GST law and could be exercised only in accordance with its provisions.

"...transitional credit amounting to Rs. 6,99,004/- cannot be allowed under Section 140 of CGST Act for the Central Excise duty paid on goods exported. The provisions of Section 174(2)(c) of CGST Act are of no assistance to the Appellant in this case", it held.

On interest, the Tribunal held that interest was payable where wrongly availed input tax credit was recoverable. It also rejected the company's argument that no penalty could be imposed because the credit had been disclosed in Form TRAN-1.

It noted that Section 73 applies to wrongly availed credit even in the absence of fraud or wilful misstatement.

Accordingly, the Tribunal partly allowed the appeal, upheld the admissibility of ₹2,90,845 in transitional credit and rejected the claim for ₹6,99,004.

It directed that the interest liability be recalculated and reduced the penalty to ₹69,900, being 10% of the disallowed credit.

For Appellant: Vikrant Kackria and Akhil Pratap Singh, Advocate

For Respondent: Veer Singh Meena, Authorised Representative