Notice issued to GST Authorities for making retrospective amendment to disallow the transitional credit of EC and SHEC

No Comments

Facts:

M/s Grasim Industries Ltd. (“the Petitioner”) filed a writ petition before the Hon’ble Gujarat High Court challenging the constitutional validity of the retrospective amendment brought out in Section 140 of the CGST Act, 2017 (“CGST Act”) by way of the CGST (Amendment) Act, 2018 to disallow transitional credit of Education Cess (“EC”) and the Secondary and Higher Secondary Education Cess (“SHEC”) in the GST regime.

Issue:

Whether retrospective Amendment made to curb the vested right of the Petitioner is valid?

Petitioner’s Contention:

The Petitioner contended that, prior to the amendment, credit of EC and SHEC were allowed to be transitioned in GST. Prior to amendment, Section 140(1) referred to transition of ‘CENVAT credit’, which was amended to ‘CENVAT credit of eligible duties’ and from the explanations, the meaning of expression “eligible duties” and “eligible duties and taxes” were amended to exclude “the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978”. Further, explanation 3 was inserted to clarify that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under subsection (1) of section 3 of the Customs Tariff Act, 1975.

The impugned amendment seeks to deny and take away the vested and accrued rights of the Petitioner and hence this amendment is violative of Article 19(1)(g) of the Constitution of India.

Held:

The Hon’ble Gujarat High Court in R/Special Civil Application No. 11061 of 2019 dated July 10, 2019 issued notice to the GST Authorities, returnable on July 31, 2019, to explain as regards the impugned amendment, more particularly, considering the submissions.

Citation: [2019] 108 taxmann.com 285 (Gujarat)

Relevant provisions:

Prior to Amendment

140(1). A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed….”

“……Explanation 1.— For the purposes of sub-sections (3), (4) and (6), the expression “eligible duties” means––

(i)…….

(ii)……

(iii)….

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.

“…. Explanation 2.—For the purposes of sub-section (5), the expression “eligible duties and taxes” means––

(i)……

(ii)….

(iii)….

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.

(v)….”

Post Amendment

140(1). A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed……”

“…. Explanation 1.—For the purposes of sub-sections (1), (3), (4) and (6), the expression “eligible duties” means––

(i)…

(ii)…

(iii)…

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;”

(v)…”

“…. Explanation 2.—For the purposes of sub-sections (1) and (5), the expression “eligible duties and taxes” means––

(i)…

(ii)…

(iii)…

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;”

(v)…”

Explanation 3.—For removal of doubts, it is hereby clarified that the expression “eligible duties and taxes” excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under subsection (1) of section 3 of the Customs Tariff Act, 1975