Background: The petitioner, a manufacturer of steel and allied products, was registered under the Central Excise Act, 1944 and the Finance Act, 1994. With the introduction of the Goods and Services Tax Act, 2017 (GST Act) on 01.07.2017, transitional provisions were enacted to allow the migration of existing CENVAT and other tax credits into the new GST regime, primarily under Section 140 of the GST Act read with Rule 117 of the GST Rules.
The petitioner sought to transition a sum of Rs. 20,12,160/- as CENVAT credit into the GST regime. While this transition was initially permitted, the Assistant Commissioner of Central Tax, Tirupati, later initiated proceedings to recover Rs. 10,86,916/- of this amount. The revenue authorities contended that, under Section 140(5) of the GST Act, only credits arising from transactions after 01.07.2017 could be transitioned, and credits relating to transactions prior to this date were ineligible.
After issuing notice, the Assistant Commissioner confirmed this view and passed an order on 22.12.2023, reversing the transition of Rs. 10,86,916/- and imposing tax, penalty, and interest under Section 73 read with Section 50 of the GST Act. The petitioner challenged this order before the High Court.
Court’s Reasoning: The High Court examined the operative part of the impugned order, which asserted that credits relating to transactions prior to 01.07.2017 could not be transitioned under Section 140(5). The Court found this interpretation to be erroneous. It emphasized that Section 140(1) of the GST Act expressly entitles a registered person to take, in their electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending immediately before the appointed day (i.e., 01.07.2017), provided it is furnished within the prescribed time and manner.
The Court further clarified that Section 140(5) provides an additional facility for transitioning credits in respect of inputs or input services received on or after the appointed day, where the duty or tax was paid under the existing law, subject to certain conditions. However, this does not restrict the operation of Section 140(1), which independently allows the transition of CENVAT credit available as of the day before GST implementation.
Legal Principle and Decision: The High Court held that the revenue’s restrictive reading of Section 140(5), to the exclusion of Section 140(1), was incorrect and contrary to the statutory scheme. The impugned order was set aside, and the authorities were directed to pass consequential proceedings expeditiously. The writ petition was allowed, with no order as to costs.
This decision reaffirms that transitional CENVAT credit available as of the day immediately preceding the GST rollout is eligible for migration into the GST regime under Section 140(1), and that Section 140(5) does not curtail this entitlement.
Case Reported at:
Case Name: Pushpith Steels Pvt. Ltd. v. Union of India and Ors.
Case Citation: (2026) taxcode.in 971 HC
