Background

The appellant, which operates the TataCliQ e-commerce platform, transitioned credit of about Rs. 32.81 crore through TRAN-1: CENVAT credit of Rs. 31,83,93,390 under Sections 140(1)/(5), KKC of Rs. 74,67,109 (later reversed under protest) and VAT credit of Rs. 22,14,479 under Section 140(6). By SCN dated 18.01.2022 under Section 74, the department alleged that eligibility had not been proved through invoices and registers; the demand with interest and 100% penalty was confirmed by both lower authorities.

Final Verdict

The Tribunal noted the admitted position that no proceedings were ever initiated under the erstwhile law questioning the credit when it was availed. Reading Sections 142(6)(a) and 174(2)(e) and following Usha Martin and SAIL (Jhar HC) and Kunjal Synergies (Cal HC), it held that the admissibility of credit availed under the erstwhile law can be questioned only under that law; officers under the CGST Act have no jurisdiction to reassess it through Section 74. Clause (i) of the proviso to Section 140(1) bars transition only of credit not admissible as ITC under the GST law and does not permit reassessment of pre-GST credits; moreover, a closing balance cannot be correlated to specific invoices. On KKC, following Godrej & Boyce (Bom HC) and Circular 87/06/2019-GST, Explanation 3 cannot operate without notification of Explanations 1 and 2, and the pending SLP, with no stay, did not affect this. The VAT credit was denied without any finding, and Section 74 was unjustified since the basis was the appellant’s own TRAN-1 disclosures. The transitional credit was held eligible in full, and the appeal was allowed with consequential relief.d