This circular provides clarity on the procedure to be followed for recovery of arrears of central excise duty, service tax, and CENVAT credit arising under the existing law, as well as reversal of inadmissible input tax credit transitioned into GST.

It explains that any arrears of central excise duty or service tax, wrongly availed or recoverable CENVAT credit, and related interest, penalty, or late fee arising from assessments, adjudication, appeals, reviews, or revised returns under the pre-GST laws, whether initiated before or after 1 July 2017, shall be recovered as arrears of central tax under the CGST Act, unless already recovered under the existing law.

The circular clarifies that CENVAT credit wrongly carried forward as transitional credit under section 140 of the CGST Act is inadmissible and must be recovered as central tax liability. Such recovery can be made through utilisation of the electronic credit ledger or electronic cash ledger and is to be recorded in the electronic liability register. However, interest, penalty, and late fee relating to such recoveries are required to be paid only through the electronic cash ledger.

It further lays down the procedure for recovery of arrears where returns for the pre-GST period are filed after the appointed day, as well as the method of payment through the ACES and ICEGATE portals. In cases where the assessee is not registered under GST, recovery is to be made in cash under the provisions of the existing law.

These instructions are intended to ensure uniform and smooth recovery of legacy tax dues and inadmissible credits in the GST regime.