IN RE: CMI FPE LIMITED
GST
2018 (9) TMI 234 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2018 (16) G. S. T. L. 311 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – AAR
Dated:- 19-5-2018
GST-ARA-25/2017-18/B-34
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by CMI FPE LIMITED, the applicant, seeking an advance ruling in respect of the following question:
Eligibility of Input Tax Credit
At the outset, we would like to make it clear that the provisions of both the CCST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar prov
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licy, 25%, 50% and 100% provision will be made for materials not moved 2 year, 3 year and 4 year respectively.
As per 3 (5B) of cenvat credit rules, 2004 we reverse the cenvat credit when the provision for write off inventory value is made in our books of accounts. As per above said rules re-credit can be taken only when such goods are subsequently used. From October-2014 to 30/06/2017 we have debited total amount Rs. 52,65,551/- Out of Rs. 52,65,551/- we availed re-credit for Rs. 29,83,759/- and (for material subsequently in production) balance credit to be availed is Rs. 22,81,792/-.
As on 30/06/2017 we have the total debit balance of Rs. 22,81,792/- In post GST there are no specific provisions available either in the GST Act/GST rules, for taking back such credit.
Statement containing the applicant's interpretation of law in respect of the aforesaid questions- We refer to Sub-rule (5B) of Rule 3 of the CCR states that if the value of any: (i) input, or (ii) capital goods before b
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Section 95 of the Finance Act, 2004 with effect from 10.9.2004. The Cenvat Credit Rules, 2004 also notified from the same date, vide Rule 3(1) provided that the manufacturer or provider of taxable (output) service shall be allowed to take credit, inter alia, of the Education Cess.
Secondary and Higher Education Cess (SHE Cess) was levied on excisable goods and taxable services with effect from 12.5.2007 under Section 136, read with Sections 138 & 140 respectively of the Finance Act, 2007. Correspondingly, the Cenvat Credit Rules, 2004 were amended for allowing credit of the SHE Cess.
Through Rule 3(7)(b) of the Cenvat Credit Rules, 2004, read with provisos thereunder it was mandated that credit of education cess on excisable goods and taxable services can be utilised for payment of education cess on excisable goods or taxable services. Similarly, utilisation of credit of SHE Cess was allowed only for payment of SHE Cess on excisable goods and taxable services.
Section 95 of the Fin
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itate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of Service Tax plus education cesses from 12.36% ton consolidated rate of 14%'.(para 121)
Thus, it was generally expected by the trade and industry that as the Education Cesses have been subsumed as part of Excise Duty or Service Tax, the existing balance of the cesses would be allowed to be utilised for payment of Excise duty or Service Tax. However, no amendments were made to Rule 3(7)(b) of the Cenvat Credit Rules, 2004 to this effect.
However Notification No.12/2015-CE(NT) amended second proviso to Rule 3(7)(b) for allowing utilisation of EC paid on inputs and capital goods received on or before 01.03.2015 by a manufacturer towards payment of excise duty Credit of balance fifty percent of EC on capital goods received by a manufacturer during the previous FY for payment of excise duty;
Credit of EC paid on input services received by the manufacturer
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present discussion is that all through the above process, till the introduction of GST, there was no change in Rule 3(1) and it continued to provide that 'a manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT Credit) of:
The education cess on excisable goods leviable under section 91, read with section 93 of the Finance Act, 2004. The Secondary and Higher education cess on excisable goods leviable under section 136, read with Section 138 of the Finance Act, 2007,
The cess on taxable service leviable under section 91, read with section 95 of the Finance Act, 2004 the Secondary and Higher education cess on taxable services leviable under Section 136, read with Section 140 of the Finance Act, 2007; paid on any input or capital goods or input service received by the manufacturer of final products or provider of output service paid on any input or capital goods or input service received by the m
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y laid down the above principle in the following words:
'17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, of utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible.'
The principle flowi
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the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme, is affected and, in particular, it loses sight of the fact that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier scheme necessarily the taxes have to be adjusted and payment made complete. Any m
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ing advance ruling on the issues detailed at column number 14 of the Application field, in form of questions framed as under 1-3 as in note sheet.
1. The admissibility of input tax Credit pertaining to chapter V of the CGST Act, 2017 from Section 16 to 21 is a different subject matter than the Transitional Provisions under chapter XX Section 139 to 142.
2. The Authority of Advance Ruling can pronounce it advance ruling only to the subject matter and questions entrusted under Section 97(2)(a) to Section 97(2)(g) and not any other subject matter or questions.
3. Since question or subject matters under Transitional Provision of Chapter XX are not covered in the said list of questions under Section 97(2), the Authority of Advance Ruling has no jurisdiction over the instant subject questions related to Transitional Provisions of Chapter XX and, hence, it will not be appropriate that the 'Authority of Advance Ruling' pronounce any Advance Ruling regarding any such questions which is out o
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ion of eligible duties in Section 140 cannot be availed. This fact has been explained by the party in their application itself. So, no further comments are warranted.
The above submissions are made only as preliminary submissions about the admissibility of the application and detailed submissions would be filed as a later stage. From the discussion as made above taxes leviable in the pre GST regime are now not finding any entry under the existing GST Act, 2017 hence, Input Tax Credit is not applicable in any case. In any case, this application is out of jurisdiction. Hence, it is prayed that the application may be rejected at this stage only.
04. HEARING
The case was taken up for preliminary hearing on 20.03.2018. Sh. S Ramaiya, Asstt. Chief Manager appeared and made an oral request as well as written submission stating that their Consultant is not available and therefore an adjournment be granted in the matter. Jurisdictional Officer Sh. Anil Kumar, Superintendent, Division – X, Ra
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or the same. The request was considered and granted.
05. OBSERVATIONS
We have gone through the facts of the case. There are two issues before us which are required to be decided. The primary issue raised by the applicant is regarding availment, under the GST laws, of input tax credit (ITC) for excise duty paid under Rule 3(5B) of the Cenvat Credit Rules, 2004 (CCR) and the second issue is whether they are eligible to avail ITC against unutilized cenvat credit such as Education Cess (EC), Secondary & Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC) lying in their books of accounts.
We find that in respect of their first question raised in the application, they at the time of hearing on 04.04.2018 have stated and accepted that this question is not covered within the scope of Section 97 of the CGST Act, 2017 and therefore they withdraw this question and the same may not be answered by the authority. In view of this, as their question is not covered within the scope of S
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, in the case of taxable services and w.e.f. 01.03.2015 in the case of excisable goods. Later on Notification No. 12/2015-CE (NT) dated 30.04.2015 was issued and the said Notification allowed manufacturers to utilize the Cenvat credit on CESS towards payment of basic excise duty in certain situations. The amendment was made applicable only to CESS paid on inputs, capital goods and input services received in the factory of the manufacturer on or after 01-03-2015. The Budget provisions in 2015 made no express provision as regards to the lapse of balance of credit available with the manufacturers or the provision of its utilisation in future or its refund.
Similarly, Secondary and Higher Education Cess (SHEC) was levied by the Finance Act, 2007 and the CCR vide Rule 3(1) notified that the manufacturer or provider of taxable (output) service shall be allowed to take credit of SHEC. The CCR also mandated that such credit of SHEC could be utilized only for payment of SHEC on excisable goods
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the unutilized amount of EC or SHE credit, which was available and had not been set off as on 1st March 2015 and 1st June 2015 for payment of tax on excisable goods and taxable services respectively. The contention was that EC and SHE were subsumed in the Central Excise Duty, the general rate of which was increased from 12% to 12.5%, and service tax, which was increased from 12.36% to 14%. Reliance was placed upon the Budget Speech of the Finance Minister and the memorandum explaining provisions of Finance Bill, 2015. Reference was also made to the TRU letter F.No.334/5/2015-TRU dated 28th February 2015. The court has held that Manufacturers and Service providers are entitled to wail and utilize EC and SHEC against the liability of EC and SHEC before the cut-off dates i.e, 01st March 2015 in case of Goods and 01st June 2015 in case of Services, as the EC and SHEC was ceased to be applicable after the said dates. The provisos added to Rule 3, sub-rule (7) in clause (b) allowing utilizat
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lso whether they are eligible to avail ITC against unutilized cenvat credit of Krishi Kalyan Cess (KKC) lying in their books of accounts. This authority has answered this question in the negative in the Advance Ruling order passed in the case of M/s. Kansai Nerolac Paints Limited (KNPL). In the case of KNPL, the query was similar i.e. whether accumulated credit by way of KKC would be considered as ITC under GST laws. The reasons on the basis of which the said ruling has been passed would also be applicable to the subject matter at hand.
We find that express provisions have been made in the Cenvat Credit Rules from time to time that credit availed in respect of EC, SHEC and KKC can be used for making tax/duty payments only against ECT SHEC and KKC, respectively. The CCR has also expressly provided that items in respect of which CENVAT credit is available, would not be utilized for payment of EC SHEC and KKC. Thus, there was a clear demarcation of the credit in respect of EC, SHEC and K
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or carry forward of Tax or duty credit under any existing law or on goods held in stock on the appointed day. Sub-rule 1 of Rule 117, reads as under:
Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of “eligible duties and taxes as defined in explanation to section 140” to which he is entitled under the provisions of the said section:
The said rule provides for carry forward of only eligible duties and taxes as defined in the explanation to section 140. Eligible duty has been defined in the explanation to section 140 with reference to sub sections i.e. 140 (3,4,5&6). The definition of eligible taxes does not include the EC SHEC and KKC. The usage of word “eligible duties and taxes” in the latter part of the Rule has confined the scope of carry forward of credit by excluding th
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me to notice where credit of VAT and PLA balance has been availed as transitional credit. This is not allowed in law”.
Further in an FAQ issued by the government on the said issue, in response to the question:
“Whether closing balance of education cess and secondary higher education cess prior to 1st Mar 2015 can be carried forward in GST?” has been answered as follows:-
“No it will not be carried forward in GST as it is not covered by definition of “eligible duties and taxes under Section 140 of the CGST Act”
06. In view of the deliberations as held hereinabove, we pass the order as under:
ORDER
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO. GST-ARA-25/2017-18/B-34
Mumbai, dt. 19.05.2018
For reasons as discussed in the body of the order, the question is answered thus-
Q1. How to avail input tax credit for excise duty paid under Rule 3(5B) of the Cenvat Credit Rules?
Ans. Not answered as this quest
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