In Re : KANSAI NEROLAC PAINTS LIMITED
GST
2018 (8) TMI 524 – APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (15) G. S. T. L. 594 (App. A. A. R. – GST)
APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAAR
Dated:- 3-8-2018
ORDER NO. MAH/AAAR/SS-RJ/03/2018-19
GST
MR. RAJIV JALOTA, MEMBER AND MRS. SUNGITA SHARMA, MEMBER
PROCEEDINGS
(Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
service tax return of Input Service Distributor (ISD) on June 30, 2017 which is carried forward in the electronic ledger maintained by the Appellant under CGST Act, 2017, will not be considered as admissible input tax credit.
D. The appellant has therefore filed an appeal against the said order under section 100 of the CGST Act 2017/MGST Act 2017.
GROUNDS OF APPEAL
1. The impugned Ruling is patently against law, unjust, erroneous and passed with complete non application of mind. The same merits to be quashed on this ground alone.
2. KKC is levied as per section 161 of the Finance Act, 2016. Section 161(5) of the Finance Act specified that for levy and collection of KKC, Chapter V of Finance Act, 1994 (Service Tax) will be applicable. Entry 92C of Union List I of Indian Constitution empowers legislature to levy service tax, as provided under Chapter V of Finance Act, 1994. 101st amendment of constitution deletes Entry 92C of union List 1, in view of implementation of Goods and Serv
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
under the aforesaid provision of the Act. Therefore KKC credit will also be considered as admissible CENVAT credit as per proviso (1) to section 140(1) read with section 16 and section 17 of the Act. Advance Ruling authority has denied aforesaid submission of the appellant without stating any reason for the same.
4. Advance Ruling Authority relies on the decision of Hon. Delhi High Court in case of Cellular Operators Association of India to negate the claim of the appellant without understanding the facts and the legal background of both the cases which completely different. Delhi High Court denied cross utilization of unutilized EC and SHE ( being withdrawn) against excise duty and service tax liability as because these cesses have not been subsumed and there was no provision in the law to cross utilized the unutilized EC and SHE cess with excise duty and service tax. In the case of appellant, Section 161(5) of theFinance Act, 2016 brought KKC under Chapter V of Finance Act, 1994 an
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
unds properly. It was stated by them that KKC is a CENVAT credit and it got accumulated because the dealer had no KKC liability. According to them, the Delhi High Court judgment quoted by the ARA is not applicable as it was in the case of Education Cess and Secondary and Higher Secondary Education cess and also it was regarding excise duty or service tax. As per their contention, KKC is subsumed in CGST Act and it does not have any independent identity as KKC. Therefore, it should be allowed as credit under the transitional provision. He further referred to section 140(1) of the CGST Act and contended that it does not say anything about cross utilization as in the earlier Act. He stated that it was only under the earlier pre GST regime that KKC was allowed to be utilized only against KKC. However, there is no such condition in the present Act. He also referred to section 140(2) of the CGST Act which speaks about carry forward of CENVAT credit in the case of capital goods. The proviso t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
of law cannot be binding. He therefore prayed that the KKC allowed to be carried forward and should be admissible as Input Tax Credit.
DISCUSSION AND FINDINGS
7. The appellant is engaged in the business of manufacture of paints and providers of works contract services as well. Under the pre GST regime the appellant had a centralized registration for head office, factory and office. Apart from centralized registration the appellant also had separate registration as ISD to distribute the eligible CENVAT credit. According to Rule ll(m) of the CENVAT credit Rules, 2004; the appellant received CENVAT credit at head office which also included KKC, which the appellant could not distribute to its factory as the KKC could be utilized only against the KKC liability. As a result, there was accumulation of KKC credit in the service tax ISD return. The issue is the admissibility of the KKC credit transitioned by the appellant.
8. We have gone through the grounds of appeal as well as all the cont
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
and cesses which are admissible to the manufacturer and other producers or provider of taxable services as CENVAT credit. The said rule is reproduced for the sake of clarity below:-
Rule 3. CENVAT credit. –
(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance A
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
t, 2004 (23 of 2004); and
(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and
(xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005)
11. It is clear from the above list that no reference is made to the KKC until Notification No.28/2016/Central Excise (N.T.) 26 May, 2016 came into effect. , the Central Government made the following rules which came into effect from 01.06.2016. These rules were intended to amend the CENVAT Credit Rules, 2004. By the said amendment rule 1(a) was inserted. This rule is reproduced below:-
“(la) : Provider of output service shall be allowed to take CENVAT credit of the Krishi Kalyan Cess taxable service leviable u/s.161 of the Finance Act, 2016 (28 of 2016).
12. The CENVAT credit was available in respect of KKC. However, we need to see the following amendments, too, as were brought by the aforesaid Notificat
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
above i.e. excise duty, additional excise duty cannot be utilized for payment of KKC. Similarly the CENVAT credit in respect of KKC cannot be utilized for payment of excise duty or service tax. It could be utilized only for payment of KKC. Thus the CENVAT rules made an exception in respect of credit of KKC.
14. The ARA has relied upon the judgment of Delhi High Court in the case of Cellular Operators Association of India v. UOI (W.P. (Civil) No.7837 of 2016 dt.15.02.2018). The Association had filed a Writ Petition for direction that credit accumulated on account of Education Cess and Secondary and Higher Secondary Education Cess should be allowed to utilized for the payment of service tax/excise liability. Under the CENVAT credit rules 2004, credit of EC and SHE could be utilized for payment of EC and CHE respectively. The cross utilization of EC and SHE towards excise duty or service tax was impermissible and not permitted. Later on EC and SHE were abolished from 1.3.2015.The Appell
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
de it clear that cess and duty are separate levies and cannot be equated. In the present case KKC cannot be treated as excise duty or service tax. It is to be utilized for payment of KKC only.
15. The Frequently Asked Question (FAQ) issued by the Central Board of Excise and Customs of Indirect Taxes (C.B.E.C.) have clarified that ITC of KKC cannot be carried forward under GST.
16. In view of the above deliberation, we pass the following order.
ORDER
In view of the above discussions and in terms of Section 101(1) of the CGST Act 2017 and MGST Act 2017, we hold that-
The accumulated credit by way of Krishi Kalyan Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) on June 30, 2017 which is carried forward in the electronic credit ledger maintained by the Appellant under CGST Act 2017, shall not be allowed to be taken as admissible input tax credit. Accordingly the order of AAR stands confirmed in terms of the above order.
The appeal filed by M/s. KNP
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
