Unutilized Cenvat Credit not transferred to GST Regime through TRAN-1 can be used for adjusting Service Tax Demand

The appellant is in appeal against disallowance of adjustment of demand of service tax, relating to the period prior to 30.06.2017, out of the cenvat credit lying to their credit as on 30.06.2017.

Facts of the case:

• The appellant was registered under the Service Tax regime. However, they did not chose to carry forward or to migrate cenvat credit to the GST regime, being the closing balance as on 06.2017.
• Pursuant to carrying an examination of the data of the appellant on the ACES software, it appeared to Revenue that appellant have mis-declared their turnover and furnished incomplete information in their ST-3 returns, with intent to evade payment of service tax. It also appeared that though the appellant has taken credit, but some of the documents are not in their possession for support.
• Such facts came to the notice only in the course of enquiry and correspondence by the Department.
• Accordingly, the appellant was required to show cause by notice.
• In response to the show-cause notice, the appellant filed reply that they did not contest the demand of service tax as alleged to be short paid. They further agreed to short payment of Service Tax due to short declaration of Turnover.
• Accordingly, tax and Interest was paid by Applicant and he further requested that the amount of cenvat credit of 14,30,166/-, lying in their favor (credit) as of 30.06.2017, may be allowed to be adjusted against the demand payable, specifically pointing out that this amount has not been carried forwarded to GST in Form TRAN-1 (not filed).
• It was observed by the department that the appellant could have carried forward the amount of cenvat credit as of 30.06.2017, and as they have not taken the said credit forward to the GST regime, such adjustment of service tax as prayed is not allowable.

Judgment of CESTAT

• There is no bar or disability under Section 140(1) read with Section 142 of CGST Act, 2017 on an assessee for claiming adjustment of the tax demand from the unutilized cenvat credit (lying to the credit as on 30.06.2017), which has not been carried forward to the GST regime.
• Accordingly, the Appellant was granted adjustment of the unutilized amount of Rs. 14,31,166/- against the demand payable by the assessee.