This appeal has been filed under Section 107 of the Central Goods and Services Tax Act, 2017 by M/s. R.K. Marbles Private Limited, Makrana Road, Kishangarh, District-Ajmer-305801 (Rajasthan) (hereinafter also referred to as “the appellant”) against the Order-in-Original No. 01/Service Tax/2019-20 issued vide C. No. GL-4(3)IAR-597/17-18/RKM/KSG.L-II/2018/65, dated 30-4-2019 (hereinafter called as the “impugned order”) passed by the Superintendent, Central Goods & Services Tax Range L-II, Kishangarh, Distt-Ajmer (hereinafter called as the “adjudicating authority”).

2. Brief facts of the case :

2.1 The appellant having GSTIN No. 08AAACR9701L1Z4 is engaged in supply of taxable service under the category of Goods Transport Agency Service, appeared to have wrongly availed the input tax credit of ₹ 2,32,334/- of Cenvat credit taken in GST TRAN-1 as ITC with regard to Input Service of GTA under RCM paid on 6-7-2017 under head 7(b) of TRAN-1 which was not shown in ST-3 return ending on June, 2017 in contravention of Section 140(1) of the CGST Act, 2017 read with Rule 117 of the CGST Rules, 2017.

2.2 During the course of audit, it has been observed that the assessee had taken Input Service Credit amounting to ₹ 2,32,334/- as on 30-6-2017 and payment of Service Tax under Reverse Charge Mechanism had made on 6-7-2017 i.e. after appointed day. But the assessee had not shown this credit in respective columns of ST-3 return or revised ST-3 return before transferring the same in Table 5(a) of GST TRAN-1 as input tax credit (ITC). This was not in accordance with the transitional provision mentioned under Section 140(1) of CGST Act, 2017 read with Circular No. 207/5/2017-ST, dated 28-9-2017. Thus, they have wrongly taken the input service credit of ₹ 2,32,334/- which is liable to be recovered in terms of the provisions of Section 73(1) of the CGST Act, 2017 and also liable for penal action under Section 73(1) read with Section 122(2) of the CGST Act, 2017.

3. Similarly, on verification of TRAN-1 data, it was noticed that the  assessee have wrongly availed the Cenvat credit of input services amounting to  ₹ 61,518/- as ITC in Table 7(b) of GST TRAN-1 relating to assessee itself. The said services were booked in their books of accounts as on 30-6-2017 and 30-9-2017. This was also not in accordance with the transitional provision mentioned under Section 140(5) of the CGST Act, 2017 read with Rule 117 of the CGST Rules, 2017 which is liable to be recovered in terms of the provisions of Section 73(1) of the CGST Act, 2017 along with interest payable under Section 50(3) of CGST/SGST Act, 2017 and also liable for penal action under Section 122(2) of the CGST Act, 2017.

4. The adjudicating authority, after considering the submission of the assessee, has passed the order as under :-

(i)      Disallowed the input tax credit amounting to ₹ 2,32,334/- (Rupees Two Lac Thirty Two Thousand Three Hundred Thirty Four only) and ordered it to be recovered in terms of provisions of Rule 14 of Cenvat Credit Rules, 2004 and Section 73(1) of Central Goods and Services Tax Act, 2017. The Cenvat credit has already been reversed by the assessee, the same is appropriated in the Govt. account.

(ii)    Ordered for recovery of interest on the said input tax credit under the provisions of Section 50(3) of the CGST Act, 2017 and Section 73. The assessee has deposited interest of ₹ 20,719/- (Rupees Twenty Thousand Seven Hundred Ninteen) vide challan CIN No. 42433, dated 6-7-2017, the same is appropriated in the Govt. account.

(iii)   Imposed a penalty of ₹ 23,233/- (Rupees Twenty Three Thousand Two Hundred Thirty Three only).

(iv)   Disallowed the input tax credit amounting to ₹ 61,518/- (Rupees Sixty One Thousand Five Hundred Eighteen only) and ordered it to be recovered from the assessee in terms of provisions of Section 73(1) of the CGST Act, 2017.

(v)     Ordered for recovery of interest on the said input tax credit under the provisions of Section 50(3) of the CGST Act, 2017 read with Section 73(1) of the CGST Act, 2017.

(vi)   Imposed a penalty of ₹ 10,000/- (Rupees Ten Thousand only) on M/s. R.K. Marbles Pvt. Ltd., Kishangarh, Ajmer under the provisions of Section 73(1) of the CGST Act, 2017 read with Section 122(2) of the CGST Act, 2017.

5. Being aggrieved with the impugned Order No. 1/Service Tax/2019-20, dated 30-4-2019, the appellant has filed the appeal on the following grounds which are summarized as under :-

• that both the issues are primarily relating to procedural violation of newly introduced law of GST during the initial phase of the introduction of the new provisions of law.
• that issue is nowhere relating to wilful evasion of tax or wilful wrong availment of Cenvat credit.
• that in both the disputes there is no debate or doubt about the availment of input services and payment of input service tax. There is no dispute about the category of input services and utilization of input services for the business purpose.
• that in the light of the above facts and ingredients of the case it is argued that what is violated is procedural condition of the law and violation was unintentionally due to provisions being new, lack of knowledge and such lapses are ought to occur during the initial phase of new law.
• that so far as provisions for invoking penalty is concerned it is submitted that the case is relating to procedural violation of law and hence no penalty is leviable.
• that in relation to denial of credit of ₹ 2,32,334/- the credit was  already reversed prior to issue of show cause notice hence no penalty is leviable.

The appellant has also placed following judgments to substantiate the case :-

• • M/s. Bharat Rolling Mills v. Commissioner of Central Excise, Allahabad reported in 2016 (344) E.L.T. 936 (Tri. – All.)
  • In Re : Jocund India Ltd. reported in 2015 (330) E.L.T. 805 (G.O.I.)
  • Commr. of Cus.,Visakhapatnam v. Anandalaxmi Mallebles Pvt. Ltd. reported in 2008 (222) E.L.T. 439 (Tri. – Bang.)
  • P. Natarajan v. Commissioner of C. Ex., Coimbatore reported in 2004 (177) E.L.T. 233 (Tri. – Chennai).

6. Personal hearing in the case was held on 5-6-2020. Shri C.M. Agarwal, Chartered Accountant appeared for personal hearing through video conference. He explained the case in detail and reiterated the submission made in their appeal and requested to decide the case at the earliest.

7. I have carefully gone through the case records and submissions made in the appeal memorandum and as well as at the time of personal hearing held on 5-6-2020. I find that there are two issues involved in the instance case first is that the adjudicating authority has disallowed the input tax credit of  ₹ 2,32,334/- in respect of the Service Tax paid by the appellant under RCM. Secondly, ITC of ₹ 61,518/- in respect of the services they booked in their books of accounts as on 30-6-2017 and 30-9-2017.

8. The relevant provisions of Section 140(1) of the CGST Act, 2017 and Section 140(5) of the CGST Act, 2017 are as under :

(1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT Credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed :

Provided that the registered person shall not be allowed to take credit in the following circumstances, namely :-

(i)      where the said amount of credit is not admissible as input tax credit under this Act; or

(ii)    where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii)   where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.

9.

(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day :

Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days :

Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.

10. From the above provisions it is clear that existing Registrants under Central Excise, Service Tax and VAT on migration to GST can carry forward the balance of Cenvat credit on inputs, capital goods and input services lying in the last return filed. In the instant case, the appellant has made the payment of Service Tax on 6-7-2017 but the credit has been taken on 30-6-2017 which is not in accordance with the existing law i.e. Cenvat Credit Rules, 2004. Since, the appellant was not entitled to avail the credit in the month of June, 2017 they were not having any Cenvat credit balance legally in their return before the appointed day, therefore, were not entitled to transfer the said credit in Table 5(a) of TRAN-1 as ITC and was not in accordance with the transitional provision of Section 141(1) of CGST Act, 2017 and rightly disallowed by the adjudicating authority. Further, I find that the appellant has taken the Cenvat credit of ₹ 61,518/- as ITC in Table 7(b) of GST TRAN-1 related to appellant itself. In the cases where the credit taken on or before 30-6-2017 should have been transferred in Table 5(a) of TRAN-1 instead of Table 7(b) and in some cases credit was taken in books of account after thirty days from the appointed day which is not in accordance with Section 140(5) of CGST Act, 2017 and was rightly disallowed by the adjudicating authority.

11. As far as imposition of penalty is concerned, I find that the appellant has already reversed the credit amounting to ₹ 2,32,334/- along with interest amounting to ₹ 20,719/- vide Challan No. 42433, dated 6-7-2017 prior to issue of show cause notice. The appellant has stated that issues are primarily relating to procedural violation and was unintentional due to provisions being new, lack of knowledge and such lapses are ought to occur during the initial phase of new law. I also find that GST being a new law such lapses are ought to occur during the initial phase but it should not be with intent to evade tax. I do not find such intention in the present case therefore, I set aside the penalty imposed under the provisions of Section 122(2) of the CGST Act, 2017.

12. In view of the discussion and findings above, I upheld the order to the extent of disallowance of ITC and set aside the penalty imposed under Section 122(2) of the CGST Act, 2017.

13. Appeal filed by the appellant is disposed of accordingly.