MARCH 13, 2018

By R K Singh, Member, CESTAT (Retd.)

THIS article in defence of CBEC circular no. 33/07/2018-GST dated 23 rd of February 2018 has been prompted by a series of articles which have recently appeared essentially condemning the said circular and in the process decorating it with such epithets as unreasonable, draconian, regressive and even illegal.

2. The heart of the circular is contained in paragraph 2.2 thereof which states as under:

3. Conceding that the circular should possibly have been worded better so that the confusion creators would not have been able to take advantage of different expressions avoidably used for the same purpose; for example there was no need to use the expression "in existence" in paragraph 2.1 and "in operation" in paragraph 2.2 of the said circular. But it's a minor issue. At the substantial level, the criticism of the said circular seems to essentially emanate on account of failure to appreciate the following three points:

(i) The onus that the cenvat credit taken is admissible is on the assesse, unlike in the case of demand where the onus that the duty is payable rests on Revenue;

(ii) A quasi judicial order in operation has the force of law and is required to be followed and not doing so tant amounts to jettisoning the rule of law itself.

(iii) Merely because an appeal has been filed before the Commissioner (Appeals)/CESTAT after depositing the mandatory 7.5%/10% of the amount of cenvat credit/ demand involved, the order appealed against does not cease to be in existence or in operation; in other words, mere deposit of the said amount does not ipso facto mean that the order appealed against is stayed. Neither Section 35F of the Central Excise Act, 1944 nor the various CBEC circulars issued in this regard any where state or even imply that with the deposit of the 7.5%/10% of the impugned cenvat credit / demand, the impugned order stands stayed; the CBEC circulars issued in this regard merely state that in case of demand, if the said amount (equal to 7.5%/10% of the impugned demand) is deposited at the time of filing appeal, "coercive" steps for recovery will not be taken. In other words, "persuasive" steps to recover the amount were not disallowed.

5. If an amount of cenvat credit has been held to be inadmissible by a quasi-judicial order which is in operation, allowing utilization of such amount will do unacceptable violence to the related quasi-judicial order (which held it inadmissible). In fact, there is no legal basis to even keep such amount of credit (which is held to be inadmissible by a quasi judicial order in operation) in the books of accounts/electronic ledger and to that extent the said CBEC circular is rather liberal in its approach inasmuch as it does not ask the assessee to reverse such credit and merely requires that such credit should not be utilized. It has to be stressed at the cost of repetition that to allow utilization of cenvat credit held to be inadmissible by a quasi-judicial order which is in operation is tantamount to consciously disobeying and disregarding a quasi-judicial order which has the force of law. In other words, to allow utilization of such cenvat credit which is held inadmissible by a quasi-judicial order which is in operation would mean jettisoning the rule of law.

6. In the light of the preceding paras, it is evident that what the said CBEC circular in effect states follows from the correct interpretation of law itself and so it doesn't even need the backing of section 168 of the CGST Act. Thus the said CBEC circular is legal and proper.

(The views expressed are strictly personal.)