QUESTION

A unit having manufacturing facility in one state issued invoices and cleared goods after charging excise duty to their centralized warehouse situated in another state, thereafter Centralized warehouse transferred these excise duty paid goods to various warehouse/depot situated in all state of India. on which no tax is being charged like excise duty and VAT and also note that this centralized warehouse /depot is not registered with Central Excise as dealer. Company has availed 100% credit in TRAN-1 form of excise duty paid as CGST credit, on the basis of documents issued to Centralized Depot on which excise duty is being paid by factory when these goods are transferred (ii) Whether the practice of the company is as per law, 100% credit is allowed in TRAN-1 on the basis of documents issued to Centralized warehouse/depot or not ?. It is worthwhile to mention that the company is all the time has ownership of these goods hence taken proportionate credit on the basis of above Documents (iii) Also advise whether, there was any other route / procedure for availing credit on these duty paid / excise duty goods as CGST credit in TRAN-1?.

ANSWER
 

We have understood your question as follows:

You have a manufacturing unit engaged in manufacturing of excisable goods. Goods were cleared on payment of Central Excise duty to a Centralised Warehouse. From this Centralised Warehouse the goods were distributed to various depots located at various places. The depot were not registered in Central Excise, therefore the procedure of First Stage Dealer/ Second Stage Dealer (Under Central Excise) was not followed in the process of distribution.

On the appointed date the goods in stock of depot were not supported by Central Excise duty paying documents.

Prescribed procedure in GST 

Section 140(3) read with Rule 117(4) enclosed herewith was framed to deal with such type of situation. In case when the goods in stock are not covered with duty paying documents then the registered person could claim credit at the rate of sixty percent on such goods which attract central tax at the rate of nine percent or more and forty percent for other goods of the central tax applicable on supply of such goods after the appointed date and shall be credited after the central tax payable on such supply has been paid:

Provided that where integrated tax is paid on such goods, the amount of credit shall be allowed at the rate of thirty percent. and twenty percent. respectively of the said tax;

For this you are required to file FORM GST TRAN-2.

OUR OPINION:

 
1. In case you have filed TRAN-2 and availed deemed credit as per provision given in Section 140 read with Rule 117(4), then there is no problem.

2. In case you availed credit @ 60% as prescribed in Rule 117(4) but procedure is not followed then you may go for litigation.
3. In case of difference between credit available @ 60% and the Excise duty paid by you i.e. you claimed credit of the duty actually paid by the manufacturing unit instead of 60%, then you may go for litigation but it will include high cost and lesser chances of success. (Reply dt. 06/03/2021)