Punjab & Haryana HC: Section 74 CGST Act Cannot Question Pre-GST CENVAT Credit

Before GST existed, a company availed CENVAT credit under the Service Tax and Central Excise regime — entirely lawfully, under the rules that governed it at the time. When GST arrived on 1 July 2017, that credit didn’t disappear; it transitioned into the new electronic credit ledger, carried forward like millions of rupees of legacy credit across the country. Years later, GST authorities looked back at that transitioned credit and asked: was it actually valid when it was first availed? And they asked that question using Section 74 of the CGST Act — a GST-era provision, applied to a Service Tax-era decision.

That is the fact pattern the Punjab and Haryana High Court confronted in Mukut House Developers Pvt. Ltd. v. Union of India & Ors. [CWP-3682-2026 (O&M)], decided on 1 September 2026 by a Division Bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rajesh Gaur. The petitioner, represented by advocates Nazuk Singhal and Himanshu Gupta, argued the matter was squarely covered by the Jharkhand High Court’s ruling in Usha Martin Ltd. v. Additional Commissioner, Central GST and Excise, Jamshedpur and Others.

Sidebar: the Bench didn’t need to reason this one out from scratch — it noted, almost in passing, that the Supreme Court had already dismissed the department’s Special Leave Petition against Usha Martin on 17 April 2026. That’s a useful reminder that a Special Leave Petition dismissal, even without a detailed reasoned order, still forecloses re-litigating the same point in a different High Court — which is exactly what let this Bench dispose of the case as briskly as it did.

In Usha Martin, the Jharkhand High Court had held that GST authorities exercising powers under the CGST Act cannot assume jurisdiction to determine whether CENVAT credit was validly availed under the erstwhile indirect tax regime. The mere act of transitioning legacy credit into the GST electronic credit ledger does not hand GST officers a new power to reopen its original admissibility — any challenge to that admissibility has to be brought under the law that actually governed the period in which the credit was availed: the Finance Act, 1994, the Central Excise Act, 1944, and the CENVAT Credit Rules, 2004, as applicable, not Section 74 of the CGST Act.

With the Supreme Court’s SLP dismissal against Usha Martin already on record, the Punjab and Haryana High Court found little left to debate: “Once that be the position, we are of the view that the present petition also deserves to be allowed for the reasons recorded in Usha Martin,” the Court held, allowing Mukut House Developers’ writ petition.

Why It Matters

Transitional CENVAT credit disputes are not a closing chapter of GST litigation — nine years into the regime, they remain a live, recurring category of dispute, because so much legacy credit was carried forward in 2017 and departments continue, periodically, to revisit it. This ruling — now backed by a Supreme Court SLP dismissal in the underlying Usha Martin line — gives firms a genuinely settled, cross-jurisdictional answer to a question that keeps resurfacing: GST officers simply do not have jurisdiction under Section 74 to relitigate whether pre-GST credit was validly availed. That is a service-tax-era and excise-era question, to be examined under service-tax-era and excise-era law, by the authorities who administered that law.

Key Takeaways

• The Punjab and Haryana High Court held that Section 74 of the CGST Act cannot be invoked to question the admissibility of CENVAT credit availed under the pre-GST Service Tax/Central Excise regime, merely because the credit was later transitioned into GST.
• This follows the Jharkhand High Court’s ruling in Usha Martin Ltd. v. Additional Commissioner, Central GST and Excise, Jamshedpur, against which the Supreme Court has already dismissed the department’s Special Leave Petition (17 April 2026) — giving the underlying principle real, tested finality rather than resting on a single High Court’s view.
• Any challenge to the original validity of pre-GST CENVAT credit must be brought under the Finance Act, 1994, the Central Excise Act, 1944, and the CENVAT Credit Rules, 2004 — not under the CGST Act’s Section 74.
• The mere transition of legacy credit into the GST electronic credit ledger does not, by itself, hand GST officers jurisdiction over questions about that credit’s original admissibility.
• The Court disposed of the matter briskly once the Supreme Court’s SLP dismissal in Usha Martin was placed on record, underscoring how quickly a settled point of law can resolve a fresh dispute once the right precedent is cited.

Practical Implications

Firms with clients who transitioned CENVAT credit into GST in 2017 and are now facing a Section 74 notice questioning that credit’s original validity have a strong, Supreme-Court-tested defence available: jurisdiction. The correct forum and law for that dispute is the pre-GST regime’s own framework, not Section 74 of the CGST Act — and this should be raised as a threshold jurisdictional objection before engaging with the substance of any such notice. Firms should also flag to clients that a Section 74 notice questioning transitional credit is not, by itself, evidence that the credit was actually improperly availed — it may simply reflect the department applying the wrong statutory framework, which is precisely the defect this line of cases corrects.

Action Checklist

• Where a client faces a Section 74 CGST Act notice questioning the admissibility of CENVAT credit originally availed pre-GST, raise the jurisdictional objection immediately, citing Mukut House Developers, Usha Martin, and the Supreme Court’s SLP dismissal against Usha Martin (17 April 2026).
• Verify the original date and basis of the CENVAT credit in question to confirm it predates 1 July 2017 and was genuinely transitioned rather than freshly availed under GST.
• Do not respond to such a notice purely on the substantive merits of the credit’s validity without first raising the jurisdictional defect — doing so risks being seen as having submitted to a jurisdiction that was never properly invoked.
• Track whether other High Courts continue to align with the Jharkhand/Punjab & Haryana position, since a settled, Supreme-Court-tested principle across multiple jurisdictions strengthens the defence further with each fresh application.
• Maintain records of all pre-GST CENVAT credit transitioned via Form GST TRAN-1, since the paper trail proving the credit’s pre-GST origin is central to invoking this jurisdictional defence.

Relevant Sections / Rules / Notifications

• Section 74, CGST Act, 2017 (held inapplicable to questioning the original admissibility of pre-GST CENVAT credit)
• Finance Act, 1994; Central Excise Act, 1944; CENVAT Credit Rules, 2004 (the correct legal framework for examining pre-GST credit admissibility)
• Usha Martin Ltd. v. Additional Commissioner, Central GST and Excise, Jamshedpur and Others (Jharkhand High Court — the precedent applied; Supreme Court SLP against it dismissed 17 April 2026)

FAQs

Q: Does this ruling mean pre-GST CENVAT credit can never be questioned by any authority?
A: No. It means GST authorities cannot use Section 74 of the CGST Act to do so. The credit’s original admissibility remains open to challenge, but only under the Finance Act, 1994, the Central Excise Act, 1944, and the CENVAT Credit Rules, 2004 — the framework that actually governed the period in which it was availed.

Q: Is this now settled law, or could another High Court rule differently?
A: The Supreme Court’s dismissal of the department’s Special Leave Petition against the underlying Usha Martin ruling gives the principle meaningful, tested weight, though an SLP dismissal without a detailed reasoned order does not carry the same precedential force as a full Supreme Court judgment on merits. Practitioners should still watch for any contrary High Court view.

Q: What should a firm do if a client already responded to a Section 74 notice on the merits before realising this jurisdictional defence was available?
A: The jurisdictional objection can generally still be raised at any stage of the proceedings, including in appeal, since jurisdictional defects are not typically waived by engaging with the merits — but firms should assess the specific procedural posture of each matter individually.

Internal Links

Today’s Intelligence — 9 September 2026 · GST Updates hub

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Prepared by Finoscape Editorial Team — hello@finoscape.com. This article is for general informational purposes and does not constitute legal or tax advice, and is based on Juris Hour’s byline-attributed reporting rather than direct retrieval of the order from the Punjab and Haryana High Court’s own portal. Practitioners should independently verify the order before citing it in client advice or submissions.