JUDGMENT The petitioner, stated to be engaged in providing various financial services, has filed the captioned writ petition seeking to challenge Ext.P4 order issued by the Appellate Authority for Advance Ruling, Kerala, under the provisions of the CGST/SGST, Act, 2017. 2. The petitioner states that as on 30.06.2017, it had a stock of computers, laptops etc. purchased from within the State of Kerala, paying the tax due under the provisions of the Kerala Value Added Tax Act, 2003 (for short ?KVAT Act?). It states that during the pre-GST period, it was not having registration under the KVAT Act, since it was only a service provider not covered thereunder. However, when GST was introduced on 01.07.2017, it claimed that it was eligible for availing transitional credit under Chapter XX of the Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as ?KSGST Act?) as regards the tax paid on the purchase of computers/laptops. Therefore, the petitioner submitted Ext.P1 application seeking an advance ruling as seen from Ext.P1. The questions posed for consideration by the authority under the statute, which read as under: 14 Question(s) on which advance ruling is required Whether computers, laptops etc. used by the applicant for providing output service would qualify as inputs for the purpose of availing transitional input tax credit under Section 140(3) of Chapter XX of the Kerala State Goods and Service Tax Ordinance, 2017? If the said goods are physically available as closing stock with the Applicant as on 30th June, 2017, can the Applicant avail input tax credit of the VAT paid on the same? The authority under the statute issued Ext.P2 dated 19.09.2018, finding that the petitioner had no liability under the VAT period and hence, it is not entitled to transitional credit under Chapter XX of the KSGST Act. The authority referred to the provisions of Section 2(59) of the KSGST Act providing for the definition of the term ?input? as also the definition of the term ?capital goods? under the KVAT Act and answered the query raised, holding that the computers/laptops used by the petitioner would not qualify for transitional credit under Section 140(2) and (3) of the KSGST Act. 3. Though the petitioner preferred a further appeal, the Appellate Authority under the Act dismissed the appeal filed as above by Ext.P4 dated 14.12.2018. 4. under the KVAT Act and answered the query raised, holding that the computers/laptops used by the petitioner would not qualify for transitional credit under Section 140(2) and (3) of the KSGST Act. 3. Though the petitioner preferred a further appeal, the Appellate Authority under the Act dismissed the appeal filed as above by Ext.P4 dated 14.12.2018. 4. It is in the afore circumstances that the captioned writ petition is filed by the petitioner seeking a declaration as to its entitlement for transitional credit under the KSGST Act. 5. I have heard Sri.Jose Jacob, the learned counsel for the petitioner, Sri.Arun Ajay Shankar, the learned Government Pleader and Sri.P.R.Sreejith, the Senior Standing Counsel (CBIC). 6. Sri.Jose Jacob, the learned counsel for the petitioner, would contend that: i. The claim raised by the petitioner was under Section 140(3) and not under Section 140(2) of the KSGST Act. ii. Hence, the very consideration of the issues in Ext.P2/P3 was flawed. iii. He relies on the provisions of the KSGST Act, KVAT Act, etc., to contend that the expression ?capital goods? has a different connotation with respect to the claim under Chapter XX of the KSGST Act as regards the extension of transitional credit. 7. Sri.Arun Ajay Shankar, the learned Government Pleader, would contend that: i. Since the petitioner was not entitled to the input credit under the existing law (KVAT), it cannot be extended under GST. ii. The petitioner is not entitled to the benefits of transitional credits since computers/laptops are admittedly ?capital goods? which are excluded from the coverage of the term ?input? under Section 2(59) of the KSGST Act. 8. Sri.Sreejith, the learned Senior Standing Counsel, apart from adopting the submissions made by the learned Government Pleader as above, would submit that: i. Even under Section 140(3) of the KSGST Act, the petitioner is not eligible since it was not entitled to the input credit when it purchased the computers/laptops. ii. Insofar as the items concerned were not entitled to input credit under the VAT period, the petitioner is not entitled to the transitional credit. iii. The reference to the definition of the expression ?capital goods? under Explanation to Chapter XX of the KSGST Act is not applicable to the claim under Section 140(3) since the term ?capital goods? is not referred to anywhere under Section 140(3). iii. The reference to the definition of the expression ?capital goods? under Explanation to Chapter XX of the KSGST Act is not applicable to the claim under Section 140(3) since the term ?capital goods? is not referred to anywhere under Section 140(3). Therefore, the Explanation under Chapter XX would apply only to Section 140(2) and similar provisions under Chapter XX where ?capital goods? are referred to. 9. I have considered the rival submissions as above and the relevant provisions of the law. 10. The facts are not in dispute. The petitioner is a service provider. It did not have registration under the KVAT Act. However, it purchased computers/laptops locally suffering tax under the KVAT Act. The petitioner was not entitled to the input credit in the KVAT regime. Once GST was rolled out, the petitioner obtained registration under the GST Scheme. It claims the benefits of the transitional credit under Chapter XX of the KSGST Act, as regards the tax paid on the purchase of computers/laptops while effecting purchase as above. 11. Chapter XX of the KSGST Act provides for transitional provisions with respect to migrating taxpayers. Section 140 provides for transitional arrangements for input tax credits. Sub-section (1) thereto is with reference to the entitlement of the registered person other than one paying tax under Section 10 (composition levy) to avail the credit of the VAT/entry tax carry forward in the return filed for June 2017. 12. Sub-section (2) is with reference to the entitlement of the same person as regards the credit of unavailed input credit in respect of ?capital goods? which was not carried forward in return. The petitioner had filed the application seeking clarification not with reference to the afore sub-section. This is clear from Ext.P1 application itself. The afore application was filed specifically with reference to entitlement under subsection (3) to Section 140. On the face of the afore, the findings contained in Ext.P2 issued by the Advance Ruling Authority are to be noticed. The said Authority made reference to the provisions of sub-section (2) to Section 140. The Authority thereafter referred to the definition of ?input? under Section 2(59) of the KSGST Act and found that capital goods are not entitled to input credit. Similarly, reference is also made to the proviso to sub-section (2) denying transitional credit, if the same was not admissible as input credit under the existing VAT Act. The Authority thereafter referred to the definition of ?input? under Section 2(59) of the KSGST Act and found that capital goods are not entitled to input credit. Similarly, reference is also made to the proviso to sub-section (2) denying transitional credit, if the same was not admissible as input credit under the existing VAT Act. True, under the KVAT Act, capital goods like computers/laptops are not eligible for extension of input credit as regards the tax paid on their purchase. However, the petitioner?s claim, as noticed earlier, was not with reference to Section 140(1) or (2). Therefore, the reference made to the afore provision while issuing Exts.P2 and P4 were without any basis and it is found accordingly. 13. Now the claim of the petitioner with reference to the provisions of Section 140(3), under which Ext.P1 was filed, is to be noticed. Therefore, the reference made to the afore provision while issuing Exts.P2 and P4 were without any basis and it is found accordingly. 13. Now the claim of the petitioner with reference to the provisions of Section 140(3), under which Ext.P1 was filed, is to be noticed. Section 140(3) reads as under: ?(3) A registered person, who was not liable to be registered under the existing law or who was engaged in the sale of exempted goods or tax free goods, by whatever name called, or goods which have suffered tax at the first point of their sale in the State and the subsequent sales of which are not subject to tax in the State under the existing law but which are liable to tax under this Act or where the person was entitled to the credit of input tax at the time of sale of goods, if any shall be entitled to take, in his electronic credit ledger, credit of the value added tax and entry tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely: (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of tax in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.? Reading of the afore provision would show that a ?registered person? is entitled for taking credit of VAT/entry tax. Reading of the afore provision would show that a ?registered person? is entitled for taking credit of VAT/entry tax. The claim can arise in the following situations as laid down under sub-section (3): i. The registered person was not liable under the existing law. ii. The registered person was engaged in the sale of exempted goods or tax-free goods. iii. The registered person was entitled to the input tax at the time of the sale of goods. In the case at hand, as already noticed, the petitioner herein was not liable to tax or was not supposed to take out registration under the existing law (KVAT). Therefore, the petitioner was making a claim with respect to the first limb of Section 140(3) of the KSGST Act. 14. The petitioner?s entitlement for availing credit of VAT/entry tax was in respect of ?inputs? held in stock and ?inputs? contained in semi-finished or finished goods held in stock as on the appointed date, provided they are used or intended to be used for making taxable supplies under the KSGST Act. The term ?input?, true, has a separate definition under Section 2(59) which reads as under: ?2(59) ?input? means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.? (Underlining supplied) A reading of the afore provision makes it clear that capital goods used by a supplier in the course of furtherance of business are outside the purview of the term ?input.? The original authority, while issuing Ext.P2, has referred to the definition of the term ?input? alone while considering the claim of the petitioner. The Appellate Authority while issuing Ext.P4 has also referred to the definition of the term ?capital goods? under Section 2(19) of the KSGST Act, which reads as under: ?2 (19) ?capital goods? means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course of furtherance of business.? to hold that insofar as the petitioner has treated the computers/laptops as capital assets in their books of accounts, the petitioner is not entitled to transitional credits. The findings of the Appellate Authority in Ext.P4, which read as under: ?(v) Further, the Computers, Laptops etc. to hold that insofar as the petitioner has treated the computers/laptops as capital assets in their books of accounts, the petitioner is not entitled to transitional credits. The findings of the Appellate Authority in Ext.P4, which read as under: ?(v) Further, the Computers, Laptops etc. which were lying in stock as on 30.06.2017 were declared as capital assets prior to GST and used by the appellant for providing output services. Thereby they had no tax liability under the erstwhile KVAT law. Further, they squarely fall under the definition of ?Capital Goods? under Section 2(19) of the KSGST Act, 2017 and not under Section 2(59) of the KSGST Act, 2017. Hence the relevant transitional provision applicable in the instant case is Section 140(2) of the KSGST Act, 2017 and Section 140(3) of the KSGST Act cannot be invoked.? With reference to the definition of the term ?capital goods? and ?input? as noticed above, the afore decision could have been upheld, but for a separate treatment with respect to the term ?capital goods? under Chapter XX of the KSGST Act. 15. The provisions of Chapter XX of the KSGST Act also provided for an Explanation as under: ?Explanation - For the purposes of this Chapter, the expression ?capital goods? shall have the same meaning as assigned to it in the Kerala Value Added Tax Act, 2003 (30 of 2004).? (Underlining supplied) Thus, as regards the provisions of Chapter XX of the KSGST Act, the term ?capital goods? is to have the same meaning as assigned under the KVAT Act. Section 2(x) to the KVAT Act, 2003, defined ?capital goods? as under: ?(x) ?Capital goods? means plant, machinery, equipments including pollution/quality control, lab and cold storage equipments used in manufacture, processing, excluding for job works or rendering of services, packing or storage of goods in the course of business and delivery vehicles but shall not include such goods and civil structure as may be notified by Government.? (Underlining supplied) True, computers/laptops would fall under the former portion of the afore definition. However, a conscious exclusion is provided in the latter portion with respect to such capital goods used for ?rendering of service.? Therefore, insofar as the petitioner was using the computers/laptops for rendering services, they were not ?capital goods? under Section 2(x) of the KVAT Act. When that be so, computers/laptops were not ?capital goods? However, a conscious exclusion is provided in the latter portion with respect to such capital goods used for ?rendering of service.? Therefore, insofar as the petitioner was using the computers/laptops for rendering services, they were not ?capital goods? under Section 2(x) of the KVAT Act. When that be so, computers/laptops were not ?capital goods? for the purposes of Chapter XX of the KSGST Act on account of the afore Explanation. In the light of the afore, the computers/laptops, which were used by the petitioner for rendering services would definitely fall under Chapter XX and were entitled to transitional credit. 16. Sri.Sreejith, the learned Senior Standing Counsel, contended that the Explanation referred to above would not apply to Section 140(3) of the KSGST Act since the term ?capital goods? do not find a reference thereunder. According to him, the Explanation applies only to those provisions of Chapter XX in which the term ?capital goods? is referred to. 17. I am unable to agree to the afore contention raised by the learned counsel since the Explanation extracted above adopts the definition from the KVAT Act wherever the term ?capital goods? comes up for consideration under Chapter XX of the KSGST Act. In the case at hand, the claim is raised under Chapter XX with reference to Section 140(3). Therefore, though Section 140(3) does not mention ?capital goods? while considering the definition of inputs, one has to refer to the term ?capital goods? as explained under Chapter XX. In such circumstances, wherever the term ?input? is referred to under Chapter XX, one comes across the term ?capital goods? also. Hence, the Explanation has to be applied. The interpretation as suggested by Sri.Sreejith would render the provision of the Explanation in-operative. 18. When that be the position, there cannot be any doubt regarding the entitlement of the petitioner for transitional credit under Section 140(3), especially since the petitioner is eligible for input credit as against the computers/laptops under the KSGST Act. 19. With respect to the contention raised by Sri.Sreejith that the petitioner was not entitled to input credit under the KVAT Act and hence not entitled to credit under the KSGST, as already noticed, the claim of the petitioner was with respect to the first limb of Section 140(3) as already found. 20. 19. With respect to the contention raised by Sri.Sreejith that the petitioner was not entitled to input credit under the KVAT Act and hence not entitled to credit under the KSGST, as already noticed, the claim of the petitioner was with respect to the first limb of Section 140(3) as already found. 20. On the whole, I am of the opinion that the petitioner was entitled to transitional credit under Section 140(3) of Chapter XX of the KSGST Act as regards computers/laptops. 21. Exts.P2 and P4 issued by the concerned authority are set aside. The respondents to consider the claim of the petitioner in the light of the afore declaration. The writ petition stands allowed as above.