2019 (4) TMI 433 - AT - Central Excise

Refund of CENVAT in cash - Rule 5 of Cenvat Credit Rules, 2004 - transfer of such credit as Input Tax credit in CGST Act or cash refund - Rule 5 of the CENVAT Credit Rules, 2004 - N/N. 27/2012- CE(NT), dated 18.06.2012 - first proviso to Section 142(3) of CGST Act, 2017. Held that - The proviso to Section 142(3) of CGST Act, 2017 deals with the cases of rejection of credit of CENVAT Credit. It specifically indicates that such amounts shall lapse. It is true, that with better planning, the appellants could have taken back the credit of CENVAT of refund which was rejected in terms of Para 2(i) of Notification No. 27/2012-CE(NT), dated 18.06.2012. Such credit would have seamlessly got transferred as input tax credit under GST into their new account post introduction of CGST, but they have not done so. Judicial discipline demands the lower authority follows the decision of the higher authority. Once it is decided by the CESTAT that the appellant is not entitled to refund of some amount of the CENVAT credit under Rule 5 of the CCR, 2004, the lower authority cannot sanction such refund as it would constitute judicial indiscipline. Therefore, the lower authority was correct in rejecting the request of the appellant. A plain reading of Section 140 of the CGST Act shows that it provides for transfer of CENVAT credit lying in balance in the assessee s account just before the CGST Act came into force. It does not provide for CENVAT credit which may have accrued to the assessee prior to this date but which was not in balance in their books of account. CESTAT was created under the Customs Act, 1962 and has been given powers under the Central Excise Act, 1944 and the Finance Act, 1994. Therefore, the powers of interpretation and application of these laws alone is the jurisdiction of the CESTAT. However, when other laws have a bearing on the application of these three laws, (e.g. SEZ Act, Foreign Trade Development and Regulation Act, various Environmental laws), interpretation of such laws also falls within the scope of CESTAT insofar as they affect the application of the Customs Act, Central Excise Act and Finance Act, 1994. The appellant s claim for refund of the disputed amount of CENVAT credit under Rule 5 has already been rejected by this bench in their previous appeal. Therefore, they are not entitled to refund of CENVAT credit. The argument that they could have planned differently and taken back the credit before CGST Act came into force and could have transferred it as Input Tax credit and since they have not done so and hence they should now be paid in cash has no legal backing. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Refund of CENVAT in cash under Rule 5 of Cenvat Credit Rules, 2004.
2. Transfer of CENVAT credit as Input Tax Credit under CGST Act or cash refund.
3. Jurisdiction of CESTAT concerning transitional provisions between old and new enactments.
4. Entitlement to refund of CENVAT credit.

Detailed Analysis:

1. Refund of CENVAT in Cash:
The appellant's claim for a cash refund of CENVAT under Rule 5 of the Cenvat Credit Rules, 2004 was previously rejected by the Tribunal. The lower authority, following judicial discipline, rejected the appellant’s subsequent request for a cash refund. The Tribunal emphasized that once a decision is made by a higher authority, the lower authority must follow it to avoid judicial indiscipline.

2. Transfer of CENVAT Credit as Input Tax Credit or Cash Refund:
Section 140 of the CGST Act allows for the transfer of CENVAT credit lying in balance in the assessee’s account just before the CGST Act came into force. It does not cover CENVAT credit accrued but not taken into account before this date. There is no provision under old laws or the CGST Act for a cash refund of CENVAT credit that was not accounted for before the CGST Act's implementation.

3. Jurisdiction of CESTAT on Transitional Provisions:
CESTAT, established under the Customs Act, 1962, and empowered by the Central Excise Act, 1944, and the Finance Act, 1994, has jurisdiction over these laws. While it can interpret other laws affecting these acts, the CGST Act has its appellate mechanism. CESTAT's role in transitional cases is limited to interpreting CGST provisions that modify the Central Excise Act and Finance Act, 1994. Purely CGST Act provisions, such as transferring CENVAT credit as Input Tax Credit, fall outside CESTAT's jurisdiction.

4. Entitlement to Refund of CENVAT Credit:
The appellant’s claim for the disputed CENVAT credit refund under Rule 5 was previously rejected by the Tribunal, and this decision stands. The appellant’s argument that they should receive a cash refund because they did not plan to take credit before the CGST Act lacks legal backing. The Tribunal affirmed that the rejected CENVAT credit lapses as per Section 142(3) of the CGST Act, 2017.

Conclusion:
The Tribunal upheld the lower authority's decision, finding no reason to interfere. The appellant's appeal was rejected, with the Tribunal affirming that the impugned order is correct and legal.

(Pronounced in open court on 04.04.2019)