2020 (1) TMI 188 - AT - Service Tax

Cash Refund of amount remaining unutilized in Education Cess (EC), Secondary Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC) - restriction on Carry forward of credit pertains to EC, SHEC and KKC - transition to GST regime - section 11B of the Excise Act - HELD THAT - Section 11B allows refund of duty paid and not of Cenvat credit. In the scheme of Cenvat, the duty/service tax/cesses which have been paid can only be taken as credit by the manufacturer and utilized towards payment of duty/service tax/Cesses, etc., on their final products. There is no scheme under which Cenvat credit can be refunded to them in cash except under Rule 5 of Cenvat Credit Rules (CCR), 2004 in respect of Cenvat credit utilized in manufacture exported goods or exported services - Since export of both goods and services are exempt, cash refund of Cenvat credit which has gone into manufacture of the goods exported or services exported is allowed under Rule 5 of CCR, 2009. Otherwise, there is no provision under which Cenvat credit can be refunded in cash. The judgment of the Larger Bench of the Hon ble High Court of Bombay in M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I 2019 (6) TMI 820 - BOMBAY HIGH COURT was precisely on the point as to whether the assessee can get cash refund of Cenvat credit which they were not able to utilize and it was answered in negative. The Hon ble High Court of Madras in SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER CGST AND CENTRAL EXCISE, COMMISSIONER OF CGST AND CENTRAL EXCISE, GOVERNMENT OF TAMIL NADU, UNION OF INDIA, CENTRAL BOARD OF EXCISE AND CUSTOMS, THE CHAIRMAN, GSTN 2019 (11) TMI 278 - MADRAS HIGH COURT was examining a different issue as to whether the precision of the credit of EC, SHEC KKC into the new GST regime was permissible or otherwise. The Hon ble High Court of Madras has not dealt with the issue of cash refund of unutilized Cenvat credit which is the question in dispute. Thus, there is no legal provision under which the assessee s appeal could be entertained - appeal dismissed.

Summary

Issues:
- Refund of unutilized Cenvat credit pertaining to Education Cess, Secondary & Higher Education Cess, and Krishi Kalyan Cess under GST regime.

Analysis:
1. The appellant, a large public sector undertaking, filed an appeal against the rejection of their application for refund of unutilized Cenvat credit amounting to ?1,46,733/-, which included Education Cess, Secondary & Higher Education Cess, and Krishi Kalyan Cess. The Cenvat credit remained unutilized due to the transition to the GST regime. The appellant sought cash refund as these Cesses could not be carried forward under the CGST Act. The application for refund was rejected by the original authority and the first appellate authority, leading to this appeal.

2. The Tribunal observed that Cenvat credit can only be utilized as credit by the manufacturer towards payment of duty, service tax, or Cesses on final products. There is no provision for cash refund of Cenvat credit except for export of goods or services under Rule 5 of Cenvat Credit Rules, 2004. The Tribunal highlighted that Section 11B of the Excise Act allows refund of duty paid, not Cenvat credit. The Tribunal emphasized that there is no legal provision for cash refund of unutilized Cenvat credit other than in specific export scenarios.

3. The Tribunal referred to the judgment of the Larger Bench of the Hon'ble High Court of Bombay in Gauri Plasticulture Pvt Ltd, which addressed the permissibility of cash refund of unutilized credit on inputs and closure of manufacturing activities. The Tribunal noted that the questions framed by the Larger Bench were answered against the assessee, indicating that cash refund of unutilized Cenvat credit was not permissible. In contrast, the appellant relied on the judgment of the Hon'ble High Court of Madras in Sutherland Global Services Pvt Ltd, which did not address the issue of cash refund of unutilized Cenvat credit.

4. After considering the judgments cited by both sides, the Tribunal concluded that there was no legal provision for the appellant to claim cash refund of unutilized Cenvat credit under the circumstances presented. The Tribunal highlighted the distinction between the issues addressed in the judgments cited by the parties and upheld the impugned order rejecting the appellant's appeal for refund.

5. Consequently, the Tribunal rejected the appeal and upheld the original decision, emphasizing the absence of a legal provision for cash refund of unutilized Cenvat credit accumulated prior to the transition to the GST regime. The judgment was dictated and pronounced in the open court by the concerned authority.