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2022 (3) TMI 1254 - AT - Central ExciseRefund of accumulated balance of credit on education cess and secondary and higher education cess - time limitation u/s 11B of Central Excise Act, 1944 - submission of appellant is that refund of credit of cess cannot be denied merely on the ground that such credit which could not be utilised prior to GST regime would stand lapsed - HELD THAT - In Bharat Heavy Electricals 2019 (4) TMI 1896 - CESTAT NEW DELHI , a Division Bench of the Tribunal examined whether credits create a vested right and do not extinguish with the change of law and held that change of law cannot be a ground for divesting an assessee from this valuable right and in this connection, the Tribunal placed reliance upon the decision of the Karnataka High Court in Slovak India Trading 2006 (7) TMI 9 - KARNATAKA HIGH COURT . In Shree Krishna Paper Mills 2019 (12) TMI 1348 - PUNJAB AND HARYANA HIGH COURT , the Punjab and Haryana High Court examined whether refund could be ordered of unutilised credit on closure of the unit and held, in view of the earlier decision of the Punjab and Haryana High Court in Rama Industries Ltd. vs. CCE, Chandigarh 2009 (2) TMI 136 - PUNJAB AND HARYANA HIGH COURT and the decision of the Karnataka High Court in Slovak India 2006 (7) TMI 9 - KARNATAKA HIGH COURT , that refund should be granted. It is, therefore, seen that there are conflicting decisions of the Karnataka High Court and the Punjab and Haryana High Court on the one hand and the Rajasthan High Court on the other hand. The decision of the Karnataka High Court in Slovak India was affirmed by the Supreme Court. It would, therefore, be appropriate to follow the view taken by the Karnataka High Court and the Punjab and Haryana High Court. It needs to be noted that CENVAT credit avail is a vested right as has held by the Supreme Court in Eicher Motors 1999 (1) TMI 34 - SUPREME COURT and Samtel India 2003 (3) TMI 121 - SUPREME COURT . The appellant is, therefore, clearly entitled to the refund of the balance amount of credit of cess and the decision to the contrary taken by the Commissioner (Appeals) cannot be sustained - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Format and completeness of the refund claim under Section 11B of the Central Excise Act, 1944. 2. Time-barred nature of the refund claim under Section 11B. 3. Vested right to accumulated credit of phased-out cesses. 4. Applicability of transitional provisions under the GST Act, 2017. 5. Entitlement to refund of unutilized credit of education cess and secondary and higher education cess post-GST implementation. Detailed Analysis: 1. Format and Completeness of the Refund Claim: The appellant's refund claim was initially rejected by the Assistant Commissioner on grounds of non-compliance with Section 11B of the Central Excise Act, 1944, citing improper format and lack of necessary documentary evidence. The appellant contended that they had submitted FORM-R and relevant documents, including ER-1 returns, which showed the accumulated balances of education cess and secondary and higher education cess. 2. Time-barred Nature of the Refund Claim: The Assistant Commissioner also rejected the claim as time-barred, arguing that the refund was sought for cesses withdrawn effective 01.03.2015, making the claim inadmissible. The appellant countered that the refund claim was filed within one year from the introduction of GST (01.07.2017), thus within the permissible time limit under Section 11B. 3. Vested Right to Accumulated Credit: The appellant argued that the credit of education cess and secondary and higher education cess, availed prior to 01.03.2015, constituted a vested right which could not be extinguished without explicit legal provision. They relied on precedents such as Eicher Motors Ltd. and Samtel India Ltd., asserting that CENVAT credit is a vested right that crystallizes upon receipt of input goods/services. 4. Applicability of Transitional Provisions under GST Act: The Assistant Commissioner and Commissioner (Appeals) held that the refund claim was governed by Sections 139 to 142 of the GST Act, 2017, which did not provide for refund of cesses phased out before GST implementation. The appellant maintained that since they did not transition the credit into GST via TRAN-1, they were entitled to a refund under Section 11B. 5. Entitlement to Refund Post-GST Implementation: The Tribunal examined multiple precedents, including Slovak India Trading Co. Pvt. Ltd., Bharat Heavy Electricals Ltd., and Kirloskar Toyota Textile Machinery Pvt. Ltd., which supported the appellant's claim for refund of unutilized credit of cesses. The Tribunal noted that the Karnataka High Court and the Supreme Court had affirmed the principle that refund should be granted when an assessee exits the Modvat scheme or closes the factory. Conclusion: The Tribunal concluded that the appellant was entitled to a refund of the accumulated credit of education cess and secondary and higher education cess, rejecting the contrary view taken by the Commissioner (Appeals). The Tribunal emphasized that CENVAT credit is a vested right and that the appellant's claim was timely and substantiated with proper documentation. The appeal was allowed with consequential reliefs. Order Pronounced on 28.03.2022.
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