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2023 (4) TMI 6 - AT - Central ExciseCash refund of cess credit - Whether the cash refund of Cenvat credit of Cess in the form of Education Cess (EC) and Secondary Higher Education Cess (SHEC) is permissible as the assessee was unable to utilize the said credit? - cess is cenvatable or not - Rule 3 of Cenvat Credit Rules - transitional CENVAT Credit - HELD THAT - Cess is commonly employed to connote a tax with a purpose or a tax allocated to a particular thing suggested by the name of the cess. In the present case, it is related to education. Cess is generally for such levy which is for some special administrative expense as shall be suggested by the name of the cess. Education cess was levied by virtue of Finance Act No. 2 of 2004 in Section 92 to 94 thereof to be charged as a duty of excise with an objective to fulfill commitment of the government to provide a finance universalized quality basic education - thus, no doubt the Cess are the part of the excise duty - the levy of EC and SHEC was however dropped and deleted by the Finance Act, 2015. Whether the cess are cenvatable? - HELD THAT - Sub-rule (vii) of Rule 3 of CENVAT Credit Rules, 2004, specifically provided that CENVAT Credit in respect of Education Cess and Secondary and Higher Education Cess shall be utilised only towards the payment of Education Cess leviable on the taxable services only and not against the normal excise duty. Thus CENVAT Rules, 2004 clearly restricted the utilisation of Education Cess and Higher and Secondary Education Cess on the output tax on goods and services and not against the normal excise duty or service tax liability. It is not disputed even before me that cross utilisation of CENVAT Credit in the form of Education Cess and Secondary and Higher Education Cess against normal service tax and excise duty liability was not allowed. The definition of 'eligible duties and taxes' as per the explanation 3 under Section 140 of the CGST Act, 2017 was amended with retrospective effect from 01.07.2017 whereby it is specified that cesses are excluded from the definition of 'eligible duties and taxes', Thus, the credit is ab initio not available for utilization for GST. In view of the above, cesses are not be transitioned through TRAN-1, as per the transitional provisions specified under CGST Act, the credit balances not transitioned to GST regime shall lapse, and, as such, the argument of the appellant the impugned credits never lapse, as there is no provision retaining the same is not sustainable. In the present case Notification No. 14 and 15 of 2015 exempted all goods and services from the levy of EC and SHEC from 01.03.2015 and 01.06.2015 respectively. Both these notifications were challenged before Hon ble High Court of Delhi in the case of CELLULAR OPERATORS ASSOCIATION OF INDIA AND OTHERS VERSUS UNION OF INDIA AND ANOTHER 2018 (2) TMI 1264 - DELHI HIGH COURT , while upholding both the notifications Hon ble High Court held that the Cenvat credit of EC and SHEC which could have been availed till the cutoff date had lapse to the Government and thus, cannot be cross utilized as against the excise duty and service tax. The balance of EC and SHEC credit available on inputs lying before 01.03.2015 cannot be utilized for payment of excise duty. Though Notification No. 12/2015 dated 30.04.2015 the Cenvat has taken on or after 01.03.2015 of EC @ 2% and SHEC @ 1% to be utilized for payment of duty of excise. But in the present case the Cenvat of Cess paid prior March, 2015 was never taken till the onset of CGST Act on 01.07.2017. Transitional arrangement for input tax credit - HELD THAT - Transitioning in the Electronic Credit Ledger, the amount of such Education Cess and Secondary and Higher Education Cess, does not entitle appellant/assess to utilize the said unutilised amount of Education Cess and Secondary and Higher Education Cess against the Output GST Liability. The taking of the input credit in respect of Education Cess and Secondary and Higher Education Cess in the Electronic Ledger after 2015, after the levy of Cess itself ceased and stopped, does not even permit it to be called an input CENVAT Credit and therefore, mere such accounting entry will not give any vested right to the Assessee to claim such transition and set off against such Output GST Liability after 01.07.2017 - the refund has to be dealt with in accordance of Section 11B as already explained above that refund of EC and SHEC, in the given circumstance, shall not be available under Section 11B of Central Excise Act, 2002 nor even under Rule 5 of CCR, 2004. There are no infirmity in the order under challenge vide which the refund claim for the amount of Cenvat credit of EC and SHEC, paid prior March 2015, has been denied to the appellant as was filed under the garb of transitional provisions of CGST Act, 2017 - appeal dismissed.
Issues Involved:
1. Eligibility of cash refund for unutilized Cenvat credit of Education Cess (EC) and Secondary Higher Education Cess (SHEC). 2. Applicability of Section 142(3) of CGST Act for refund claims. 3. Interpretation of Rule 5 of Cenvat Credit Rules, 2004. 4. Timeliness of the refund claim. Summary: 1. Eligibility of Cash Refund for Unutilized Cenvat Credit of EC and SHEC: The appellant carried forward Rs.18,20,555/- as unutilized Cenvat credit of EC and SHEC into the GST regime via GST Tran-1. Upon clarification that Cess is not eligible for transition, the appellant reversed the credit and filed for a refund. The Tribunal held that EC and SHEC, being part of excise duty, ceased to be levied from 01.03.2015 and thus could not be transitioned into the GST regime. The credits were deemed "dead claims" post-2015 and not eligible for cash refund. 2. Applicability of Section 142(3) of CGST Act for Refund Claims: The Tribunal observed that Section 142(3) of the CGST Act mandates that refund claims be disposed of according to the provisions of the existing law, specifically Section 11B of the Central Excise Act, 1944. The Tribunal concluded that Section 142(3) does not provide an independent right to claim refunds of unutilized Cenvat credit of EC and SHEC. 3. Interpretation of Rule 5 of Cenvat Credit Rules, 2004: The Tribunal interpreted Rule 5 of CCR, 2004, which allows refunds where adjustment of accumulated credit is not possible due to exports. The Tribunal emphasized that Rule 5 should be read as a whole, indicating that refunds are permissible only in the case of exports and not for any other reason. The Tribunal cited the decision in Union of India and Ors. Vs. Ind-Swift Laboratories Limited to support this interpretation. 4. Timeliness of the Refund Claim: The Tribunal noted that EC and SHEC ceased to exist from 01.03.2015, and the appellant's refund claim filed on 27.06.2020 was barred by time. The Tribunal found no valid reason to extend the relevant date from 01.03.2015 to 30.08.2018. Conclusion: The Tribunal upheld the order rejecting the refund claim, stating that the appellant's claim for cash refund of unutilized Cenvat credit of EC and SHEC, paid prior to March 2015, was not permissible under the transitional provisions of the CGST Act, 2017. The appeal was dismissed.
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