2023 (10) TMI 1250 - AT - Central Excise

Refund in lieu of transfer to successor credit account - rejection of claim for monetization of accumulated CENVAT credit - HELD THAT - It is on record that several disputes relating to the retrospective application of the debarring, as well as other connected issues, are pending in writ proceedings before the Hon ble Supreme Court. Though the decision of the Tribunal in Mylan Laboratories Ltd 2020 (3) TMI 837 - CESTAT HYDERABAD has rejected the claim for refund of unutilized cess from ineligibility after substitution of the existing tax regime with the new levy, there are several other decisions which have allowed refund of this very cess. On perusal of the said decisions, viz., that of the Tribunal in Schlumberger Asia Services Ltd 2021 (5) TMI 954 - CESTAT CHANDIGARH and in re International Seaport Dredging Pvt Ltd 2022 (6) TMI 822 - CESTAT CHENNAI it is seen to pertain to monetization of the cess - It would appear that the decision of the Tribunal in re Mylan Laboratories Ltd did not have the benefit of judicial determination that prompted subsequent decisions of the Tribunal. The matter is remanded back to the original authority for re-determination of eligibility in accordance with settled law on refund of accumulated CENVAT credit considering the peculiarities of the facts and circumstances therein.

Summary

Issues involved:
The appeal involves the issue of refund in lieu of transfer to successor credit account of accumulated CENVAT credit, which was rejected by the original authority and upheld by the Commissioner of CGST & Central Excise (Appeals-II), Mumbai. The main contention was whether the provision in the CENVAT Credit Rule, 2004 allowed for monetization of accumulated credit when the transition of credit into the successor regime was barred by law.

Comprehensive Details:

1. The lower authorities held that the restrictive nature of credit for Krishi Kalyan Cess (KKC) only allowed utilization for discharging the same cess on taxable services, thus precluding carry forward. They relied on the decision of the Larger Bench of the High Court of Bombay in Gauri Plasticulture P Ltd v. Commissioner of Central Excise, Indore.

2. The appellant argued that accumulated CENVAT credit is a vested right and should be refunded due to the freezing of entitlement by the operation of law. They cited various Tribunal decisions and the judgment of the High Court of Delhi in Brand Equity Treaties Ltd v. Union of India to support their claim.

3. The Authorized Representative contended that the retrospective debarment of transition of the cess indicated legislative intent to erase the credit. They referred to the decision of the High Court of Jharkhand in Rungta Mines Ltd v. Commissioner of Central Goods and Service Tax and Central Excise, Jamshedpur, and the Tribunal decision in Mylan Laboratories Ltd v. Commissioner of Central Tax and Customs, Guntur.

4. The appellant had to reverse the credit in the successor tax regime due to a retrospective amendment in August 2018. The claim was based on the principle of CENVAT credit being a vested right and the exclusion from future utilization entitling reimbursement in cash. Several disputes on the retrospective application of the debarring were pending before the Supreme Court.

5. The Tribunal's decision in Mylan Laboratories Ltd did not consider subsequent decisions supporting refund claims for unutilized cess. The matter was remanded back to the original authority for re-determination based on settled law on refund of accumulated CENVAT credit, considering the specific circumstances of the case.

Separate Judgment:
No separate judgment was delivered by the judges in this case.