2022 (4) TMI 1637 - AT - Central Excise

Refund of accumulated balance amount of credit on education cess, secondary and higher education cess and krishi kalyan cess the cess - case of appellant is that refund of credit of cess cannot be denied merely on the ground that such credit, which could not be utilized prior to GST regime, would stand lapsed - HELD THAT - It is not in dispute that prior to 01.03.2015 cess was leviable on manufactured goods, in addition to excise duty and the appellant had availed credit under the provisions of the Credit Rules on cess paid on procurement of goods and services. It is also not in dispute that by a notification dated 01.03.2015, levy of cess was exempted. The closing balance of credit of cess as on 28.02.2015, therefore, could not be utilized by the appellant and it was carried forward by him in the central excise returns. The Division Bench in Emami Cement 2022 (3) TMI 1254 - CESTAT NEW DELHI , after placing reliance upon the decision of the Tribunal in Slovak India Trading which decision was subsequently affirmed by the Karnataka High Court and the Supreme Court as also Division Bench decisions of the Tribunal in Bharat Heavy Electricals, Kirloskar Toyota, Nichiplast India as also the judgment of the Punjab and Haryana High Court in Shree Krishna Paper Mills, held that the appellant was entitled to claim refund of the balance amount of credit of cess. The Division Bench also held that the notification dated 07.12.2015, on which reliance had been placed by the Department, was contrary to the decisions of the High Court and the Tribunal and, therefore, would not come to the aid of the Revenue. The Division Bench also held that CENVAT credit was a vested right - the facts of this appeal are similar to the facts of Emami Cement. The order dated 25.03.2019 passed by the Commissioner (Appeals), therefore, cannot be sustained and is set aside - appeal allowed.

Summary

Issues:
1. Denial of refund of accumulated balance amount of credit on education cess, secondary and higher education cess, and krishi kalyan cess.
2. Applicability of CENVAT credit rules pre and post-GST regime.
3. Interpretation of notification exempting levy of cess on goods.
4. Claim for refund of balance credit on cess post-GST regime.
5. Validity of show cause notice and rejection of refund claim.
6. Legal precedent and judicial decisions supporting the appellant's claim for refund.
7. Department's argument against cash refund of unutilized credit.
8. Impact of Circular dated 07.12.2015 on the refund claim.

Analysis:
The judgment by the Appellate Tribunal CESTAT Allahabad involved an appeal against the denial of a refund claim for accumulated credit on various cesses. The appellant, a manufacturer of power equipment, had carried forward the credit on cess as of 28.02.2015 due to a notification exempting cess levy from 01.03.2015. Post-GST regime, the appellant filed a refund claim for the balance credit, which was rejected by the Assistant Commissioner and Commissioner (Appeals).

The appellant contended that denial of refund solely based on non-utilization of credit pre-GST regime was unjustified. Citing legal precedents like Slovak India Trading Co. Pvt. Ltd. and various Tribunal decisions, the appellant argued for the vested right of CENVAT credit and entitlement to refund under section 142(8)(b) of the GST Act. On the other hand, the Department argued against cash refund of unutilized credit post-cutoff date and relied on the Delhi High Court judgment in Cellular Operators Association of India vs. Union of India.

The Tribunal, referring to the Emami Cement case and other legal precedents, held in favor of the appellant, stating that the denial of refund based on non-utilization of credit pre-GST regime was not justified. The Tribunal emphasized that CENVAT credit is a vested right and set aside the Commissioner (Appeals) order, allowing the appeal with consequential relief. The judgment highlighted the inconsistency of the Circular dated 07.12.2015 with established legal principles and upheld the appellant's right to claim the refund of the balance credit on cess.