2024 (8) TMI 393 - AT - Central Excise

Rejection of refund claim of Cenvat Credit of CVD and SAD paid by the appellant in terms of Section 142(3) of CGST Act, 2017 - lower authorities have rejected the claim on the ground that the refund of Cenvat is not appearing under Clause (a) to (f) of Section 11 B (2) - HELD THAT - Since, the refund was otherwise not admissible in cash in respect of Cenvat credit but by virtue of Section 142 (3), the assessee is eligible for refund. Therefore, Clause (a) to (f) are not relevant for the purpose of refund of Cenvat credit in terms of Section 142 (3). Accordingly, on this ground the refund was wrongly rejected. From Section 142(8)(a) of CGST Act, 2017 it is clear that it provides that any amount of tax which was recoverable under the existing law before 01.07.2017 and the same is recovered, the amount recovered shall not be admissible as input tax credit under this Act. There is no ambiguity in the provision that any amount of tax paid under the existing law as was done in the present case no input tax credit is admissible. Here we are dealing with the Cenvat credit and not with the input tax credit - the finding of both the lower authorities dealing with the Section 142(8)(a) of the CGST Act, 2017, for rejecting the present refund claim is absurd and absolutely illegal. Therefore, on this ground also refund could not have been rejected. As regard the contention of the lower authorities that since the amount of service tax was paid on pursuance by the audit party, the refund is inadmissible - it is found that neither any show cause notice for recovery of the service tax invoking any extended period was issued nor adjudication of such proceeding was done. Therefore, in not paying the service tax, no mala fide intention or suppression of fact is involved. Therefore, merely because the appellant have paid the service tax on pursuance by the audit will not be a reason for denying the refund under Section 142. However, except the grounds for rejection no other issues have been dealt by the sanctioning authority such as admissibility of the input service for Cenvat credit, unjust enrichment and relevant documents verification. Accordingly, the matter deserves to be remanded to the adjudicating authority only for the limited purpose, as discussed. The impugned order is set aside - Appeal is allowed by way of remand to the adjudicating authority.

Summary

Issues involved:
- Rejection of refund claim of Cenvat Credit of CVD and SAD under Section 142(3) of CGST Act, 2017
- Interpretation of Section 142(8)(a) of CGST Act, 2017
- Admissibility of refund for Cenvat credit of Service Tax paid under existing law
- Relevance of Section 11 B (2) clauses (a) to (f) in refund claims

Analysis:

1. Rejection of Refund Claim of Cenvat Credit: The issue revolved around the rejection of the refund claim of Cenvat Credit of CVD and SAD by both lower authorities. They based their decision on the grounds that the refund was not covered by Clause (a) to (f) of subsection (2) Section 11 B of the Central Excise Act, 1944, and that Section 142(8)(a) of the CGST Act, 2017 rendered the refund inadmissible. However, the appellant argued that previous judgments supported the admissibility of the refund for duty paid as Cenvat credit before 01.07.2017, even if the service tax was paid under the reverse charge mechanism after 01.04.2017. The appellate tribunal found that the lower authorities erred in rejecting the claim solely based on Section 11 B (2) clauses, as Section 142(3) allowed for cash refund of Cenvat credit, making the rejection unjustified.

2. Interpretation of Section 142(8)(a) of CGST Act, 2017: The appellant contended that Section 142(8)(a) of the CGST Act, 2017, which bars refund of input tax credit, was wrongly applied to their case involving Cenvat credit of Service Tax paid under the previous law. The tribunal agreed, emphasizing that Section 142(8)(a) pertained to input tax credit, not Cenvat credit. The lower authorities' misinterpretation of this provision led to the erroneous rejection of the refund claim, as the appellant's case concerned Cenvat credit, not input tax credit, making the rejection illegal.

3. Admissibility of Refund for Cenvat Credit of Service Tax Paid: The tribunal noted that the lower authorities also argued that the refund claim was invalid since CVD and SAD were not covered under Section 11 B (2) clauses (a) to (f) of the Central Excise Act, 1944. However, the tribunal clarified that Section 142(3) allowed for cash refund of Cenvat credit, rendering the lower authorities' interpretation regarding Section 11 B (2) clauses irrelevant in the context of refunding Cenvat credit. Therefore, the rejection on these grounds was deemed incorrect.

4. Remand for Further Consideration: While the tribunal allowed the appeal and set aside the impugned order, it remanded the matter to the adjudicating authority for further consideration. The remand was specifically for addressing issues such as the admissibility of input service for Cenvat credit, unjust enrichment, and verification of relevant documents. The tribunal emphasized that the matter needed to be reconsidered based on the clarified legal interpretations provided in the judgment.