2025 (1) TMI 987 - AT - Central Excise

Refund against payment of CVD SAD in cash under transitional provisions available in Section 142(3) read with Section 142(6)(a) of the CGST Act - denial on the ground that Appellant had paid duty amount alone and not interest or the penalty that was imposed by the DGFT for which regularisation of import remained incomplete - HELD THAT - The issue that remained primarily confined to absence of any such provision in Rule 9(1)(b) of the CENVAT Credit Rules 2004 that would have made fulfilment of the condition contained in DGFT letter as a condition precedent for such refund and non-payment of interest that would disentitle the benefit of refund of CVD SAD to the manufacture upon sale of goods manufactured from imported inputs which Appellant claimed to have not paid due to exercise of discretion of Customs Authority in allowing such non-payment of interest by the Appellant in its favour but subsequently have to pay the same interest upon refusal of its refund application and such payment of interest was duly intimated to the Respondent-Department vide its letter dated 31.03.2022. With these developments that occurred during pendency of this appeal it is to be seen as to if Appellant is entitled to get refund of CVD SAD in cash and if CESTAT is empowered to pass an order to that effect. On the point of divergent decision on the issue as has been held in M/S. SERVO PACKAGING LIMITED VERSUS COMMISSIONER OF G.S.T. AND CENTRAL EXCISE PUDUCHERRY 2020 (2) TMI 353 - CESTAT CHENNAI and M/S. AUROBINDO PHARMA LTD. VERSUS COMMISSIONER OF CUSTOMS CHENNAI II 2022 (5) TMI 394 - CESTAT CHENNAI this Tribunal at Hyderabad had observed that those were passed before Larger Bench s view had come in the case of M/S. BOSCH ELECTRICAL DRIVE INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL TAX CHENNAI 2023 (12) TMI 1145 - CESTAT CHENNAI-LB and not applicable to the present case since same Chennai Bench itself had subsequently passed another order holding that Appellant would be eligible for cash refund. Therefore the issue of cash refund of CVD SAD paid in GST Regime has attained finality in favour of such cash refund. Another point that is required to be brought on record is that post disposal of appeal by the Commissioner (Appeals) interest was paid by the Appellant and in the normal course matter would have gone to the Commissioner (Appeals) for redetermination had he made any observation on the point that payment of interest against CVD SAD dues was mandatory to allow refund of those two taxes upon sale of manufactured goods and had there been any such condition available under Rule 9(1)(b) of the CENVAT Credit Rules 2004 but having regard to fact that Respondent-Department was competent to realise any arrear dues from the refund sanction under Section 142 in view of clear provision contain under Section 142(8) of the CGST Act apart from the fact that such a provision was already existing under Section 11(1) of the Central Excise Act there is no point in redetermining the issue that was not dealt by the Commissioner (Appeals). Conclusion - Appellant is entitled to get refund of CVD SAD with applicable interest as per law in cash. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the Appellant is entitled to a cash refund of the Countervailing Duty (CVD) and Special Additional Duty (SAD) paid under the transitional provisions of the Central Goods and Services Tax (CGST) Act, 2017.
Whether the non-payment of interest and penalties affects the eligibility for a refund of CVD and SAD.
Whether the CESTAT is empowered to grant such a refund under the CGST Act, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Cash Refund of CVD and SAD

Relevant legal framework and precedents: The Appellant sought a refund under Section 142 of the CGST Act, 2017. The Tribunal considered precedents, including the decisions in the cases of Servo Packaging Ltd. and Clariant Chemicals India Ltd., which addressed similar issues regarding the refund of duties paid post-GST implementation.
Court's interpretation and reasoning: The Tribunal analyzed whether the CVD and SAD paid post-GST implementation could be refunded in cash when the Appellant could not avail of these amounts as CENVAT Credit. The Tribunal noted consistent decisions by coordinate benches that supported the refund eligibility.
Key evidence and findings: The Tribunal found that the Appellant paid the duties after the CGST Act came into force and was unable to claim CENVAT Credit for these amounts, thereby supporting the claim for a cash refund.
Application of law to facts: The Tribunal applied the legal framework to conclude that the Appellant was entitled to a cash refund of the CVD and SAD, aligning with precedent decisions.
Treatment of competing arguments: The Tribunal addressed the contrary decision in Servo Packaging Ltd. but noted that subsequent decisions, including one from the same Chennai Bench, favored the Appellant's position.
Conclusions: The Tribunal concluded that the Appellant is entitled to a cash refund of the CVD and SAD paid under the transitional provisions of the CGST Act.

Issue 2: Impact of Non-payment of Interest and Penalties

Relevant legal framework and precedents: The Tribunal examined the applicability of Rule 9(1)(b) of the CENVAT Credit Rules, 2004, and the transitional provisions under Section 142 of the CGST Act.
Court's interpretation and reasoning: The Tribunal reasoned that the non-payment of interest and penalties did not preclude the refund of CVD and SAD, especially since the Customs Authority had exercised discretion in initially allowing non-payment of interest.
Key evidence and findings: The Appellant had paid the interest during the pendency of the appeal, which was communicated to the Respondent-Department.
Application of law to facts: The Tribunal found that the payment of interest post-appeal did not affect the eligibility for a refund, as there was no explicit condition in the relevant rules requiring such payment for refund eligibility.
Treatment of competing arguments: The Tribunal noted that the Refund Sanctioning Authority's requirement for interest payment was not in conformity with the law.
Conclusions: The Tribunal concluded that the non-payment of interest and penalties did not affect the Appellant's entitlement to a refund.

Issue 3: Empowerment of CESTAT to Grant Refund

Relevant legal framework and precedents: The Tribunal referred to Section 142 of the CGST Act and the precedent decisions that empowered it to adjudicate on refund claims.
Court's interpretation and reasoning: The Tribunal interpreted the legal provisions to affirm its jurisdiction to grant the refund.
Key evidence and findings: The Tribunal relied on prior decisions that established its authority to decide on such matters.
Application of law to facts: The Tribunal applied the legal provisions to establish its jurisdiction over the refund claim.
Treatment of competing arguments: The Tribunal addressed contrary views by highlighting the evolution of the legal position through subsequent decisions.
Conclusions: The Tribunal concluded that it was empowered to grant the refund under the CGST Act.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "In all these case laws, the issue was identical i.e., as to whether CVD+SAD as part of Custom Duties paid subsequent to 01.07.2017 on account of non-fulfilment of Export Obligation, are eligible for cash refund when the Appellant cannot take these amounts as CENVAT Credit."
Core principles established: The Tribunal established that the Appellant is entitled to a cash refund of CVD and SAD paid post-GST implementation, irrespective of the non-payment of interest and penalties, provided the Appellant could not avail of CENVAT Credit.
Final determinations on each issue: The Tribunal set aside the order of the Commissioner (Appeals) and directed the Respondent-Department to pay the refund with applicable interest within two months.

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