2021 (8) TMI 818 - AT - Central Excise

Refund of accumulated balance of unutilized credit of Education Cess and Secondary and Higher Education Cess - time limitation - applicability of Section 11B of the Central Excise Act - HELD THAT - In the present case the appellant has filed the refund claim of accumulated balance of unutilized credit of Education Cess and Secondary and Higher Education Cess available in their books under Section 11B of the Central Excise Act within a period of one year i.e. on 29/06/2018 from the introduction of GST law. It is also found that with the introduction of GST there is a restriction for these cesses to be transitioned into GST by virtue of Section 140(1) of the Act and therefore the appellant did not transfer the said credit of cesses into GST and preferred to file the refund claim under Section 11B of the Central Excise Act. In view of the contradictory decisions of various High Courts, this Tribunal is bound to follow the decision of the jurisdictional High Court and the jurisdictional High Court has held in the case of UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. 2006 (7) TMI 9 - KARNATAKA HIGH COURT which has been relied upon by the Division Bench of the Delhi Tribunal in the case of BHARAT HEAVY ELECTRICALS LTD VERSUS COMMISSIONER OF CENTRAL TAX SECUNDERABAD - GST 2020 (1) TMI 188 - CESTAT HYDERABAD has categorically held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST. The findings in the impugned order regarding time-bar is beyond the show-cause notice as well as Order-in- Original and the same is not sustainable in law - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Eligibility of refund of unutilized Education Cess (EC) and Secondary and Higher Education Cess (SHEC) under Section 11B of the Central Excise Act.
2. Applicability of Section 140(1) of the CGST Act, 2017 on the transition of cess credits.
3. Time-bar aspect of the refund claim.

Detailed Analysis:

1. Eligibility of Refund of Unutilized EC and SHEC:
The appellant, engaged in the manufacture and export of textile machinery parts, filed a refund claim for unutilized EC and SHEC credits under Section 11B of the Central Excise Act. The claim was rejected by the original and appellate authorities based on the restriction under Section 140(1) of the CGST Act, 2017, which prohibits the transition of such credits into the GST regime. The appellant argued that there is no express provision for lapsing these credits and cited several judgments supporting the entitlement to refunds, including the Division Bench decision in Bharat Heavy Electricals Ltd. and the Karnataka High Court decision in Slovak India Trading Co. Pvt. Ltd. The Tribunal agreed with the appellant, emphasizing that the credits earned were a vested right and could not be extinguished merely due to a change in law without a specific provision debarring such refunds.

2. Applicability of Section 140(1) of the CGST Act, 2017:
The Tribunal noted that Section 140(1) restricts the transition of cess credits into GST, leading the appellant to file a refund claim under the existing law to avoid lapsing of credits. The Tribunal referenced the Division Bench decision in Bharat Heavy Electricals Ltd., which held that the unutilized credit of EC and SHEC should be refunded if it could not be transitioned into GST. The Tribunal also highlighted that the Karnataka High Court in Slovak India Trading Co. Pvt. Ltd. supported the refund of unutilized credits when the assessee moved out of the Modvat/Cenvat Scheme.

3. Time-bar Aspect of the Refund Claim:
The appellant filed the refund claim within one year from the introduction of GST. The Tribunal found the appellate authority's findings on time-bar to be beyond the scope of the original show-cause notice and Order-in-Original. The Tribunal cited decisions like CCE Vs. Suresh Synthetics and CCE Vs. Gas Authority of India, which support that issues not raised in the show-cause notice cannot be used to deny claims. The Tribunal concluded that the refund claim was timely and within the permissible period.

Conclusion:
The Tribunal allowed the appeal, holding that the appellant is entitled to a refund of the unutilized EC and SHEC credits under Section 11B of the Central Excise Act. The Tribunal emphasized that the vested right to credits could not be extinguished without a specific provision and that the jurisdictional High Court's decision in Slovak India Trading Co. Pvt. Ltd. prevails over other conflicting judgments. The findings on the time-bar were deemed unsustainable as they were beyond the scope of the original proceedings.

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