2024 (9) TMI 905 - HC - GST

Refund of unutilized credit on account of payment of Service Tax, EC, SHEC, and KKC under the GST regime - transition of EC, SHEC and KKC Credit - HELD THAT - The petitioner has not made out any case for the grant of any of the reliefs sought in the writ petition. A reading of the provisions of the CENVAT Rules indicates that the EC, SHEC and KKC can be utilized only for payment of such Cess and not for any other purposes (See the First and Second provisos to Rule 3(7)(b) Rule 3(7)(d) of the CENVAT Credit Rules, 2004). It is clear that there is no cross-utilization of EC, SHEC and KKC against tax payable on account of Service Tax under the provisions of the Finance Act, of 1994. It is evident from the judgment of the Division Bench of the Madras High Court in ASSISTANT COMMISSIONER OF CGST AND CENTRAL EXCISE, COMMISSIONER CGST AND CENTRAL EXCISE, UNION OF INDIA, CENTRAL BOARD OF EXCISE AND CUSTOMS VERSUS SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED, GOVERNMENT OF TAMIL NADU, THE CHAIRMAN GSTN 2020 (10) TMI 804 - MADRAS HIGH COURT that there cannot be any transitioning of Cess paid as EC, SHEC and KKC under the provisions of Section 140 of the CGST Act. Coming to the claim of the petitioner that it is entitled to entertain a claim for refund under the provisions of Section 54 of the CGST Act, I am of the view that the said contention cannot be accepted in the light of clear provisions contained in Sub-Section (3) of Section 54 of the CGST Act. It is clear from a reading of Sub- Section (3) of Section 54 of the CGST Act that a claim for refund of the CGST/SGST/IGST (in cash) can be entertained only in two circumstances. The first is where there is a zero-rated supply of goods or services and the second one is, where the refund application arises on account of an inverted duty structure, i.e where the duty to be paid or paid on output services or goods is less than the duty paid on input services or input goods. That apart, the question of entertaining any application for a refund under the provisions of Section 54 of the CGST Act does not arise in the case of the petitioner. The contention of the learned counsel appearing for the petitioner that various Tribunals had taken a view contrary to the view taken by this Court and has held that EC, SHEC and KKC paid at the relevant time under the provisions of the Finance Act 1994 can be refunded cannot be accepted. In view of the statutory provisions, the view taken by various Tribunals does not appear to be in accordance with the statutory provisions. There are no merit in any of the contentions of the learned counsel appearing for the petitioner - petition dismissed.

Summary

Issues:
1. Whether the petitioner is entitled to a refund of unutilized credit on account of payment of Service Tax, EC, SHEC, and KKC under the GST regime.
2. Whether the rejection of the petitioner's application for refund as time-barred is legally sustainable.
3. Whether the petitioner can maintain an application for refund under Section 54 of the CGST Act.

Analysis:
1. The petitioner, a Public Limited Company, sought a refund of Rs.1,57,53,287/- for unutilized credit on account of payment of Service Tax, EC, SHEC, and KKC under the GST regime. The petitioner claimed that the retrospective amendment of Section 140 of the CGST Act prevented the transition of accumulated credit on account of various Cess payments to the GST regime. The petitioner argued that the transitional credit claimed was reversed, entitling them to seek a refund under Section 142(3) of the CGST/SGST Acts. The respondent rejected the refund claim as time-barred under Section 11B of the Central Excise Act, 1944. The petitioner also filed a refund application under Section 54 of the CGST Act, contingent on the rejection of the initial refund claim. The petitioner contended that the rejection of the refund application as time-barred was illegal and unsustainable, citing judgments supporting their entitlement to the refund.

2. The respondent Department argued that the petitioner was not entitled to a refund of EC, SHEC, and KKC under the CENVAT Credit Rules, as these Cess amounts could only be set off against similar Cess payments. The Department highlighted that EC and SHEC were abolished before the introduction of GST, and KKC was abolished with the Taxation Law (Amendment) Act 2017. The Department referenced the Division Bench judgment of the Madras High Court in a similar case to support their position. They contended that the petitioner's claim for refund was not maintainable and time-barred, as per Section 54(3) of the CGST Act, which limits cash refunds to zero-rated supplies or inverted duty structures.

3. The Court analyzed the statutory provisions and previous judgments, including the Madras High Court decision, to determine the petitioner's entitlement to a refund. The Court agreed with the Division Bench's interpretation that Cess amounts like EC, SHEC, and KKC could not be transitioned to the GST regime under Section 140 of the CGST Act. The Court noted that the petitioner had no statutory right to claim a refund for unutilized Cess amounts. Additionally, the Court found that the petitioner's claim under Section 54 of the CGST Act was not valid, as there was no provision enabling the transition of EC, SHEC, and KKC. The Court dismissed the petitioner's arguments based on the statutory provisions and held that the petitioner was not entitled to a refund.

4. The Court rejected the petitioner's contention that various Tribunals had taken a contrary view, emphasizing that the statutory provisions did not support the petitioner's claim for a refund of EC, SHEC, and KKC. The Court also declined to direct the competent authority to consider the petitioner's refund application under Section 54 of the CGST Act, as the petitioner was not entitled to such a refund. Ultimately, the Court dismissed the writ petition, finding no merit in the petitioner's contentions and upholding the rejection of the refund claim.