2025 (2) TMI 591 - AT - Service Tax

Refund of CENVAT credit arising from the balance of Education Cess and Secondary Higher Education Cess as per the revised ST-3 return for the period of June-September 2017 - sub-sections (3) and (9) of Section 142 of the CGST Act 2017 read with Section 11B of the Central Excise Act 1944 - main ground on which the refund application of the appellants was held as not entertainable in the impugned order is that there exists no provision under Rule 5 of the CCR for cash refund of excess CENVAT credit and therefore the refund in terms of proviso (c) to Section 11B(2) ibid is not permissible in the case of the appellants. HELD THAT - The provisions of Sections 142(3) and 142(9)(b) of the CGST Act is a transitional arrangement wherein it has been specifically provided that such provisions apply as a non-obstanate clause whereby such provisions will have overriding effect if anything to the contrary is contained under the provisions of existing law i.e. Central Excise Act 1944 except for the provisions of sub-section (2) of section 11B ibid. Thus all the conditions of the requirements of Section 11B ibid as it remained under the existing law other than those relating to Unjust Enrichment clause contained in Section 11B(2) ibid would apply only if they are not contradictory to the provisions of Section 142(9)(b) of the CGST Act 2017 in dealing with refund of CENVAT credit . It is also on record that there is no dispute with respect to fulfillment of unjust enrichment angle in the case of the present refund as the authorities below have not raised any objection with respect to these. Further the appellants have also submitted that the amount claimed as refund has not been passed to any other person and the amount of Rs.25, 52, 385/- reversed has been shown in their books of accounts and the return filed with the department. The proviso (c) to Section 11B(2) ibid cannot be read to state that refund of such excess CENVAT credit has not been provided under Rule 5 of the CCR as the entire arrangement of refund of excess CENVAT credit is arising as a transitional arrangement by moving from Excise duty/Service Tax regime to GST regime. There are merit in the argument of the learned Advocate for the appellants that they are eligible for refund of duty in cash under Section 11B(2)(d) ibid inasmuch as the phrase duty of excise used in Section 11B(2)(d) ibid refers to duties of excise leviable under Section 3 of the Central Excise Act 1944 and it also includes CENVAT credit which is nothing but such duty of excise paid on inputs or service tax paid on input services which have been allowed for taking credit in terms of Rule 3 of the CCR. In view of the above discussions the impugned order is not legally sustainable and the appellants are eligible for refund of excess CENVAT credit paid by them and specifically allowed to be refunded in terms of Section 142(9)(b) of the CGST Act 2017. When the Central Excise Act 1944 amongst other laws relating to old tax regime was repealed by Section 174 of the CGST Act 2017 and that the CCR is also being superseded vide Notification No.20/2017-C.E. (N.T.) dated 30.06.2017 by the Central Government for smooth implementation of transfer to GST regime in indirect taxation the provisions of Section 142 of the CGST Act 2017 are sufficient to provide for the tax administration for sanction of cash refund in circumstances stated therein and there is no need and it is not legally feasible to make any specific provision in CENVAT statute itself for enabling cash refund of excess CENVAT credit relating to earlier regime while moving to the new GST regime. The Co-ordinate Bench of this Tribunal in DY. GEN. MANAGER (FINANCE EXCISE) BHARAT HEAVY ELECTRICALS LTD. VERSUS COMMISSIONER CGST CE KANPUR. 2022 (4) TMI 1637 - CESTAT ALLAHABAD have held that rejection of refund of accumulated balance amount of credit on education cess secondary and higher education cess and Krishi Kalian cess by original authority and upheld by the Commissioner (Appeals-Thane) cannot be legally sustained and set aside the impugned order of rejecting the appeal filed by the appellants in that case. Conclusion - There are no merits in the impugned order passed by the learned Commissioner (Appeals) to the extent it has rejected the refund of excess CENVAT credit which is contrary to the legal provisions of Section 142(3) and Section 142(9)(b) of the CGST Act 2017 and thus it does not stand the scrutiny of law. Therefore by setting aside the impugned order dated 18.11.2020 the appeal is allowed in favour of the appellants with consequential relief with respect to refund of excess CENVAT credit of Rs.25, 52, 385/- payable to the appellants. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the refund of CENVAT credit arising from the balance of Education Cess and Secondary & Higher Education Cess, as per the revised ST-3 return for the period of June-September 2017, is refundable under sub-sections (3) and (9) of Section 142 of the CGST Act, 2017, read with Section 11B of the Central Excise Act, 1944.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework involves the interpretation of Section 142 of the CGST Act, 2017, which provides transitional provisions for the refund of CENVAT credit. Additionally, Section 11B of the Central Excise Act, 1944, is considered for refund procedures. The Tribunal also referenced various precedents, including decisions from the Hon'ble Supreme Court and previous Tribunal rulings, to support its interpretation of the law.

Court's Interpretation and Reasoning:

The Tribunal interpreted Section 142 of the CGST Act, 2017, as providing a mechanism for refunding CENVAT credit in cash, notwithstanding the absence of specific provisions for such refunds in the existing CENVAT Credit Rules. The Tribunal emphasized that the transitional provisions in Section 142 are intended to facilitate a smooth transition from the previous tax regime to the GST regime, allowing for cash refunds of unutilized CENVAT credit.

Key Evidence and Findings:

The Tribunal found that the appellants had duly complied with the procedural requirements under the CENVAT Credit Rules, 2004, and had appropriately claimed the refund of unutilized CENVAT credit. The evidence showed that the appellants had a closing balance of Education Cess and Secondary & Higher Education Cess, which could not be transitioned to the GST regime.

Application of Law to Facts:

The Tribunal applied the provisions of Section 142(3) and 142(9)(b) of the CGST Act, 2017, to the facts of the case, concluding that the appellants were entitled to a cash refund of the unutilized CENVAT credit. The Tribunal noted that the provisions of Section 142 override any contrary provisions in the existing law, except for the unjust enrichment clause in Section 11B(2) of the Central Excise Act, 1944.

Treatment of Competing Arguments:

The Tribunal addressed the arguments presented by the Revenue, which contended that the refund was not permissible due to the lack of specific provisions under Rule 5 of the CENVAT Credit Rules. The Tribunal rejected this argument, stating that the transitional provisions in the CGST Act specifically allow for cash refunds, and the absence of such provisions in the CENVAT statute does not preclude the refund.

Conclusions:

The Tribunal concluded that the appellants are entitled to a refund of the unutilized CENVAT credit in cash, as provided under Section 142 of the CGST Act, 2017. The Tribunal set aside the impugned order and allowed the appeal with consequential relief.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"The provisions of Sections 142(3) and 142(9)(b) of the CGST Act, is a transitional arrangement wherein it has been specifically provided that such provisions apply as a non-obstante clause whereby such provisions will have overriding effect, if anything to the contrary is contained under the provisions of existing law i.e., Central Excise Act, 1944, except for the provisions of sub-section (2) of section 11B ibid."

Core Principles Established:

The Tribunal established that the transitional provisions under the CGST Act are designed to ensure that taxpayers are not deprived of their vested rights to CENVAT credit during the transition to the GST regime. The provisions allow for cash refunds of unutilized credit, notwithstanding the absence of such provisions in the existing CENVAT Credit Rules.

Final Determinations on Each Issue:

The Tribunal determined that the appellants are entitled to a refund of Rs. 25,52,385/- in cash, representing the unutilized balance of Education Cess and Secondary & Higher Education Cess, as per the revised ST-3 return. The impugned order was set aside, and the appeal was allowed with consequential relief.