The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has allowed cash refund of CENVAT credit on the amount of cash of countervailing duty ( CVD ) and special additional duty ( SAD ) paid even after July 1, 2017.
Shakti Pumps, the respondent-assessee is in the business of manufacturing submersible pumps, power-driven pumps, centrifugal pumps, and solar pumping systems. It is registered with the Goods and Services Tax Department, but before the introduction of the CGST Act, it was registered with the Central Excise Department.
The assessee was availing of CENVAT credit for duty paid on the input goods as well as the service tax paid on input services that were used in the manufacture of the final products, and it also filed the statutory monthly ER-1 returns.
The assessee filed two refund claims before the Joint Commissioner of State Tax, GST Indore, claiming refund of CENVAT credit in cash in respect of CVD amounting to Rs. 1,35,10,358/- and SAD amounting to Rs. 1,10,44,821/- paid by it post-implementation of the CGST Act in terms of Section 142(3) read with Section 142(6)(a) of the CGST Act.
However, the Joint Commissioner communicated that it was not the appropriate authority. The refund applications were, therefore, re-submitted by Shakti Pumps before the Assistant Commissioner seeking refund of CENVAT credit in cash of CVD amounting to Rs. 1,35,10,358/- by the first application and refund of CENVAT credit in cash of SAD of Rs. 1,10,44,821/- by the second application in terms of sections 142(3) and 142(6)(a) of the CGST Act, which applications were received on 08.07.2019.
The Assistant Commissioner had rejected the refund claims filed by the assessee. The assessee appealed before the Commissioner (Appeals). The Commissioner (Appeals) has held that there could be no doubts that Shakti Pumps was eligible for CENVAT credit and, therefore, the Assistant Commissioner committed an illegality in rejecting the claim. The Commissioner (Appeals) held that Shakti Pumps would be entitled to a refund in cash of CVD and SAD in terms of Section 142(3) of the CGST Act, subject to verification of unjust enrichment by the sanctioning officer.
The department challenged the order passed by the Commissioner (Appeals) Customs, CGST, and Central Excise, Indore. The department contended that CVD and SAD are not duties paid under the “existing law as defined under Section 2(48) of the CGST Act, and there is no machinery or mechanism for refunding CVD and SAD under the Central Excise Act of 1944. Mere specifying any duty as eligible for CENVAT credit does not make it so unless eligibility is proved under the Rules. The notification does not allow CENVAT credit of duties paid due to default, and therefore, allowing CENVAT credit of default duties would be against the mandate of the notification.
The two-member bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the appellant/assessee has paid the CVD and SAD for the period before July 1, 2017, even though the payment was made after July 1, 2017. Since the duty was paid by the appellant for the period when the Cenvat credit rules existed, the appellant was entitled to Cenvat credit during the period prior to July 1, 2017.
While allowing the appeal, the tribunal held that the assessee is entitled to a cash refund of CENVAT credit in the amount of CVD and SAD paid even after July 1, 2017 and upheld the order of Commissioner (Appeals).
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