CESTAT allows Refund of Unutilized CENVAT Credit on Education Cess, Citing Transitional Provisions of CGST Act [Read Order]

The Mumbai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) allowed a refund of ₹25,52,385 to the assessee, ruling that unutilized CENVAT credit on Education Cess and Secondary & Higher Education Cess, which could not be carried forward post-GST, was eligible for cash refund under the transitional provisions of the Central Goods and Services Tax(CGST) Act.

Star India Private Limited,appellant-assessee,was engaged in distributing theatrical and non-theatrical rights of films. It was registered under the Service Tax regime and later transitioned to Goods and Service Tax(GST) under the Maharashtra State Government.

The assessee filed a refund claim of ₹25,52,385 on June 28, 2018, for the balance of Education Cess and Secondary & Higher Education Cess lying as on June 30, 2017. This amount had initially been carried forward through TRAN-1 and reflected in the ST-3 return. However, after clarification through the CGST (Amendment) Act, 2018, and a circular dated January 2, 2019, the credit was reversed by filing revised TRAN-1 and ST-3 returns on September 29, 2017.

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The refund was claimed under Section 11B of the Central Excise Act, 1944, supported by necessary documents. The department issued a deficiency memo and provided a personal hearing. The Original Authority rejected the claim through an order dated July 19, 2019.

On appeal, the Commissioner (Appeals) upheld the rejection on November 18, 2020, stating that Krishi Kalyan Cess was not eligible for carry forward or refund under the GST regime. It was held that Rule 5 did not permit refund of unutilized credit except in export cases.

The appellant then filed the present appeal before the Tribunal.

A single member bench of M.M Parthiban(Technical Member) heard both sides, reviewed the records, and considered the additional submissions filed by the assessee.The issue was whether the assessee was entitled to a refund of unutilized CENVAT credit on Education Cess and Secondary & Higher Education Cess, as per the revised ST-3 return for June to September 2017. The refund was claimed under Section 142(3) and 142(9)(b) of the CGST Act, 2017, read with Section 11B of the Central Excise Act, 1944.

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The appellate tribunal referred to the relevant provisions and confirmed that transitional refund claims had to be dealt with under the old laws, and any eligible amount had to be refunded in cash unless it was already carried forward under GST. It also relied on the Larger Bench decision in Bosch Electrical Drive India Pvt. Ltd., holding that the CESTAT had jurisdiction to hear such matters under Section 142 of the CGST Act.

Read More:Refund allowable on Pre-GST unutilized Credit of Education Cess, SHEC: CESTAT

The assessee had correctly claimed the input credit in their June 2017 return but couldn’t use it after GST was introduced. They applied for a cash refund as allowed under the transitional provisions. The lower authority rejected the claim, stating that Rule 5 of the CCR didn’t permit cash refunds. However, the CESTAT held that Section 142 had an overriding effect and allowed refunds where the credit wasn’t carried forward.

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There was no issue of unjust enrichment, as the reversal was shown in the books and returns. The tribunal noted that the earlier laws had been repealed and the refund couldn’t be denied for lack of provision in the CCR.

The CESTAT referred to Supreme Court rulings that recognized CENVAT credit as a vested right and supported refunds under transitional provisions. It also relied on past decisions where cash refunds were allowed when the credit couldn’t be carried forward due to procedural issues.

It gave weight to the Bombay High Court’s ruling in Combitic Global Caplet Pvt. Ltd., which held that refundable credit must be paid in cash, and crediting it to the CENVAT account served no purpose post-GST.

Finding no legal basis for the rejection, the tribunal set aside the order dated November 18, 2020, and allowed the refund of ₹25,52,385 with consequential relief.

To Read the full text of the Order CLICK HERE

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