Denial of Tax Credit Violates Articles 14 & 300A: CESTAT Holds Rejection of Transitional Credit Refund on Limitation Grounds Unsustainable [Read Order]

The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the denial of transitional tax credit to the appellant violated constitutional rights under Articles 14 and 300A of the Indian Constitution.

The appellant, M/s. Advance Micro Fertilisers Pvt. Ltd., a manufacturer of agricultural products such as insecticides and plant growth regulators, had deposited the service tax under the existing law but could not avail the Cenvat credit due to the transition to GST. The company carried forward the credit through the TRAN-I form under Section 140 of the CGST Act, 2017.

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A show cause notice was issued to the appellant raising a demand of Rs. 2.67 lakhs. Although the assessee applied for a refund claim for the above mentioned amount under Section 11B of the Central Excise Act 1944, as the said amount was available as a credit but could not be availed due to the introduction of the GST regime, the claim was denied by the authorities, noting that it was barred by limitation.

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The appellant’s counsel contended that the relevant date for calculating the limitation period was the date of the show-cause notice, not the date of the tax deposit, and cited precedents such as Circor Flow Technologies India Pvt. Ltd. and Nitin Industries, where similar claims were upheld.

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The tribunal noted that Section 142(3) of the CGST Act mandates the disposal of refund claims under the existing law, irrespective of limitations under Section 11B of the Central Excise Act 1944.

The bench, by going through the decisions of various high courts, observed that denial of credit of tax or duty paid under existing law would amount to a violation of Articles 14 and 300 A of the Constitution of India and that, according to Article 300 A of the Indian Constitution, unused credit is recognised as a vested right and property.

The CESTAT, consisting of Binu Tamta (Judicial Member), allowed the appeal filed by the company and set aside the rejection of its refund claim.

To Read the full text of the Order CLICK HERE

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