Relief to Jindal Steel and Power: Post-GST VAT Refunds must be Processed u/S 142 (3) of CGST Act, 2017, rules Orissa HC [Read Order]

In a significant case of Jindal Steel and Power, the Orissa High Court ruled that post-GST Value Added refunds must be processed under section 142 (3) of the Central Goods and Service Tax Act, 2017.              

The petitioner department sought to quash the order passed by the Additional Secretary to the Government of India. The petitioner contended that out of the total demand of Rs.69,98,64,638.00 since the deposit has been made to the tune of Rs.65.00 crores, the balance amount of Rs.4,2389,327/- has been erroneously sanctioned in favour of the opposite party, for which the petitioner has approached this Court claiming for re-crediting it in the Cenvat Credit ledger.

The opposite party exported final products on payment of Central Excise duty of Rs. 69,98,64,638/- during the period 01.01.2017 to 31.03.2017, and claimed rebate, vide application dated 14.08.2017, under Rule 18 of the Central Excise Rules, 2002. The Original Authoritysanctioned the entire amount as a rebate.

The petitioner department reviewed on the ground that duty was paid on a CIF value basis instead of the FOB value basis andthe rebate should be sanctioned in cash only to the extent of duty payable on aFOB value basis whereas excess duty paid over and above the FOB value basis should be refunded in the manner it was paid, i.e., by re-crediting in the Cenvat Credit Account.

The Commissioner (Appeals) held that the amount of Rs.4,23,89,327/- was erroneously sanctioned to the opposite party in cash instead of re-crediting in the Cenvat Credit Ledger andset aside the Order-in-Original dated 10.10.2017. The appeal filed by the opposite party was allowed by the Commissioner (Appeals) vide order dated 15.12.2020.

The Revision application was filed because it is settled law that the rebate of duty was available only in respect of duty paid on FOB value and not any value over and above the FOB value and that additional amount of Rs. 4,23,89,327/- sanctioned erroneously by the Original Authority was to be allowed not as an amount of refund but as a reversal entry because refund/rebate is not admissible and that as per Section 142 (3) of the CGST Act, 2017, every claim for refund filed after the appointed date, i.e. 01.07.2017, shall be disposed of by the provisions of existing law.

Further stated that any amount eventually accruing to the Applicant shall be paid in cash and that Commissioner (Appeals) has erred in applying the aforesaid Section 142 (3) since the disputed amount involved herein relates to the re-credit and not to refund in cash and, as such, the same must lapse.

The Commissioner (Appeals) held that since the application for the rebate was filed after the appointed date, i.e., 01.07.2017, the amount which earlier would have been allowed to be refunded by way of re-credit, should now be refunded in cash as per the provisions of said Section 142(3).

As per Section 142(3) of the GST Act, every claim for the refund filed by any person before, on or after the appointed day i.e. 01.07.2017 for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, should be disposed of by the provisions of existing law and any amount eventually accruing to such person should be paid in cash.

While upholding the impugned order, the two-judge bench comprising Dr Justice B R Sarangi and Justice M S Raman held that “respondent No.2 ought to have directed the sanctioning Authority to refund the amount of the duty refundable to the petitioner in cash instead of credit in CENVAT Account.”

To Read the full text of the Order CLICK HERE

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