Relief to Toyota: CESTAT Sets aside Order Rejecting Refund of excess CENVAT credit being Contrary to S. 142(3) of CGST Act [Read Order]

In a ruling in favour of Toyota Kirloskar Motor Private Limited, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside the order rejecting the refund of excess cenvat credit being contrary to section 142 (3) of the Central Goods and Service Tax (CGST), Act, 2017. M/s Toyota Kirloskar Motor Private Limited, the appellants herein, inter alia, are engaged in the manufacturing of motor vehicle parts and were registered under Central Excise authorities, they also have a spare parts depot in Pune. The appellants avail CENVAT credit of duty/tax on inputs and input services used in manufacture of final products. Are You Paying More Tax Than You Should? Master Capital Gains Law Now! The appellant had filed a refund application in the prescribed Form-R dated 11.03.2019 for refund of Rs.1,51,307/- being the closing balance of Education Cess and Secondary & Higher education Cess lying in their account as on 30.06.2017, which was not carried forward as transition credit under GST regime, on the various grounds mentioned in their refund application. The appellants in support of their claim for refund under Section 11B of the Central Excise Act, 1944 had furnished requisite documents along with such refund application submitted to the department. Read More: Bank Guarantee Charges for Raw Material Procurement Covered Under Input Service u/r 2(l): CESTAT allows Bajaj’s CENVAT Claim The appellants had filed original ER-1, a monthly return for production and removal of goods and other relevant particulars including CENVAT credit, for the month of June 2017 on 07.07.2017, indicating total admissible CENVAT credit of Central Excise duty for an amount of Rs.7,31,376/- and total Cess amount of Rs. 1,51,307/-, before the jurisdictional Deputy Commissioner of Central Tax, LTU, Bangalore with whom the appellants were centrally registered. As the said authority had returned the refund application filed by them vide his office letter dated 05.12.2018, stating that the refund claim has to be preferred with the concerned division office of the department, the appellants have subsequently, had filed such refund application before the Deputy Commissioner of Central Tax. Range-I, Talegaon Division-I of Pune-I Commissionerate. Are You Paying More Tax Than You Should? Master Capital Gains Law Now! Upon receipt such refund application, the jurisdictional Assistance Commissioner of Central Tax, Talegaon Division-I had issued Show Cause Notice dated 16.04.2019 seeking the appellants to show cause why the refund shall not be rejected on the grounds mentioned in the said SCN. The appellants had submitted that they had closing balance of education Cess and Secondary Higher Education (SHE) Cess as on 30th June, 2017, amounting toRs.1,51,307/- and the same was not carried forward in from TRAN-1 to GST under transitional provisions. Since the closing balance of Education Cess and SHE Cess could notbe utilized and also not permitted to be transitioned to GST, the appellants had requested for refund of the same. He stated that the appellants submitted an application to the Deputy Commissioner vide their letter dated 27.07.2018, as they were registered under the Bangalore, LTU in the pre-GST period. Read More: No Exemption to Interest on Refund Under DTVSV Scheme: Gujarat HC The concerned authority rejected the said claim on the ground that it was not filed in the prescribed From R. Accordingly, the appellants submitted the claim in the prescribed format vide letter dated 30.10.2018 to the Deputy Commissioner, Bangalore. The Deputy Commissioner vide letter dated 5.12.2018 returned the claim stating that refund has to be filed with the concerned jurisdictional authorities. Thereafter, the appellants submitted the refund application in Form ‘R’ to the Deputy Commissioner, Pune vide reference No. TKM/GST/DIV6/ 050/18-19 dated 11.3.2019, comprising the closing balance of Education Cess of Rs.1,00,770/- & SHE Cess of Rs.50,537/- totaling to Rs. 1,51,307/-.Assistant Commissioner of Central Tax, Pune, had issued a Show Cause Notice No. PI/Ref-SCN/01/Toyota/ 2019-20 dated 16.4.2019, proposing to reject the refund claim of Rs. 1,51,307/-, based on the allegation that the refund of closing balance of Education Cess & SHE Cess lying in CENVAT credit account is not covered in any of the categories of duty of excise as provided under sub-section (2) of Section 11B of CEA, 1944; Rule 5 of CCR, 2004 shows that refund of unutilized CENVAT credit in relation to duty paid on input or input services has been provided only in cases of export of the final products; except for such a contingency, it appears that there is no provision for grant of refund or encashment of CENVAT credit, in the entire framework of the CCR, 2004. Are You Paying More Tax Than You Should? Master Capital Gains Law Now! It was stated that it is not in dispute that Education Cess & Secondary Higher Education Cess was leviable on taxable services, and the appellant had availed credit under the provisions of the CENVAT Credit Rules. With advent of GST, closing balance as on 30.06.2017, the appellants had an unutilized credit of Education Cess & Secondary Higher Education Cess of Rs. 1,51,307/-, as evidenced from ER-1 return for the of June 2017. Read More: Assessment Converted from limited to Unlimited Scrutiny without Approval: ITAT Remands Case He further submitted that the refund cannot be denied on the allegation that there was no provision under Rule 5 of CCR, 2004 or CEA, 1944 for refund of unutilized CENVAT credit except Notification No. 27/2012-C.E. (N.T.) dated 18.06.2012. He further stated that it is pertinent to note that there is no provision in the newly enacted law i.e. GST that such credits would lapse. Thus, he claimed that merely by change of legislation suddenly the appellants could not be put in a position to lose this valuable right. The short issue for determination before the Tribunal is whether refund of CENVAT credit arising out of balance of Education Cess and Secondary & Higher Education Cess as per the ER-1 for the month of June 2017, is refundable under Section 142(3) of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944? Are You Paying More Tax Than You Should? Master Capital Gains Law Now! The bench found that the appellants had duly followed the procedure and conditions prescribed in complying with the obligations under Cenvat Credit Rules, 2004, in taking credit of input and had also complied with for payment of duty/CENVAT credit in their periodical returns, the relevant one, which was filed for the month of June, 2017 with the department. The 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. hat the provisions of Section 142of 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 142of the CGST Act, 2017, in dealing with refund of ‘CENVAT credit’. Further, upon introduction of GST regime, the transitional arrangements have been provided under Section 142 of CGST Act, to enable the CENVAT credit, if refundable, to be paid in cash to the eligible persons, as there was no way that such excess CENVAT credit could be used by the assessee in payment of tax on output service or duty on final products. Are You Paying More Tax Than You Should? Master Capital Gains Law Now! The tribunal found that the said CENVAT Credit balance was not carried forward to the Appellant’s account on the appointed date since it was not due on the said day also. Therefore, in view of clear provision contain under Section 142(6)(a) of the CGST Act, Claimant/Appellant is eligible to get the refund of credit by E/87606/2019 cash except where unjust enrichment is alleged or established against the Appellant. It was viewed that there is no merit in the impugned order passed by the 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) of the CGST Act, 2017 and set aside the same. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Relief to Toyota: CESTAT Sets aside Order Rejecting Refund of excess CENVAT credit being Contrary to S. 142(3) of CGST Act [Read Order]

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Relief to Toyota: CESTAT Sets aside Order Rejecting Refund of excess CENVAT credit being Contrary to S. 142(3) of CGST Act [Read Order]

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