The Chandigarh Bench of Customs, Excise, and Service Appellate Tribunal ( CESTAT ) has observed that SBI Cards And Payment Service Ltd is not entitled to refund of Krishi Kalyan Cess ( KKC ).
SBI the appellants/assessee are a subsidiary of the State Bank of India and are engaged in providing various financial services. The appellants were registered under the erstwhile service tax regime and subsequently obtained GST registration under the goods and services tax regime.
The appellants had filed the service tax return in Form ST-3 for the period April 2017 to June 2017, on 11.08.2017. The closing balance in the above-mentioned ST-3 return was carried forward under GST through Form GST TRAN-1 and was claimed as ‘transitional credit’ in terms of Section 140 of the CGST Act.
The appellants realized that the CENVAT credit in respect of certain service invoices was not claimed in the original ST-3 return filed on 11.08.2017 and hence filed a revised ST-3 return for the period April 2017 to June 2017 on 23.09.2017. The revision led to the enhancement of Cenvat credit of service tax as well as KKC credit.
The assessee applied for refund of service tax and KKC under transitional credit as per Section 142(9)(b) of the Central Goods and Services Tax Act, 2017. The adjudicating authority rejected the refund application based on non-submission of requisite documents without considering the submissions made by the assessee-appellant. Commissioner (Appeals), remanded back matter to adjudicating authority for considering the submission made by the assessee-appellant and scrutiny of refund.
The department issued a Show Cause Notice demanding an explanation of the eligibility of the refund of the Cenvat Credit vis-à-vis carryforward in GST Tran-1 as per applicable GST provisions. Adjudicating authority by the OIO issued the refund Cenvat credit of service tax; however, refund of the KKC was denied.
The assessee contended that the impugned order denying the refund of unutilized credit of KKC in cash under Section 142(9)(b) of the CGST Act, 2017 is not sustainable in law. The accumulated Cenvat credit of service tax is a legitimately accumulated balance since the cess was paid on inputs and input services used in the provision of output service.
The assessee argued that Section 142(9)(b) squarely covers the refund application of the assessee-appellants in which refund is sought by the assessee-appellants for such amount of Cenvat credit that has been accrued additionally as a result of the revision of the service tax return (ST-3). As per Rule 3 of the Cenvat Credit Rules, 2004 KKC finds mention in Rule 3(1a) of the Credit Rules, and therefore, it was entitled to carry forward the Cenvat credit, which included KKC.
The department contended that the refund has to be processed as per the existing law, and the existing law in this case was Chapter V of the Finance Act. As per the Larger Bench, refund of only that element of Cenvat is admissible to be refunded in cash as per the provisions of Section 142 of the CGST Act, 2017 and which was permissible to be refunded under the existing law. There is no provision in the existing law to refund the Krishi Kalyan Cess in cash.
The two member bench of S. S. Garg (Judicial Member) held that the assessee is eligible for a cash refund of cesses lying as Cenvat credit balance as of 30.06.2017 in their accounts.
While dismissing the appeals of the assessee, the Tribunal held that the appellants are not entitled to the refund of the KKC.
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