The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the refund of Cenvat credit on Education Cess, Secondary and Higher Education Cess, and Krishi Kalyan Cess is not permissible under the GST regime.
Schlumberger Asia Services Ltd., the appellant, had filed a refund claim amounting to Rs. 49,28,511 on August 30, 2019, for unutilized Cenvat credit of the said cesses lying in their credit ledger as of June 30, 2017. Following the introduction of the GST regime on July 1, 2017, the appellant sought to transfer the unutilized balance into the GST system and later claimed a refund for the amounts that remained unadjusted.
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The refund claim was rejected by the Deputy Commissioner of CGST, Gurugram, through an order-in-original dated February 4, 2020. On appeal, the Commissioner (Appeals), CGST, Gurugram, upheld the rejection order. Aggrieved by the decision, the appellant approached the CESTAT.
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The appellant’s counsel argued that they were lawfully entitled to the refund since the credit of these cesses was legitimately earned and had remained unutilized due to the structural change in the tax regime. They also argued that disallowing the refund amounted to unjust enrichment of the government.
The appellant relied on several decisions, including Bharat Heavy Electricals Ltd. v. Commissioner, Emami Cement Ltd. v. Commissioner, Kirloskar Toyota Textile Machinery Pvt. Ltd. v. Commissioner, and the landmark Eicher Motors Ltd. v. Union of India case, to support the principle that accumulated credit should be refunded if not otherwise utilizable.
The revenue opposed the appeal and submitted that the issue had already been settled by the Division Bench of the Kerala High Court in Muthoot Finance Ltd. v. Union of India. They argued that there is no statutory basis under the CGST Act to refund Education Cess, SHE Cess, or Krishi Kalyan Cess after the transition to GST.
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The single-member bench of S.S. Garg (Judicial Member) quoted the High Court’s ruling in Muthoot Finance Ltd. v. Union of India, which held that refund of such cesses post-GST is not maintainable, as there was no enabling provision under the GST framework. The tribunal also observed that the refund claim could not be revived or entertained merely because the assessee was unable to utilize the credit, especially when the levy itself had been abolished and not carried forward under the new tax law.
The tribunal held that the decisions cited by the appellant were either not applicable to the post-GST context or had been overtaken by the Kerala High Court’s authoritative pronouncement. Finding no infirmity in the orders passed by the lower authorities, the tribunal dismissed the appeal.
The tribunal ruled that once the GST regime came into effect and specific transition provisions excluded such cesses from carry-forward or refund eligibility, no refund claim for the same could be entertained. The appellant’s appeal was dismissed.
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