₹28.3 Lakh Refund payable to Bank of Baroda as Untransitioned CENVAT Credit to GST TRAN-1: CESTAT [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has directed the Central Goods and Services Tax ( CGST ) Department to refund ₹28.3 lakh to Bank of Baroda. The refund pertains to the non-transitioned CENVAT credit of Krishi Kalyan Cess ( KKC ) that the bank could not transfer to the Goods and Services Tax ( GST ) regime via the TRAN-1 form.

The Appellant bank provides banking and financial services.  It had CENVAT Credit of KKC introduced w.e.f. 01.07.2016 that could only be adjusted against payment of KKC as per Rule, 3(7)(d) of the CENVAT Credit Rules, 2004.  It had accumulated credit of ₹28,30,992/- as on the last date of Service Tax remaining in-force i.e. on 30.06.2017. 

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With substitution of the same by GST w.e.f. 01.07.2017, this KKS could not be transited on 30.06.2017 to Electronic Credit Ledger as FAQ was issued by the Respondent Department guiding assessee not to transfer the same.  Subsequently, Appellant sought for its refund in 2018 under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 for refund of ₹28,30,992/- by submitting letter to the Refund Sanctioning Authority on 05.04.2018. 

A Show-cause notice dated 22.10.2018 was issued to the Appellant proposing denial the refund and upon adjudication the said refund claim was rejected vide Order-in-Original dated 28.11.2018 that was unsuccessfully appealed before the Commissioner (Appeals) by the present Appellant.  Legality of the said order passed by the Commissioner ( Appeals ) is questioned in the present appeal.

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In short, the dispute arose when the bank, which had accumulated CENVAT credit of ₹28,30,992 in KKC by June 30, 2017, was unable to transition the credit into the new GST regime starting July 1, 2017. Upon applying for a refund in 2018 under the provisions of the Central Excise Act, the claim was denied by the CGST authorities, leading to an appeal.

The tribunal noted that CENVAT credit, which could not be transitioned under GST, must be refunded according to existing laws, even though the KKC itself was discontinued post-GST implementation. The order, issued by Dr. Suvendu Kumar Pati, Member ( Judicial ) of CESTAT, instructs the CGST department to process the refund within two months, along with applicable interest.

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In its ruling, CESTAT bench of Dr. Suvendu Kumar Pati,  Member ( Judicial ) set aside the earlier decision of the Commissioner ( Appeals ) to reject the refund, stating that the unutilized credit of KKC must be refunded.

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