Case Law Details
Hindustan Zinc Ltd Vs Commissioner, Central Excise & CGST(CESTAT Delhi)
The issue involved is whether the appellant-manufacturer of Lead and Zinc Concentrates which are dutiable whether they are entitled to refund of unutilized Cenvat credit of i) education cess ii) Secondary and Higher Education Cess, lying unutilized (credit balance) as on 30th June 2017.
I find that the Division Bench of this Tribunal in the case of Bharat Heavy Electricals Ltd (supra) under similar facts and circumstances have held as follows:
“4. We have carefully gone through the rival arguments. There is no dispute that on 01/07/2017, the cesses Appellants could not carry over the same under the GST regime. Thus the appellants were in a position where they could not utilize the same. We agree with learned Counsel of the appellant that the credits earned were a vested right in terms of the Hon’ble Apex Court judgement in Eicher Motors case and will not extinguish with the change of law unless there was a specific provision which would debar such refund. It is also not rebutted by the revenue that the appellants had earned these credits and could not utilize the same due to substantial physical or deemed exports where no Central Excise duty was payable and under the existing provisions, had the appellants chosen to do so they could have availed refunds\rebates under the existing provisions, had the appellants chosen to do so they could have availed refunds/rebates under the existing provisions. There is no provision in the newly enacted law that such credits would lapse. Thus merely by change of legislation suddenly the appellants could not be in a position to lose this valuable right. Thus we find that the ratio of Apex courts judgment is applicable as decided in cases where the assessee could not utilize the credit due to closure of factory or shifting of factory to a non dutiable area where it became impossibly to use these credits. Accordingly the ratio or such cases would be squarely applicable to the appellant’s case. Following the Judgment of Hon’ble Karnataka High Court in the case of 2006 (201) E.L.T. 559 (Kar) in the case of Slovak India Trading Co. Pvt Ltd. and similar other judgements/decisions cited supra, we hold that the assesee is eligible for the cash refund of the cessess lying as cenvat credit balance as on 30/06/2017 in their accounts. The decision of the larger bench in the case of Steel Strips cited by the learned Department Representative could not b applicable in view of the contradictory decisions of High Courts on the same issue”.
Following the Ruling of Division Bench of this Tribunal in Bharat Heavy Electricals Ltd. wherein under similar facts and circumstances, the appeal was allowed in favour of assessee, accordingly, I allow these Appeals and set aside the impugned orders. The Appellant shall be entitled to consequential benefits in accordance with law.
FULL TEXT OF THE CESTAT DELHI ORDER
The issue involved is whether the appellant-manufacturer of Lead and Zinc Concentrates which are dutiable whether they are entitled to refund of unutilized Cenvat credit of i) education cess ii) Secondary and Higher Education Cess, lying unutilized (credit balance) as on 30th June 2017.
2. The Appellant is engaged inter alia in the manufacture of Lead and Zinc Concentrates falling under Chapter 26 of the First Schedule to the Central Excise Tariff Act, 1985, and also availing Cenvat credit on various inputs, capital goods and input service in terms of the provisions of the Cenvat Credit Rules, 2004 (Credit Rules).
3. The Appellant was regularly filing Central Excise ER-1 returns, and as on 30.06.2017, the Appellant was having balance of eligible Cenvat credit of Rs. 13,18,02,879/- (in respect of Central Excise Registration No. AAACH7354KEM070) and Rs. 3,65,83,241/- (in respect of Central Excise Registration No. AAACH7354KXM003) in its ER-1 returns for June 2017.
4. Out of the aforesaid amounts, Appellant had transitioned the amount of Rs. 13,05,81,973/- and Rs. 3,49,84,516/- respectively, to GST regime by filing Form GST-TRAN-1 (TRAN-1) in terms of Section 140(1) of the Central Goods and Services Tax Act, 2017(CGST Act), representing the Cenvat credit of Central Excise duty and Service tax paid on inputs, input services and capital goods. As regards the balance amount of Rs. 12,20,906/- and Rs. 15,85,225/-respectively, representing the Cenvat credit of Education Cess and Secondary and Higher Education Cess (collectively, Cess amounts), Appellant had not transitioned the same in GST in view of Guidance Note dated 14.03.2018 issued by Board and amendment made to Section 140 vide Central Goods and Services Tax (Amendment) Act, 2018 (CGST Amendment Act) retrospectively w.e.f. 01.07.2017.
5. Accordingly, Appellant had filed two refund applications on 29.06.2020 for refund of unutilised Cenvat credit of Cess amounts lying in balance as on 30.06.2017 amounting to Rs. 12,20,906/- and Rs. 15,85,225/- in terms of Section 142(3) of the CGST Act, read with Section 174(2)(c) ibid.
6. In the above background, two Show Cause Notices, both dated 14.07.2020 (“SCNs”) were issued to the Appellant, proposing to reject the refund applications on the following grounds:
6.1 The definition of “eligible duties and taxes” under Section 140 of the CGST Act, was amended retrospectively w.e.f. 01.07.2017, to exclude Cess amounts. Thus, credit of such amount is not available for utilization toward GST. As per the transitional provisions under CGST Act, credit balance not transitioned in GST regime shall lapse. 6.2 Section 11B of the Central Excise Ac t, 1944 (Excise Act) provides for refund of duty and interest, whereas, credit of Cess amounts is to be availed and utilised only for payment of the Cess. Thus, there is no provision either in the Credit Rules or in Section 11B, which provides for refund of Cess amounts.
6.3 Inasmuch as the last date for filing TRAN-1 is 27.12.2017, and the refund claim under Section 11B(1) is to be filed before the expiry of one year from the relevant date, refund claims filed by the Appellant are time barred.
7. Appellant submitted detailed reply to the SCNs, both vide letters dated 27.07.2020, rebutting every allegation contained in the SCN.
8. However, without appreciating the submissions made by the Appellant, the Ld. Assistant Commissioner, Kankroli vide separate Orders-in-Original both dated 31.07.2020 (“OIO”) upheld the allegations contained in the SCN entirely and rejected Appellant’s refund claims and recorded the following findings:
- The definition of “eligible duties and taxes” under Section 140 of the CGST Act, was amended retrospectively w.e.f. 01.07.2017, to exclude Cess amounts. Further, credit of Cess amounts is to be availed and utilised only for payment of the Cess. Since Cess amounts are not levied under GST, the same are not meant to be transitioned in GST. Thus, credit of such amounts is not available for utilization towards GST. Accordingly, Appellant did not transition the credit of Cess amounts in GST via TRAN-1. Moreover, as per the transitional provisions under CGST Act, credit balance not transitioned in GST regime shall lapse. The Appellant cannot circumvent the said provisions by filing refund under Section 142(3) of the CGST Act.
- There is no provision either in the Credit Rules or in Section 11B, which provides for refund of Cess amounts. The refund of Cenvat credit arises only in respect of goods exported as per rule 5 of the Credit Rules. Thus, Section 142(3) is not meant to cover refund of Cenvat credit, which is not eligible for transition in GST via TRAN-1.
- Section 142(3) is meant to cover those scenario where an assessee pays duty through Cenvat credit account, and subsequently, appellate authority decide the case in assesee’s favour. Thus, such credit cannot be transitioned in GST since Central Excise duty and Service tax are no longer used in GST.
- The judgments and decisions relied upon by the Appellant, are not applicable in the present case.
- Since the Appellant has filed refund application under Section 11B of the Excise Act, the limitation of one year is applicable.
- Reliance is placed on the decision of Hon’ble Tribunal in the case of Mylan Laboratories Ltd. v. Commissioner of Central Tax & Customs, 2020 (3) TMI 837-CESTAT Hyderabad.
9. On appeal to Commissioner (Appeals) by the Appellant, the Ld. Commissioner (Appeals) Jodhpur vide common Order-in-Appeal dated 24.11.2020, rejected the Appellant’s appeals and upheld the OIOs.
10. Being aggrieved with the impugned order, the Appellant has filed the present appeals on the following grounds which are independent of and without prejudice to each other.
11. The learned Counsel urges that-
A. Appellant is entitled to claim refund of Cess amount in terms of section 142(3) of the CGST Act.
11.1 As mentioned above, Appellant has transitioned the credit of duty and tax in GST vide TRAN-1 under Section 140 of the CGST Act. Inasmuch as the credit of Cess amounts cannot be transitioned in GST, Appellant has filed refund of such amounts in terms of Section 142(3) ibid. Text of Section 142(3) is reproduced below:
“142. Miscellaneous transitional provisions.
(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provision of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944: (1 of 1944.)
Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:
Provided further that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.”
(emp.supp).
11.2 A bare perusal of above provision indicates that every refund claim of inter alia Cenvat credit or any other amount paid under the existing law, shall be disposed of in accordance with the provision of existing law and any amount eventually accruing shall be paid in cash. The said provision is notwithstanding anything to the contrary contained under the provisions of existing law, other than Section 11B(2). The provision further states that the refund amount which is fully or partially rejected, shall lapse. And, where the Cenvat credit amount has been transitioned in GST, refund of such amount shall not be allowed.
11.3 The term “existing law” is defined under Section 2(48) of the CGST Act, to mean “any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both, passed or made before the commencement of this Act by Parliament or any Authority or person having the power to make such law, notification, order, rule or regulation”. Thus, in respect of the Appellant’s refund claim in the present case, existing law means the Excise Act and the rules made and the notifications issued, thereunder.
11.4 In the present case, it is submitted that the Appellant has filed the refund of unutilised Cenvat credit of Cess amounts under Section 142(3), as such amounts have not been transitioned in GST. There is no dispute in this regard, in the present case. In fact, the Ld. Assistant Commissioner in Para 14 of the OIOs, has categorically stated that the Appellant has not transitioned the Cess amounts, claimed as refund, to GST. It is further submitted that Section 142(3) clearly provides for refund of Cenvat credit or any other amount paid under the existing law, claim of which shall be disposed off in accordance with the provisions of existing law. The Cess amounts have been paid by the Appellant and availed Cenvat credit thereof, in accordance with the provisions of the Excise Act and the Cenvat Credit Rules. Cenvat credit of such amounts, was legally earned by the Appellant and the same stood as a vested right of the Appellant as on 30.06.2017. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of Eicher Motors Ltd. v. Union of India, 1999 (106) E.L.T. 3 (S.C.). Thus, it is submitted that the Appellant has fulfilled all the conditions of Section 142 (3) and it has correctly filed the refund claim in the present case.
11.5 In support of above submissions, reliance is placed on the following rulings where it was held that assessee is entitled for refund of unutilised credit of Cess amounts lying in balance as on 30.06.2017:
> Bharat Heavy Electricals Ltd. v. Commissioner, CGST, Central Excise & Customs, Bhopal, 2019 (4) TMI 1896-CESTAT New Delhi
> Kirloskar Toyota Textile Machinery Pvt. Ltd. v. Commissioner of Central Tax, Bengaluru, 2021 (8) TMI 818- CESTAT Bangalore
> Atul Ltd. v. CCE & ST, Vodadara-II, 2021 (11) TMI 423 – CESTAT Ahmedabad
11.6 Although the aforesaid decision of this Tribunal in Bharat Heavy (supra) has been stayed by the Hon’ble MP High Court vide Order dated 18.03.2021 passed in the matter of Department’s Central Excise Appeal No. 11/2020. It is held in various judgments that stay by a higher forum dos not undermine the precedential value of a judgment. It is submitted that the effect of the order of stay in a pending appeal bfore the High Court, does not amount to “any declaration of law” but is only binding upon the parties to the said proceedings and at the same time, such interim order does not destroy the binding effect of the decision of this Tribunal, as a precedent, because while granting the interim order, the High Court had no occasion to lay down any proposition of law inconsistent with the one declared by the Tribunal. Therefore, the decision of this Tribunal in the case of Bharat Heavy (supra) is still a valid law and has precedential value. Reliance in this regard is placed upon the following judgments:
> Shree Chamundi Mopeds Ltd. v. Church of South Trust Asociation CSI Cinod Secretariat, Madras, AIR 1992 SC 1439
> Niranjan Chatterjee & Ors v. State of West Bengal & Ors., 2007 SCC Online Cal 283
> Abdul Rahiman v. The District Collector, Malappuram & Another, 2009 SCC Online Ker 4358
12. Accordingly, the learned Counsel prays for allowing the Appeal with consequential relief. It is also urged that the refund application are not time barred as there is no application of Section 11(B) of the Central Excise Act, as these refunds arise due to transitional provisions under the CGST Act r/w the Rules thereunder.
13. The learned Authorised Representative for Revenue relies on the impugned order. He further relies on the Ruling of Hon’ble Madras High Court in the case of Southernland Global Services Pvt Ltd. 2020-TIOL-1739-HC-MAD.
14. Having considered rival contentions, I find that the Division Bench of this Tribunal in the case of Bharat Heavy Electricals Ltd (supra) under similar facts and circumstances have held as follows:
“4. We have carefully gone through the rival arguments. There is no dispute that on 01/07/2017, the cesses Appellants could not carry over the same under the GST regime. Thus the appellants were in a position where they could not utilize the same. We agree with learned Counsel of the appellant that the credits earned were a vested right in terms of the Hon’ble Apex Court judgement in Eicher Motors case and will not extinguish with the change of law unless there was a specific provision which would debar such refund. It is also not rebutted by the revenue that the appellants had earned these credits and could not utilize the same due to substantial physical or deemed exports where no Central Excise duty was payable and under the existing provisions, had the appellants chosen to do so they could have availed refunds\rebates under the existing provisions, had the appellants chosen to do so they could have availed refunds/rebates under the existing provisions. There is no provision in the newly enacted law that such credits would lapse. Thus merely by change of legislation suddenly the appellants could not be in a position to lose this valuable right. Thus we find that the ratio of Apex courts judgment is applicable as decided in cases where the assessee could not utilize the credit due to closure of factory or shifting of factory to a non dutiable area where it became impossibly to use these credits. Accordingly the ratio or such cases would be squarely applicable to the appellant’s case. Following the Judgment of Hon’ble Karnataka High Court in the case of 2006 (201) E.L.T. 559 (Kar) in the case of Slovak India Trading Co. Pvt Ltd. and similar other judgements/decisions cited supra, we hold that the assesee is eligible for the cash refund of the cessess lying as cenvat credit balance as on 30/06/2017 in their accounts. The decision of the larger bench in the case of Steel Strips cited by the learned Department Representative could not b applicable in view of the contradictory decisions of High Courts on the same issue”.
15. Following the Ruling of Division Bench of this Tribunal in Bharat Heavy Electricals Ltd. wherein under similar facts and circumstances, the appeal was allowed in favour of assessee, accordingly, I allow these Appeals and set aside the impugned orders. The Appellant shall be entitled to consequential benefits in accordance with law.
16. The Adjudicating authority is directed to disburse the refund with applicable interest, as per Rules, within a period of 60 days from the date of service/receipt of this order.
(Order pronounced in the open court on 02/02/2022)
