Case Law Details
Nu Vista Limited Vs Commissioner (Appeals) CGST, Central Excise (CESTAT Delhi)
It is not in dispute that prior to 01.03.2015 cess was leviable on manufactured goods, in addition to excise duty and the appellant had availed credit under the provisions of the Credit Rules on cess paid on procurement of goods and services. It is also not in dispute that by a notification dated 01.03.2015, levy of cess was exempted. The closing balance of credit of cess as on 28.02.2015, therefore, could not be utilized by the appellant and it was carried forward by him in the central excise returns.
The Assistant Commissioner, by order dated 12.11.2018, rejected the refund claim.
The submission of learned counsel for the appellant is that refund of credit of cess cannot be denied merely on the ground that such credit which could not be utilised prior to GST regime would stand lapsed.
In Kirloskar Toyota, the Tribunal while examining whether refund claim of accumulated balance of unutilised credit of cess available in the books, can be refunded under section 11B of the Central Excise Act 194421 and held, in view of the aforesaid Division Bench decision of the Tribunal in Bharat Heavy Electricals, as also the decisions of the Supreme Court and the Karnataka High Court in Slovak India Trading that an assessee is entitled to refund of unutilised credit of cess after the introduction of GST.
In Shree Krishna Paper Mills, the Punjab and Haryana High Court examined whether refund could be ordered of unutilised credit on closure of the unit and held, in view of the earlier decision of the Punjab and Haryana High Court in Rama Industries Ltd. CCE, Chandigarh 22 and the decision of the Karnataka High Court in Slovak India, that refund should be granted.
The decision of the Karnataka High Court in Slovak India was affirmed by the Supreme Court. It would, therefore, be appropriate to follow the view taken by the Karnataka High Court and the Punjab and Haryana High Court.
Learned authorised representative also place reliance upon the notification dated 07.12.2015 issued by CBEC to contend that a policy decision had been taken not to allow utilisation of accumulated credit of cess, after cess had been phased out and it is reproduced below:
“Discussion & Decision
The conference after discussion and briefing from the officers from the Board noted that it was Government conscious policy „decision to withdraw the Education Cess and Secondary and Higher Education Cess. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past. The rule and notifications as they exist need to be followed and do not need any amendment.
The aforesaid policy contained in the notification dated 07.12.2015 is clearly contrary to the decisions of the High Courts and the Tribunal referred to above and, therefore, cannot be come to the aid of the Revenue.
It needs to be noted that CENVAT credit avail is a vested right as has held by the Supreme Court in Eicher Motors and Samtel India.
The appellant is, therefore, clearly entitled to the refund of the balance amount of credit of cess and the decision to the contrary taken by the Commissioner (Appeals) cannot be sustained. The order dated 12.06.2019 passed by the Commissioner (Appeals) is, therefore, set aside and the appeal is allowed with consequential reliefs, if any.
FULL TEXT OF THE CESTAT DELHI ORDER
Nu Vista Limited 1 (formerly Emami Cement Limited) has filed this appeal to assail the order dated 12.06.2019 passed by the Commissioner (Appeals)2 by which the appeal, that was filed to assail the order dated 12.11.2018 passed by the Assistant Commissioner rejecting the claim of Rs. 53,47,491/-submitted by the appellant for refund of the accumulated balance of credit on education cess and secondary and higher education cess3, has been dismissed.
2. The appellant is engaged in the business of manufacture of clinker and cement. Prior to 01.03.2015, cess was leviable on goods manufactured by the appellant, in addition to excise duty, and the appellant availed CENVAT credit under the provisions of the CENVAT Credit Rules 2004 4 on cess paid on procurement of goods and services. However, the notification dated 01.03.2015 exempted levy of the cess on all goods falling in the First Schedule to the Central Excise Tariff Act, 19855. Thus, w.e.f. 01.03.2015 only central excise duty was leviable and levy of cess was exempted. The closing balance of the cess as on 28.02.2015 could not consequently be utilised by the appellant post 01.03.2015 and it was carried forward in the central excise returns. This was for the reason that credit of cess could be utilised for payment of the cess under the Credit Rules and could not have been utilised for payment of excise duty. On introduction of the Central Goods and Service Tax, 2017 Act6e.f. 01.07.2017, the closing balance of the credit on cess appearing in the excise returns filed by the appellant in the month of June 2017 was not carried forward and instead the appellant filed a claim for refund of such balance of Rs. 53,47,491/- of credit on cess on 29.05.2018.
3. A show cause notice dated 16.07.2018 was, however, issued to the appellant stating therein that the claim appeared to be inadmissible for the following reasons:
(i) The refund claim is incomplete under the provisions of section 11B of Central Excise Act, 1944 as not filed under proper format as prescribed.
(ii) The refund claim is incomplete under the provisions of section 11B of Central Excise Act, 1944 as not accompanied by such documentary evidence to establish that amount of refund claimed was actually paid by them and not provided information in regard to period involved.
(iii) The refund claim appears time barred under section 11B of the Central Excise Act, 1944 as it is filed for accumulated credit of Education Cess & Secondary & Higher Education Cess has been withdrawn w.e.f. 01.03.2015 vide Notification No. 14/2015-CE and 15/2015-CE both dated 01.03.2015.
(iv) The refund claim appears inadmissible as these Cesses have been phased out vide above Notifications and no new liability to pay such Cesses arises, no vested right can be said to exist in relation to the accumulated credit of the past.
(v) The claim for amount of CENVAT credit carried forward in the return relating to the period ending with day immediately preceding the appointed day are governed by Transitional Provisions under section 139 to 142 of Central Goods & Service Tax Act, 2017.
4. The appellant filed a reply dated 17.08.2018 to the aforesaid show cause notice. The relevant portion of the reply is reproduced below:
“(i) We enclosed the FORM–R for refund claim for kind reference.
(ii) This refund claim for accumulated ED Cess and SHE Cess balances in ER-1 up to June, 2017 which was not set – off against payment of Excise duty payment (copy of ER-1 already submitted).
(iii) Refund claim of accumulated balances of ED Cess and SHE Cess are lying in ER-1 which was not set-off against excise duty payment, and refer in SCN Notification No. 14/2015-CE and 15/2015-CE both dated 01.03.2015.are hereby exempted w.e.f. 01.03.2015 (Copy enclosed mark Annexure “A”) and imposed new levies KK cess and SB Cess.
(iv) Notification No. 14/2015-CE and 15/2015-CE both dated 01.03.2015. exempted for ED Cess and SHE Cess levies and not denying to set off against the payment of Excise duty payment of accumulated balances of ED Cess and SHE Cess.
(v) We have not availed closing balances of ED Cess and SHE Cess of ER_1 in TRAN1, hence filed for refund claim.”
5. The Assistant Commissioner, by order dated 12.11.2018, rejected the refund claim and the relevant portion of the order is reproduced below:
“8. I have carefully gone through the refund application and the documents on record and defence submission of the claimant and find that:
(i) The refund claim originally is not submitted in proper format and also found incomplete under the provisions of Section of Section 11B of the Central Excise Act, 1944 as not accompanied by such documentary evidence to establish that amount of refund claimed was actually paid by them and not provided information in regard to period involved.
(ii) The Education Cess Secondary Higher Education Cess has been withdrawn w.e.f. 01.03.2015 vide Notification No. 14/2015-CE and 15/2015-CE both dated 01.03.2015.
(iii) As these Cesses have been phased out vide above Notifications and no new liability to pay such Cesses arises, no vested right exists of claimant in relation to the accumulated credit of the part.
(iv) Further in the minutes of Tariff Conference held on 28th and 29th October’15 issued under F. No. 96/85/2015-CX.I dtd. 07.12.2015 by CBEC, New Delhi at point B21 clarified as under:-
“It was Governments’s conscious policy decision to withdraw the Education Cess and Secondary & Higher Education Cess. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liablility to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past”.
(v) In view of above clarification, I am of the opinion that as the claimant has not vested right on the accumulated cenvat credit of Education Cess and therefore they are not eligible for refund of the same.
(vi) I also find that the refund claim is time barred under Section 11B of the Central Excise Act, 1944 as the Education Cess and Secondary Higher Education Cess has been withdrawn w.e.f. 01.03.2015.”
6. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals). The said appeal was rejected by the Commissioner (Appeals) by order dated 12.06.2019 placing reliance upon the judgement of the Rajasthan High Court in Banswara Syntex Ltd. Commr. C. EX. & Service Tax, Udaipur7. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below:
“9. The appellant has contended that the credits of Edu. Cess and Secondary & Higher Edu. Cess were rightly & legitimately availed by the appellant before 01.03.2015 when the levy of impugned Cesses was in force, in accordance with the Cenvat Credit Rules, 2004 (in short CCR, 2004) and once the eligibility of such credit was not in dispute, such credit cannot be denied. The appellant has further contended that the vested right of Cenvat credit availed prior to the date of exemption (i.e. 01.03.2015) cannot be taken away unless and until it was expressly provided in any provision of law, rules or notification. Since no such provision has been introduced expressly denying the credit availed in respect of Education Cess and Secondary & Higher Edu. Cess, the same cannot be denied. The appellant has also contended that with introduction of GST law (i.e. 01.07.2017) cess credit of Education Cess and S.H.Edu. Cess became ineligible credit for TRAN-1 and thus they could not transfer the impugned Cess credit to their electronic credit ledger. Thus, they had filed a refund claim on 29.05.2018 which is well within the time limit of one year and the same cannot be considered as time barred.
10. I observed that in the instant case the balance credit of Education Cess and S.H.Edu. Cess as on 30.06.2017 with the appellant being ineligible cess credit the appellant could not have transferred such credit in their electronic credit ledger thorough TRAN-1. The impugned Cesses had been phased out w.e.f. 01.03.2015 vide Notification No. 14/2015-CE and 15/2015-CE both dated 01.03.2015.
11. In this regard, I find that the issue has already been discussed in the Tariff Conference held on 28th & 29th October 2015 in which it has been decided that accumulated credit of education cess and secondary & higher education cess, which had been phased out, could not be utilized any further. As far as the claim of refund of unutilized credit of impugned cesses is concerned, I find that the matter has already been decided by Hon’ble High Court of Rajasthan in the case of M/s. Banswara Syntex Ltd. Versus CCE, Udaipur.”
(emphasis supplied)
7. Shri Sparsh Bhargava learned counsel for the appellant made the following the submissions:
(i) Refund of the credit could not have been denied to the appellant merely on the ground that such credit was not utilized prior to GST regime. In this connection, reliance has been placed on the decision of the Tribunal in Slovak India Trading Co. Pvt. Ltd. vs. Commissioner of C. Ex., Bangalore8, against which the appeals filed by the department before the Karnataka High Court and the Supreme Court were dismissed. These decisions are reported in 2008 (10) S.T.R. 101 (Kar.) 9 and 2008 (223) E.L.T. A170 (S.C.)10;
(ii) Reliance has also been placed upon the following decisions of the Tribunal:
(a) M/s Bharat Heavy Electricals Ltd. (Excise & Taxation Division) The Commissioner, Central Goods Service Tax, Central Excise & Customs, Bhopal11;
(b) Schlumberger Asia Services Ltd. Commissioner of CE & ST, Gurgaon-I12;
(c) Nichiplast India Private Ltd. Principal Commissioner CGST13; and
(c) Kirloskar Toyota Textile Machinery Pvt. Ltd. Commissioner of Central Tax, Bengaluru South GST Commissionerate14;
(iii) Reliance has also been placed upon the decision of the Punjab and Hariyana High Court in The Commissioner, Goods & Service Tax Commissionerate vs. M/s Shree Krishna Paper Mills & Industries Ltd. & Ors.15;
(iv) CENVAT credit is a vested right which crystallised in favour of an assessee the moment input goods/services are received and cannot be taken away. In this connection reliance has been placed upon the decisions of the Supreme Court in Eicher Motors Ltd. and another vs. Union of India and others16 and Samtel India Ltd. vs. Commissioner of Central Excise, Jaipur17; and
(v) The appellant is also entitled to refund in view of the provisions of section 142(8)(b) of the GST Act. In support of this contention, reliance has been placed upon the decision of the Tribunal in Punjab National Bank vs. Commissioner of Central Tax, Bangalore North18.
8. Shri O.P. Bisht, learned authorised representative appearing for the Department, however, made the following submissions:
(i) The assessee cannot claim cash refund or encashment of unutilized and unavailed amount of credit. In support of this connection reliance has been placed on the decision of a learned Member of the Tribunal in Bharat Electricals Ltd. Commissioner of C.T., Secunderabad-ST19
(ii) Since cess was not payable after the cut-off date, disallowing credit thereafter is justified. In support of this contention, reliance has been placed on the judgment of the Delhi High Court in Cellular Operators Association of India Union of India20;
(iii) Clarification issued by Circular dated 07.12.2015 also disentitles the appellant from claiming refund; and
(iv) The balance credit of cess with the appellant as on 30.06.2017, being ineligible cess credit, the appellant could not have transferred such credit in electronic credit ledger thorough TRAN-1.
9. The submissions advanced by learned counsel for the appellant and the learned authorised representative appearing for the Department have been considered.
10. It is not in dispute that prior to 01.03.2015 cess was leviable on manufactured goods, in addition to excise duty and the appellant had availed credit under the provisions of the Credit Rules on cess paid on procurement of goods and services. It is also not in dispute that by a notification dated 01.03.2015, levy of cess was exempted. The closing balance of credit of cess as on 28.02.2015, therefore, could not be utilized by the appellant and it was carried forward by him in the central excise returns.
11. The submission of learned counsel for the appellant is that refund of credit of cess cannot be denied merely on the ground that such credit which could not be utilised prior to GST regime would stand lapsed. In this connection, learned counsel placed reliance upon the decision of the Tribunal in Slovak India Trading.
12. The Tribunal, in the aforesaid decision rendered in Slovak India Trading held that refund has to be made when an assessee goes out of the Modvat Scheme or when the Company is closed.
13. The appeal filed by the Department before the Karnataka High Court to assail the aforesaid decision of the Tribunal was dismissed and the relevant portion of the judgment is reproduced below:
“5. ******* The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 17 against the Revenue and in favour of the assessee.”
14. The Supreme Court also dismissed the appeal filed by the Department to assail the aforesaid order of the Karnataka High Court and the order is reproduced below:
“Delay condoned.
The Tribunal while allowing the appeal filed by the respondent assessee has relied upon the following decisions:
1. Eicher Tractors v. CCE, Hyderabad, 2002 (147) E.L.T. 457 (Tri.-Del.)
2. Shree Prakash Textiles (Guj.) Ltd.v. CCE, Ahmedaba, 2004 (169) E.L.T. 162 (Tri. – Mumbai)
3. CCE, Ahmedabad v. Babu Textile Industries, 2003 (158) E.L.T. 215 (Tri.-Mumbai); and
4. CCE, Ahmedabad v. Arcoy Industries, 2004 (170) E.L.T. 507 (Tri.- Mumbai).
of the Tribunal in which it has been held that the assessee is entitled to refund of the amount deposited if the assessee has gone out of the Modvat Scheme or their unit is closed. Aggrieved against the order of the Tribunal, revenue filed C.E.A. No. 5/2006 in the High Court of Karnataka at Bangalore. The High Court by its impugned order has affirmed the order of the tribunal and dismissed C.E.A. No. 5/2006 filed by the revenue.
Learned ASG appearing for the Union of India fairly concedes that those decisions of the Tribunal, which were relied upon by the Tribunal, have not been appealed against.
In view of the concession made by the learned ASG, this special leave petition is dismissed.”
15. It is, therefore, clear from the aforesaid decision rendered in Slovak India Trading by the Tribunal, the Karnataka High Court and the Supreme Court that refund has to be granted when either the there is a closure of the factory or when an assessee goes out of the Modvat scheme.
16. In Bharat Heavy Electricals, a Division Bench of the Tribunal examined whether credits create a vested right and do not extinguish with the change of law and held that change of law cannot be a ground for divesting an assessee from this valuable right and in this connection, the Tribunal placed reliance upon the decision of the Karnataka High Court in Slovak India Trading. The observations of the Tribunal are as follows:
“4. We have carefully gone through the rival arguments. There is no dispute that on 01/07/2017, the cesses credit validly stood in the accounts of the assessee and very much utilizable under the existing provisions. The 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. 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 put 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 of such cases would be squarely applicable to the appellant‟s case. Following the judgement 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 assessee 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 Departmental Representative could not be applicable in view of the contradictory decisions of High Courts on the same issue.”
(emphasis supplied)
17. In Schlumberger Asia Services, the Tribunal followed the aforesaid decision of the Tribunal in Bharat Heavy Electricals.
18. In Kirloskar Toyota, the Tribunal while examining whether refund claim of accumulated balance of unutilised credit of cess available in the books, can be refunded under section 11B of the Central Excise Act 194421 and held, in view of the aforesaid Division Bench decision of the Tribunal in Bharat Heavy Electricals, as also the decisions of the Supreme Court and the Karnataka High Court in Slovak India Trading that an assessee is entitled to refund of unutilised credit of cess after the introduction of GST. The relevant observations of the Tribunal are as follows:
“6. After considering the submissions of both the parties and perusal of the material on record as well as various judgments relied upon by both the parties cited supra, I find that in the present case the appellant has filed the refund claim of accumulated balance of unutilized credit of Education Cess and Secondary and Higher Education Cess available in their books under Section 11B of the Central Excise Act within a period of one year i.e. on 29/06/2018 from the introduction of GST law. I also find that with the introduction of GST there is a restriction for these cesses to be transitioned into GST by virtue of Section 140(1) of the Act and therefore the appellant did not transfer the said credit of cesses into GST and preferred to file the refund claim under Section 11B of the Central Excise Act. This issue was considered by the Division Bench of the CESTAT, New Delhi in the case of Bharat Heavy Electricals Ltd. cited supra and after considering the decision of the Apex Court as well as the High Court of Karnataka in the case of Slovak India Trading Co. Pvt. Ltd. has held that the assessee is entitled to refund of an unutilized credit of Education Cess and Higher Education Cess after the introduction of GST.
******
6.1. Further, I find that the Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. (cited supra) has held that when the assessee has moved out of Modvat Scheme/Cenvat Scheme, portion of unutilized credit should be allowed as refund. Since the issue is covered by the decision of the Slovak India Trading Co. Pvt. Ltd. (cited supra) and the same being the decision of a jurisdictional High Court would prevail over decision of other High Courts and the Tribunal as held in the case of CCE & ST Vs. Andhra Sugars Ltd. cited supra and the Larger Bench decision of the Tribunal, Bangalore in the case of J.K. Tyre & Industries Ltd. Vs. Asst. Commissioner of Central Excise wherein the Larger Bench has held that the Tribunal is bound by the decision of the jurisdictional High Court and is not bound by the decision of other High Courts. Further, I find that the two decisions relied upon by the Department in the case of Bharat Heavy Electricals Ltd. and Mylan Laboratories both the decisions have been rendered by Single Member of the Tribunal whereas the decision in the case of Bharat Heavy Electricals Ltd. has been rendered by Division Bench of CESTAT, New Delhi which would prevail over the decision of the Single Member. Further, I find that the decision of the Hon‟ble Madras High Court in the case of Sutherland Global Services Pvt. Ltd. is not applicable in the present case because the said decision was on the issue whether cess can be transitioned into GST or not? Whereas the issue in the present case is whether unutilized cenvat credit of Education Cess and Secondary and Higher Education Cess could be claimed as refund under Section 11B of the Central Excise Act, 1944? Therefore, in view of the contradictory decisions of various High Courts, this Tribunal is bound to follow the decision of the jurisdictional High Court and the jurisdictional High Court has held in the case of Slovak India Trading Company (cited supra) which has been relied upon by the Division Bench of the Delhi Tribunal in the case of Bharat Heavy Electricals Ltd. has categorically held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST. As far as time-bar aspect is concerned, the findings in the impugned order regarding time-bar is beyond the show-cause notice as well as Order-inOriginal and the same is not sustainable in law. Hence, by following the ratios of the Division Bench of Delhi Tribunal in Bharat Heavy Electricals Ltd. and jurisdictional High Court in Slovak India Trading Co. Pvt. Ltd., I allow the appeal of the appellant.”
(emphasis supplied)
19. In Nichiplast India, a learned Member of the Tribunal observed as follows:
“12. Having considered the rival contentions, following the rulings of Karnataka High Court as confirmed by the Hon‟ble Supreme Court, I hold that the appellant is entitled to refund of the amount of Cenvat Credit lying in their Cenvat Credit account on closure of business. I further direct that the appellant is entitled to interest as per Rules, as per section 11BB of Central Excise Act, i.e. three months after the date of application till the date of grant of refund. Appeal Allowed.”
20. In Shree Krishna Paper Mills, the Punjab and Haryana High Court examined whether refund could be ordered of unutilised credit on closure of the unit and held, in view of the earlier decision of the Punjab and Haryana High Court in Rama Industries Ltd. CCE, Chandigarh 22 and the decision of the Karnataka High Court in Slovak India, that refund should be granted. The observations of the Punjab and Haryana High Court are as follows:
“8. We further find that this court in Rama Industries (Supra) relying upon judgment of Karnataka High Court in the case of Union of India Vs Slovak India Trading Co. Pvt. Ltd. 2006 (201) ELT 559 (Kar) has sanctioned refund of unutilised Cenvat Credit on the closure of factory. Rajasthan High Court in the case of Lav Kush Textiles Vs CCE, Jaipur 2017 (353) ELT 417 (Raj), Welcure Drugs & Pharmaceuticals Ltd. Vs CCE 2018 (15) GSTL 257 (Raj) has formed similar view. High Courts have held that judicial discipline is required to be maintained; Tribunal cannot distinguish High Court judgments and is bound by High Court judgments. However, larger bench of Bombay High Court in the case of Gauri Plasticulture (Supra) has formed a different opinion.
It is true that judgment cited by counsel for the Revenue has been delivered by a bench of three judges of Bombay High Court, nonetheless, as per judicial discipline we cannot ignore judgment of this Court and take contrary view. We do not find any fault in the judgment of this Court in the case of Rama Industries as well judgments delivered by Rajasthan and Karnataka High Court, thus we do not deem it fit to disagree with judgment of this court and refer the matter to larger bench.******”
21. Shri O.P. Bisht, learned authorised representative appearing for the Department has, however, placed reliance upon the decision of a learned Member of the Tribunal in Bharat Heavy Electricals Ltd., wherein it has been held as follows:
“4. Learned departmental representative draws the attention of the bench to the judgment of the Larger Bench of the Hon’ble High Court of Bombay in the case of Gauri Plasticulture Pvt Ltd [2019-TIOL-1248-HC-MUM-CX-LB] on this issue in which questions framed by the Hon’ble Larger Bench were as follows:
“(a) Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs?
(b) Whether by exercising power under Section 11B of the said Act of 1944, a refund of un-utilised amount of Cenvat Credit on account of the closure of manufacturing activities can be granted?
(c) Whether what is observed in the order dated 25th January 2007 passed by the Apex Court in Petition for Special Leave to Appeal (Civil) No. CC 467 of 2007 (Union of India vs Slovak India Trading Company Pvt Ltd.) can be read as a declaration of law under Article 141 of the Constitution of India?”
and they were answered as follows:
“40. As a result of the above discussion, we answer the questions of law framed above as (a) and (b) in the negative. They have to be answered against the assessee and in favour of the Revenue. Questions (a) and (b) having been answered accordingly, needless to state that the order of the Hon’ble Supreme Court in the case of Slovak India (supra) cannot be read as a declaration of law under Article 141 of the Constitution of India.”
5. Per contra, learned counsel for the appellant relies on the judgment of the Hon’ble High Court of Madras in the case of Sutherland Global Services Pvt Ltd [2019 (11) TMI 278 – Madras HC] to assert that the accumulated credit of EC, SHEC & KKC does not lapse on switchover to the GST regime and could be carried forward as credit under GST.
6. I have carefully considered the judgments relied upon by the both sides. The judgment of the Larger Bench of the Hon’ble High Court of Bombay was precisely on the point as to whether the assessee can get cash refund of Cenvat credit which they were not able to utilize and it was answered in negative. The Hon’ble High Court of Madras was examining a different issue as to whether the precision of the credit of EC, SHEC & KKC into the new GST regime was permissible or otherwise. The Hon’ble High Court of Madras has not dealt with the issue of cash refund of unutilized Cenvat credit which is the question in dispute. In view of the above, I find that there is no legal provision under which the assessee’s appeal could be entertained.”
22. The aforesaid decision of a learned Member is contrary to the Division Bench judgment of the Tribunal in Bharat Heavy Electricals and was also distinguished by the Tribunal in Kirloskar Toyota.
23. Learned authorised representative of the Department also placed reliance upon the decision of the Rajasthan High Court in Banswara Syntex Ltd. The Rajasthan High Court observed as follows:
“22. Even while amending the Rules of 2004 and substituting the proviso to Rule 3(7)(b) of the Rules of 2004, despite dispensing with the Education Cess and Secondary and Higher Secondary Education Cess, the Central Government has not thought it appropriate to provide for refund of the amount of such Cess, lying unutilised. In this view of the matter, in our considered view, the rule making authority has consciously not provided for refund of Cenvat credit.
23. It is noteworthy that an assessee is entitled to take Cenvat credit in respect of the inputs, immediately on their arrival in his factory or premises as provided in Rule 4 of the Cenvat Credit Rules, 2004. Hence, it is the Cenvat Credit Rules, 2004, which bestows upon an assessee, a right to claim credit of duty or cess paid on its inputs or input services. Such right accrues, fructifies and crystallizes on the date of procurement of the goods or services, but the same is available only to the extent of availing credit of such tax, in accordance with the existing conditions and provisions prevailing on that date.
24. In other words, Cenvat credit lying in an assessee‟s account creates an infallible and indefeasible right, which in the present case is indispensable and undeniable; however, to the extent of making payment of the corresponding cess, if any, payable on or after that date, as categorically stipulated in 1st and 2nd proviso to Rule 3(7)(b) of the Cenvat Credit Rules, 2004.
25. Since the Cenvat Credit Rules, the repository of rights of an assessee to avail credit of the duty or other sums paid on inputs does not entail or even envisage refund of such credit in cash and encashment cannot be claimed as a matter of course. It can also not be asserted that an assessee is entitled to or has an ingrained or vested right to claim refund of Education Cess and Secondary and Higher Secondary Education Cess or any other duty paid in accordance with the law dehors the Cenvat Credit Rules, 2004. Provisions as enacted in the form of Section 11B of the Act of 1944 or other provisions are of little avail to the assessee, as they do not even provide for availment of credit of the duty, much less refund or its payment in cash.
26. The judgment in case of SRD Nutrients Private Limited (supra) cited by Learned Counsel for the appellant – assessee has no bearing on the issue at hands, as the facts on record and question posed for consideration before us are entirely different from the facts and issues, which were involved in the case before Hon’ble the Supreme Court. The said judgment of Hon’ble the Apex Court simply lays down that Education Cess as well as Secondary and Higher Secondary Education Cess are a part of Excise duty. This position of law perhaps cannot be disputed, even the authorities below have not denied claim of refund on such count; they have rather treated the Education Cess and Secondary and Higher Secondary Education Cess to be a duty under the Act of 1944, even while rejecting the assessee’s claim.
27. In view of the discussion foregoing, we are of the considered opinion that the Tribunal has committed no error of law in holding that the appellant cannot claim cash refund or encashment of the unutilized and unavailed amount of Education Cess and Secondary and Higher Secondary Education Cess, lying in its credit.”
24. It is, therefore, seen that there are conflicting decisions of the Karnataka High Court and the Punjab and Haryana High Court on the one hand and the Rajasthan High Court on the other hand. The decision of the Karnataka High Court in Slovak India was affirmed by the Supreme Court. It would, therefore, be appropriate to follow the view taken by the Karnataka High Court and the Punjab and Haryana High Court.
25. Learned authorised representative for the Department also placed upon the decision of the Delhi High Court in Cellular Operators Association. This judgment was rendered in a Writ Petition that had been filed for quashing the notification dated 29.10.2015 and for a direction that the credit accumulated on account of cess should be allowed to be utilised for payment of service tax leviable on telecommunication services. The submissions of the petitioner was that the unutilised amount of cess, after it was exempted w.e.f. 01.03.2015, should be permitted to be utilized for payment for payment of tax on excisable goods and taxable services as it was subsumed in the central excise duty which had been raised in 2015. The High Court rejected this contention.
26. In the present case, the plea of the appellant is not for adjustment of the credit on cess amount against payment of excise duty or service tax, but it is for refund of credit accumulated on account of payment of tax on cess. This decision would, therefore, not help the respondent.
27. Learned authorised representative also place reliance upon the notification dated 07.12.2015 issued by CBEC to contend that a policy decision had been taken not to allow utilisation of accumulated credit of cess, after cess had been phased out and it is reproduced below:
“Discussion & Decision
The conference after discussion and briefing from the officers from the Board noted that it was Government conscious policy „decision to withdraw the Education Cess and Secondary and Higher Education Cess. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past. The rule and notifications as they exist need to be followed and do not need any amendment.
28. The aforesaid policy contained in the notification dated 07.12.2015 is clearly contrary to the decisions of the High Courts and the Tribunal referred to above and, therefore, cannot be come to the aid of the Revenue.
29. It needs to be noted that CENVAT credit avail is a vested right as has held by the Supreme Court in Eicher Motors and Samtel India.
30. The appellant is, therefore, clearly entitled to the refund of the balance amount of credit of cess and the decision to the contrary taken by the Commissioner (Appeals) cannot be sustained. The order dated 12.06.2019 passed by the Commissioner (Appeals) is, therefore, set aside and the appeal is allowed with consequential reliefs, if any.
(Order Pronounced on 28.03.2022)
Notes:
1. the appellant
2. the Commissioner (Appeals)
3. the cess
4. the Credit Rules
5. the Tariff Act
6. GST Act
7. 2019 (365) E.L.T. 773 (Raj.)
8. 2006 (205) E.L.T. 956 (Tri.- Bang.)
9. Union of India Slovak India Trading Co. Pvt. Ltd.
10. Union of India Slovak India Trading Co. Pvt. Ltd.
11. 2020-VIL-402-CESTAT-DEL-CE
12. Service Tax Appeal No. 60095 of 2021 decided on 24.05.2021
13. Excise Appeal No. 50790 of 2019 decided on 23.07.2021
14. 2021-VIL-375-CESTAT-BLR-CE
15. CEA No. 36 of 2019 (O & M) decided on 11.12.2019
16. (1999) 2 SCC 361
17. (2003) 11 SCC 324
18. 2021-VIL-289-CESTAT-BLR-ST
19. 2020 (41) G.S.T.L 465 (Tri-Hyd)
20. 2018 (14) G.S.T.L. 522 (Del.)
21. the Excise Act
22. 2009-TIOL-100-HC-P&H-CX
