Case Law Details
Spacewood Furnishers Private Limited Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
The appellant had imported machines under Advance Licenses pre-GST. Due to cancellation of export orders post-GST implementation, they could not fulfill their export obligations. Consequently, in 2018 (post-GST), they paid the duties foregone at the time of import, which included Countervailing Duty (CVD), Special Additional Duty (SAD), Education Cess, and Secondary & Higher Education Cess. These duties, amounting to ₹9,96,439, were eligible for CENVAT credit under the pre-GST regime. However, as they were paid post-GST, the credit could not be transitioned into the GST regime.
The appellant filed a refund claim under Section 11B of the Central Excise Act, 1944, read with Section 142 of the CGST Act, 2017. The lower authorities rejected the claim, primarily arguing that the duties paid were ‘customs duties’ and not CENVAT credit or excise duty/service tax covered under Section 142(3) of the CGST Act, and alternatively, that they were ‘arrears of tax’ or not eligible for input tax credit post-GST.
The CESTAT set aside the impugned order dated 06.11.2020 and allowed the appeal. It directed the refund of ₹9,96,439 to M/s Spacewood Furnishers Private Limited, holding them eligible for the cash refund of the CENVAT credit paid by them, in terms of Section 142(3) of the CGST Act, 2017.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal has been filed by M/s Spacewood Furnishers Private Limited, Nagpur (herein after, for short, referred to as ‘the appellants’) against the Order-in-Appeal No. NGP/EXCUS/000/APPL/79/20-21 dated 06.11.2020 (referred to, as ‘the impugned order’) passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Nagpur.
2.1 Brief facts of the case, leading to this appeal, are summarized herein below:
2.2 The appellants herein, inter alia, are engaged in manufacture of excisable goods viz., furniture and its parts falling under Chapter 44 of the Schedule to the Central Excise Tariff Act, 1985 and were registered under Central Excise authorities bearing Registration No. AACCS4955RXM002; and upon transition into GST regime, the appellants factory at Nagpur was holding GSTN No. 27AACCS4955R1ZJ. The appellants avail CENVAT credit of duty/tax on inputs, capital goods and input services used in such manufacture of final products. The appellant had filed a refund application in the prescribed Form-R dated 28.03.2019 for refund of Rs.9,96,439/- being the credit of Additional duties of Customs/Countervailing Duty (CVD), Special Additional Duty of Customs (SAD) and Education Cess and Secondary & Higher education cess. These duties have been paid by the appellants vide challans dated 29.05.2018, 14.06.2018 and 04.09.2018, consequent to cancellation of export orders and resultant non-fulfillment of export obligation in respect of imports through Advance License, thereby necessitating payment of duty foregone at the time of import of machines under such Advance License, as authorised and certified by the Customs authorities at Nagpur. As these duties paid could not be transitioned as input credit under GST regime, the appellants had filed refund claim on 06.10.2018 with the jurisdictional Assistant Commissioner of Customs at Nagpur, who had directed them vide letter dated 31.12.2019 to file the same with Assistant Commissioner of Central Excise having jurisdiction with the factory, and thus the appellants vide their letter dated 02.01.2019 had filed the refund claim with AC, Central Excise Division, Hingna, claiming various grounds as mentioned in their refund application. The Assistant Commissioner, CGST & Central Excise Division, Hingna, vide letter dated 05.03.2019, had returned the refund claim to the appellants on the ground that such claim has been made with inappropriate authority, as the matter was related to customs duty.
2.3 Once again the appellants had preferred refund claim of Rs.9,96,439/- before the Assistant Commissioner, CGST & Central Excise Division, Hingna, who for disposing the matter had issued a notice dated 26.04.2019 to the appellants for showing cause, why such refund claim should not be rejected under Section 11B of the Central Excise Act, 1944 read with Section 142 of CGST Act, 2017. The said matter was adjudicated by passing an Order-in-Original in rejecting the refund claim of Rs.9,96,439/- in terms of Section 11B of the Act of 1944 read with Section 142 of the Act of 2017.
2.4 Being aggrieved with the order passed by the Original authority, the appellants had preferred an appeal before the Commissioner (Appeals) who had vide impugned order dated 06.11.2020, had rejected the appeal filed by the appellants and upheld the order passed by the original authority. Feeling aggrieved with the impugned order, the appellants have filed this appeal before the Tribunal.
3.1 Learned Advocate appearing for the appellants had submitted that the appellants is a manufacturer of modular furniture as final products, which are removed on payment of Central Excise duty, earlier; and payment of Goods and Service Tax (GST), in the post GST regime. As a part of backward integration, and instead of importing laminated particle boards, fiber boards, HDF boards for use in manufacture of modular furniture, the appellants had imported sophisticated German make ‘short cycle lamination machines’ which are used for the process of paper lamination on raw particle/fiber/ HDF boards, indigenously. Resultantly, the appellants were able to offer more variety of laminated products to the domestic market in different designs, colours with such indigenous in-house lamination facility. However, on account of their cancellation of export orders, and as per the advice of the DGFT authorities for redemption of export obligation in respect of imports through Advance Licenses, they had paid the duties of customs and additional duties of customs, education Cess and Secondary Higher Education Cess as required under the law. As these payment of duties were made during 2018, after coming into effect of the GST regime, the admissible credit amount of Rs.9,96,439/- could not effectively be carried forward as input credit to GST regime, and hence they had applied for refund of the same before the jurisdictional authorities. However, their request for refund was rejected by the various authorities below, who had dealt with the matter.
3.2 Learned Advocate stated that it is not in dispute that additional duty leviable under Section 3 of the Customs Tariff Act, 1975 (CVD) which is equivalent to the duty of excise, Education Cess & Secondary Higher Education Cess leviable was available as CENVAT credit under the provisions of the CENVAT Credit Rules, 2004. With advent of GST, the appellants though had paid the applicable duty as above, could not utilize credit of CVD, Education Cess & Secondary Higher Education Cess. He further submitted that the refund such duties paid cannot be denied on the allegation that these are in the nature of arrear of taxes in terms of Section 142(8a). He further stated that it is pertinent to note that there is no provision in the newly enacted law i.e., CGST Act, 2017 that such credits would lapse. Thus, he claimed that merely by change of legislation suddenly the appellants could not be put in a position to lose this valuable right.
3.3 In this regard, he cited the judgement of Hon’ble Supreme Court in the case of Eicher Motors (2002-TIOL-149-SC-CX-LB) and in Samtel India Ltd. (2003-TIOL-40-SC-CX) wherein it had been held that credit earned is vested right. In the cited case, he stated that the input duty credit is vested right which has validly been earned by appellants and such right cannot be taken away with change in law unless specific provision which would debar from refund.
3.4 Further, learned Advocate also relied on the decisions of the Tribunal in the cases of Mithila Drugs Pvt. Ltd. vide Final Orders Nos. 50157 to 50159/2022 dated 03.02.2022; in the case of Sri Chakra Poly Plast India Pvt. Ltd. vide Final Order No. A/30030/2024 dated 18.01.2024 and in the case of Clariant Chemicals India Ltd., vide Final Order No. A/85964/2022 dated 18.10.2022, wherein it was held that the appellants in those cases were entitled to claim the refunds thereof. He also cited the order of the Tribunal in the case of New Age Laminators Pvt. Ltd. Vs. Commissioner of C. Excise & GST, Alwar [2022 (381) E.L.T. 88 (Tri. – Del.), wherein it was held that the appellants, who had paid the CVD and SAD during May, 2018 & May, 2019, by way of regularization on being pointed out by the Revenue authorities, are entitled to refund of such duty under the provisions of Sections 142(3) and 142(6) of the CGST Act, 2017. He had also relied upon the Interim Order No. 40021/2023 dated 21.12.2023 of the Larger Bench of the Tribunal in the case of Bosch Electrical Drive India Pvt. Limited Vs. Commissioner of Central Tax, Chennai to state that the Tribunal has the jurisdiction in deciding the appeal against any order passed under Section 142 of the CGST Act, 2017. With the above submissions and those made in the grounds of appeal, learned Advocate prayed for allowing the appeal, with consequential relief.
4. Learned Authorized Representative (AR) appearing for Revenue, reiterated the findings made by the Commissioner (Appeals) in the impugned order and submitted that in view of the specific provisions for refund of CENVAT credit provided under Rule 5 of the CCR, the appeal for refund of CENVAT credit of CVD and Education Cess & Secondary Higher Education Cess in cash under Section 11B ibid, is not permissible. In this regard, he relied upon the order of the Hon’ble High Court of Jharkhand at Ranchi in the case of Rungta Mines Limited Vs. Commissioner of CGST & Central Excise, Jamshedpur – 2022 (67) G.S.T.L. 180 (Jhar.) and order of the Tribunal in the case of Servo Packaging Limited Vs. Commissioner of CGST & Central Excise, Puducherry – 2020 (373) E.L.T. 550 (Tri. – Chennai). Accordingly, he submitted that the impugned order is sustainable in law and prayed for rejection of the appeal filed by the appellants.
5. Heard both sides and perused the case records. The additional submission made in the form of written paper books in this case, by both sides, were also perused carefully.
6. The short issue for determination before the Tribunal is to decide, as to whether or not, the Additional duties of Customs/Countervailing Duty (CVD), Special Additional Duty of Customs (SAD) and Education Cess and Secondary & Higher education cess paid by the appellants, as duty foregone at the time of import of machines under such Advance License in lieu of fulfillment of export obligation under Advance License as per Foreign Trade Policy, is eligible for refund under Section 142 of the Central Goods and Services Tax, 2017 (‘CGST Act, 2017’, for short) read with Section 11B of the Central Excise Act, 1944?
7. In order to appreciate the issues under dispute, the specific legal provisions of the CGST Act, 2017, Central Excise Act, 1944 and CENVAT Credit Rules, 2004 (CCR) relevant to the dispute are extracted and herein given below for ease of reference:
Central Goods and Services Tax Act, 2017
“Miscellaneous transitional provisions.
Section 142. (1) Where any goods on which duty, if any, had been paid under the existing law at the time of removal thereof, not being earlier than six months prior to the appointed day, are returned to any place of business on or after the appointed day, the registered person shall be eligible for refund of the duty paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business within a period of six months from the appointed day and such goods are identifiable to the satisfaction of the proper officer:
Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply.
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(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 provisions 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.
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(6) (a) Every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of subsection (2) of section 11B of the Central Excise Act, 1944 (1 of 1944) and the amount rejected, if any, shall not be admissible as input tax credit under this Act:
Provided 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;
(b) Every proceeding of appeal, review or reference relating to recovery of CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law and if any amount of credit becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.
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(8)(a) Where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;
(9)(a) Where any return, furnished under the existing law, is revised after the appointed day and if, pursuant to such revision, any amount is found to be recoverable or any amount of CENVAT credit is found to be inadmissible, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;
(b) Where any return, furnished under the existing law, is revised after the appointed day but within the time limit specified for such revision under the existing law and if, pursuant to such revision, any amount is found to be refundable or CENVAT credit is found to be admissible to any taxable person, the same shall be refunded to him in cash under the existing law, notwithstanding anything to the contrary contained in the said law other than the provisions of subsection (2) of section 11B of the Central Excise Act, 1944 (1 of 1944) and the amount rejected, if any, shall not be admissible as input tax credit under this Act.
Repeal and saving.
Section 174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed…..”
Central Excise Act, 1944
“Claim for refund of duty and interest, if any, paid on such duty.
Section 11B. (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person :
Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) as substituted by that Act :
Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.
Explanation.— Omitted by the Finance (No. 2) Act, 1980.
(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:
Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to—
(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant’s account current maintained with the Principal Commissioner of Central Excise or Commissioner of Central Excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(f) the duty of excise and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify:…..”
CENVAT Credit Rules, 2004
“CENVAT credit.
Rule 3. (1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of—
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act:
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(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
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(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via);….”
8.1 Before I proceed with the present case in hand, the competency of the Tribunal in handling the orders passed under Section 142(2) of the CGST Act, 2017 in appeal before them, has been dealt by the Larger Bench of the Tribunal, and the reference made therein have been clarified in the Interim Order No. 40021/2023 dated 21.12.2023 in the case of Bosch Electrical Drive India Private Limited Vs. Commissioner of Central Tax, Chennai. The relevant paragraphs of the said order are extracted and given below:
“48. The Division Bench of the Tribunal, while referring the matter to the Larger Bench had observed in paragraph 14.1 that an appeal would lie under section 112 of the CGST Act to the Appellate Tribunal constituted under the provisions of the CGST Act against an order passed under sub-section (3) of section 142 of the CGST Act. As noticed above, an appeal would not lie before the Appellate Tribunal constituted under the provisions of the CGST Act because an appeal lies only against an order passed either under section 107 or section 108 of the CGST Act.
49. In the present case, the service tax was paid under the provisions of Chapter V of the Finance Act and refund was claimed under sub-section (3) of section 142 of the CGST Act, under which the claim was required to be disposed of in accordance with the provisions of the existing law. Therefore, even if the service tax had been deposited by the appellant after 01.01.2017, nonetheless the refund of any amount of the CENVAT credit could be claimed only under subsection (3) of section 142 of the CGST Act and against this order an appeal will lie to the Tribunal.
50. The reference is, accordingly, answered in the following manner: An appeal would lie to the Customs, Excise & Service Tax Appellate Tribunal against an order passed under section 142 of the Central Goods and Services Tax Act, 2017.”
Thus, it could be seen that Larger Bench of the Tribunal has held that this Tribunal is the appropriate appellate forum for preferring an appeal against an order passed under Section 142 of the CGST Act, 2017.
9.1 From the facts of the case, it is seen that the appellants had duly followed the procedure and conditions prescribed in complying with the obligations under the Foreign Trade Policy and the Customs Act, 1962, inasmuch as upon identifying that they are unable to fulfill the export obligations cast upon them in importation of capital goods/ machinery under Advance License scheme, which had arisen consequent to cancellation of export orders, they had paid the applicable duties of customs vide challans dated 29.05.2018, 14.06.2018 and 04.09.2018, as authorised and certified by the Customs authorities at Nagpur. The nature of duties paid by the appellants remains as the duties of customs which otherwise would have been paid at the time of import of machines under such Advance License, even though these are being paid now as duty foregone. It is not in dispute that the additional duties of customs equivalent to the duty of excise, Education Cess & Secondary Higher Education Cess leviable on the imported goods was available as CENVAT credit under the provisions of the CENVAT Credit Rules, 2004. Post introduction of GST regime, CVD on imported article is presently charged as Integrated Goods and Service Tax (IGST) which is levied under Section 5 of the IGST Act, 2017 and collected in terms of Section 3(7) of the Customs Tariff Act, 1975 and the same is allowed as input duty credit Section 16(1) of CGST Act, 2017.
9.2. Further, the fact on record as evidenced by Challans No. 5411 dated 29.05.2018; No. 5419 dated 14.06.2018 and No.5532, No.5533 both dated 04.09.2028 indicate that in respect of Advance Licenses No. 0310565400 dated 19.03.2010, No.0310664441 dated 11.11.2021, No.0310562489 dated 02.03.2010 and No.0310615408 dated 10.02.2011, respectively, the appellants had paid the applicable basic customs duty, CVD, education cess, secondary education cess thereon and interest upto date of payment, which were duly verified by the jurisdictional Inspector of Customs, Nagpur. No doubt, initially the imports were made duty free but for the reason that the appellants were granted four advance licenses as above, copies of which are placed in the file records as part of the appeal papers. It is also nowhere denied by the appellants that they could not fulfill the export obligation arising out of the said license. The only course of action left with the appellants, in such a situation, was to seek redemption by way of payment of customs duty along with interest, which has been complied with. The apparent and admitted fact remains on record is that the entire customs duty, including CVD and Cess with respect to the capital goods imported by the appellant stands fully deposited by the appellant not only along with interest in terms of Chapter 4 of FTP. These admitted facts are sufficient to hold that the appellant became entitled to avail CENVAT Credit of the CVD/SAD paid by him on the imported capital goods in terms of Rule 3 of CENVAT Credit Rules, 2004 (CCR). In terms of legal provisions prescribing the procedure for transitional credit of tax paid under various situations, under Section 142 of the CGST Act, 2017, when the same is unable to be utilized for further payment of duty/tax, the appellants had applied for refund before the departmental authorities. On perusal of the communication the appellants had with the jurisdictional Customs and Central Excise authorities at Nagpur vide letters dated 04.10.2018, 22.12.2018, 28.03.2018, it clearly indicate that during the meeting with the Assistant Commissioner of Customs, Nagpur, the appellants were advised to file the refund claim with the Central Excise authorities, and upon with drawing the earlier refund application filed with the Customs, the appellants had filed fresh application for refund of duty with the jurisdictional Central Excise authorities on 29.03.2019. These facts have also been reflected in the SCN dated 26.04.2019.
9.3 The main ground on which the refund application of the appellants was held as not entertainable by the original authority is that the duties paid by the appellants are ‘customs duties’ and it is not CENVAT credit nor excise duty or service tax under the existing law and therefore, these are not covered under Section 142(3) of the CGST Act, 2017. The relevant paragraphs of the original order dated 25.06.2019 are extracted and given below:
“31. I find that the claimant seeks refund of duties paid by challans in July 2018 and September 2018 for redemption of advance authorization due to non fulfilling of export obligation against these advance authorization. Their contention is that Mint of CVD and SAD paid by them and that was available to them as Cenvat credit which they could not take because of the inception of GST, should be refund to them under provisions of section 142(3) of the CGST Act.
32. However Section 142(3) of the CGST Act 2017 stipulate that 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 provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944.
33. I find that the duties paid by the claimant while redemption of advance authorization are customs duties under Customs Act 1962. The customs duties paid by the claimant is not a Cenvat credit nor excise duty or service tax paid under the existing law i.e. Central Excise Act 1944 or Finance Act 1994, and therefore are not covered under Section 142(3) of the CGST Act 2017.
34. I also find that the customs duties paid by the claimant, was result of re assessment of Bills of Entry due to non fulfillment of conditions of Advance License. thus denying exemption granted already while assessing the relevant Bills of Entry The said amount was recovered under relevant provisions of Customs Act. Further Section 142(8a) of the CGST Act provides that where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day. under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law. be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. Therefore the amount se paid by the claimant in the present case is not admissible as input tax credit under CGST Act 2017.
Order
I reject the refund claim of Rs. 996439/- filed by the claimant vide their letter SW/P-5/2018-19 dated 28.03.2019 in terms of Section 11B read with Section 142 of the CGST Act 2017.”
Further, during the proceedings before the first appellate authority, learned Commissioner (Appeals), has held that any tax paid on assessment after the appointed dated i.e., GST era shall not be eligible for input tax credit and thus in turn shall not be refundable. The relevant findings of the impugned order are extracted and given below:
“21. The issue to be decided in this case is whether the appellant is entitled for refund of Customs duties paid by them during the redemption of advance authorisation. These customs duties were paid by the appellant as they failed to fulfil the export obligation against advance authorisation.
22. As there is no documents of proof against the cancellation of export order. Hence it can’t be assured whether export of furnished goods had taken place or not.
18. The Customs duty paid by the appellant is not a Cenvat Credit neither excise duty nor service tax paid under the existing law. Hence refund of the same may not be granted.
23. As the tax was recovered as an arrear of tax and the amount so recovered shall not be admissible as input tax credit. There is no provision to claim refund of customs duties paid by the appellant. Hence it might not be treated as refund.
24. The issue here again comes whether the Section 142(8a) of CGST Act 2017 is applicable here or otherwise. In the present issue the appellant first imported the goods under advance authorisation in the year 2012-13 with concessional rate of duty i.e first assessment of imported goods completed that time only. Thereafter since they could not fulfil the export obligation they paid the full amount of customs duty applicable in the year 2018. Thus the duty was reassessed in the year 2018 and was paid by the appellant.”
9.4 On careful consideration of the impugned order passed in this case, the highlighted/bold portion seems to be disjoint to the main finding recorded in paragraph 22. Firstly, on the face of the four challans through which the disputed duty/cess have been paid clearly indicated the relevant Advance License Nos. and such licenses also carry the name of the appellants being specifically mentioned therein. Further, such payment of duty/cesses made through in these challans, duly verified by the jurisdictional Inspector of Customs, are indicative of the fact that these are being paid in redemption of export obligation against such Advance Licenses as provided in Chapter 4 of the FTP and as per procedure provided by the DGFT & Department of Revenue. Hence, the finding made by the learned Commissioner (Appeals) that there is no document of proof for cancellation of export order, is not relevant to the fact of duty payment being made for redemption of export obligation. Further, as ‘the additional duty of excise leviable under Section 3 of the Customs Tariff Act along with Education cess, Secondary and Higher Education Cess’ find specific mention in Rule 3 of CENVAT Credit Rules, 2004, such finding made in the impugned order at paragraph 22 that it is not a CENVAT credit or excise duty, does not stand the scrutiny of law. In fact, Section 2A of the Central Excise Act, 1944 provides that expression ‘duty of excise’ shall be referred to ‘CENVAT’. The finding given by the learned Commissioner (Appeals) that the duties paid by the appellants in the said four challans are ‘arrears of tax’ also has no legal basis. The provisions of Section 11 of the Central Excise Act, 1944, empowers Central Excise officers to take action for recovery of arrears and pursuing the recovery with the assessee. If dues remain unrecovered even after taking action under section 11 ibid, then action is to be taken under provisions of section 142 of the Customs Act, 1962 which have been made applicable in Central Excise cases, vide Notification No. 68/63-Central Excise dated 04.05.1963, as amended, issued under section 12 of the Central Excise Act, 1944. The process of recovery of arrears starts with confirmation of demand against the defaulter assessee and includes a number of appellate forums wherein assessee as well as Department can go for appeal. In the present case, the duty/cess have been paid by the appellants voluntarily along with applicable interest, and hence the finding given by the learned Commissioner is contrary to the legal position and the procedures prescribed by the Government. In view of the above discussions, I find that the impugned order is not legally sustainable and the appellants are eligible for refund of excess CENVAT credit paid by them, as this is specifically allowed to be refunded in terms of Section 142(3) of the CGST Act, 2017.
10.1 In this regard, I find that the Co-ordinate Bench of the Tribunal has held in the case of New Age Laminators Pvt. Ltd. (supra) that refund of CVD and SAD paid for redemption of Advance Authorisation scheme is admissible as refund under Section 142(3) and (6) of the CGST Act, 2017. The relevant paragraphs in the said order are extracted and given below:
7. Having considered the rival contentions, I find that the payment of CVD and SAD subsequently during GST regime, for the imports made prior to 30-6-2017 is not disputed under the advance authorisation scheme. It is also not disputed that the appellant have paid the CVD and SAD in May, 2018 & May, 2019, by way of regularisation on being so pointed out by the Revenue Authority. Further, I find that the Court below have erred in observing in the impugned order, that without producing proper records of duty paid invoices etc. in manufacture of dutiable final product, refund cannot be given. I further find that refund of CVD and SAD in question is allowable, as credit is no longer available under the GST regime, which was however available under the erstwhile regime of Central Excise prior to 30-6-2017. Accordingly, I hold that the appellant is entitled to refund under the provisions of Section 142(3) and (6) of the CGST Act.
8. Accordingly, I direct the jurisdictional Assistant Commissioner to grant refunds to the appellants of the amount of SAD & CVD as reflected in the show causes notices and also in the orders-in-appeal. Such refund shall be granted within a period of 45 days from the date of receipt of this order along with interest under Section 11BB of the Central Excise Act. The impugned orders are set aside.”
10.2 I further find that the issue of reversal of excess CENVAT credit under the transitional arrangement as provided under Section 142 of CGST Act, 2017 has already been addressed by the Co-ordinate Bench of the Tribunal in the following cases, and it was held that cash refund of such excess CENVAT credit is permissible. The relevant paragraphs in the Final Order No. A/85964-2022 dated 18.10.2022 in the case of M/s Clariant Chemicals India Limited Vs. Commissioner of Central Excise & Service Tax, Raigad are extracted and given below:
8. Upon hearing the Counsels from both sides and after perusal of the case record, it is apparent that Appellant’s eligibility to take credit of the duties paid as CENVAT Credit is undisputable and only because of procedural aberration occurred during transition to GST period, Appellant could not take the credits in its electronic ledger in the GST regime, for which it sought for refund such a contingency is perhaps foreseen by the legislature for which contingent provision is well enumerated in Clause 6(a) of Section 142 of the CGST Act that deals with claim for CENVAT Credit after the appointed date under the existing law. It reads:- “6(a) every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated weather before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of exiting law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act: Provided 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;” (Underlined to emphasise)
9. It is an admitted fact of the parties that the said CENVAT Credit balance was not carried forward to the Appellant’s account on the appointed date since it was not due on the said day also. Therefore, in view of clear provision contain under Section 142(6)(a) of the CGST Act, Claimant/Appellant is eligible to get the refund of credit by E/87606/2019 cash except where unjust enrichment is alleged or established against the Appellant. The Appellant is also otherwise eligible to go for availment of transitional credit through filing required forms in Tran-I as per the order passed by the Hon’ble Supreme Court on 22nd July, 2022 but in view of the observation of this Tribunal read with Section 142(6)(a) of the CGST Act that such CENVAT Credit amount shall be paid to the Appellant in cash, it can’t avail dual benefits once order of this Tribunal is duly complied by the Respondent Department by the closing date of the window.
THE ORDER
10. The appeal is allowed and the order passed by the Commissioner of Central Tax, Central Excise & Service Tax (Appeals), Raigarh vide Order-in-Appeal No. MKK/466/RGD APP/2018-19 dated 07.02.2019 is hereby set aside and the Appellant is eligible to get refund of Rs.11,04,057/- paid against CVD and SAD which applicable interest, if any, within a period of two months of communication of this order.”
10.3 The relevant paragraphs in the Final Order No. 42467/2021 dated 16.12.2021 in the case of M/s Circor Flow Technologies India Pvt. Limited Vs. Principal Commissioner of GST & Central Excise, Coimbatore are extracted and given below:
“11. Section 142 (3) of GST Act provides how to deal with claims of refund of service tax of tax and duty / credit under the erstwhile law. It is stated that therein that such claims have to be disposed in accordance with the provisions of existing law and any amount eventually accruing has to be paid in cash.
12. In the present case, there is no allegation that the credit is not eligible to the appellant. It is merely stated that tax has been paid voluntarily and therefore credit is not available under the GST regime. Though credit is not available as Input Tax Credit under GST law, the credit under the erstwhile Cenvat Credit Rules is eligible to the appellant. Such credit has to be processed under Section 142 (3) of GST Act, 2017 and refunded in cash to the assessee.
13. From the discussions made above, the principles laid down in the decisions cited above, I am of the view that rejection of refund claim cannot be justified. The impugned order is set aside. Appeal is allowed with consequential relief, if any.”
10.4 In the case of Dhyan Networks and Technologies Pvt. Ltd. Vs. Commissioner of GST and Central Excise, Chennai – (2023) 4 Centax 304 (Tri.-Mad), the Tribunal has held that cash refund is required to be given to the assessees in terms of Section 142 of the CGST Act, 2017. The relevant paragraphs of the said order are extracted and given below:
“8. Further I find that this Tribunal in the case of Wave Mechanics Pvt. Ltd. [2019 (370) E.L.T. 291 (Tribunal)] cited supra has held that cash refund is not admissible under Rule 5 of Cenvat Credit Rules read with Notification No. 27/2012-C.E., dated 18-6-2012 in respect of clearances made by one EOU to another EOU on IUT basis. It was also held that the amounts in respect of cash refund has been claimed were debited in the Cenvat credit account at the time of filing the refund claim as required under the said notification and the appellant was entitled to take recredit of the Cenvat credit. Further after going through the sub-section (3) of Section 142 of CGST Act, I find that as per the said sub-section, 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 provisions of existing law other than the provisions of sub-section (2) of Section 11B of the Central Excise Act, 1944. Further it is very clear that as per sub-section (6)(a) of Section 142, every proceeding of appeal, review or reference relating to a claim for Cenvat credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of subsection (2) of Section 11B of the Central Excise Act, 1944. Further I find that the appellant had already debited the entire amount in their Cenvat account and the said amount was debited under a bona fide belief that the cash refund would be sanctioned to them and the very fact that Cenvat credit was never disallowed, hence the Cenvat credit lying in the balance of Cenvat account are liable to be refunded in cash to the appellant as per the provisions of subsection (3) or sub-section (6)(a) of Section 142 of CGST Act. This issue is no more res integra and has been held in favour of the appellant by various decisions cited supra. Hence, by following the ratio of the said decisions, I am of the considered view that the impugned order denying the cash refund is not sustainable in law and the appellant is entitled to cash refund as per sub-section (3) and sub-section (6)(a) of Section 142 of CGST Act. All the three appeals are accordingly allowed.”
7. As the appellant has been allowed to take re-credit and is not able to do the same due to the introduction of G.S.T., I am of the view that he has to be given refund of the said amount in cash. From the discussions made above and also following the decision as cited above, I am of the view that the appellant is eligible for refund of the amount of Rs. 2,93,427/-.”
10.5 I find that the learned AR had argued by placing reliance on the judgement of the Hon’ble High Court of Jharkhand wherein it has been held that the provision of Section 142(3) of the CGST Act, 2017 does not entitle a person to seek refund who has no such right under the existing law or where the right under the existing law has extinguished or where right under the new CGST regime with respect to such claim has not been exercised in terms of the CGST Act. On careful reading of the said judgement, it transpires that the Hon’ble High Court had held in paragraph 45 that “Section 142(3) (of the CGST Act, 2017) does not create any new right on any person but it saves the existing right which existed on the appointed day and provides the modalities for refund in cash if found entitled under the existing law as the entire claim is mandated to be dealt with as per the existing law. It neither revive any right which stood extinguished in terms of the existing law nor does it create a new right by virtue of coming into force of CGST Act.”. The facts of the present case before me are entirely different from the one dealt therein, as the appellant therein M/s Rungta Mines Ltd. paid service tax on ‘port services’ during April, 2017 and the CENVAT credit was not taken by them, as the original invoice/bill was not received though generated on 23.05.2017. Further, M/s Rungta Mines Ltd. did not claim the service tax paid as CENVAT credit in their relevant ER-1 return and later in the TRAN-1 form brought in CGST Act, 2017. However, in the present case before the Tribunal, the appellants have paid the duty voluntarily and have claimed refund of the CENVAT credit eligible to them in terms of the provisions of CGST Act, 2017. Hence, I find that the case law cited by the learned AR does not have relevance to the present case in hand before the Tribunal.
10.6 Further, I find that the Order of the Tribunal in the case of Servo Packaging Limited (supra) relied upon by the learned AR, had come to a conclusion that the appellant could have availed the CENVAT credit of the payment of duty as prescribed in paragraph 4.50 of the HBP, but that would not give them any right to claim refund of such credit in cash with the onset of GST because CENVAT is an option available to an assessee to be exercised and the same cannot be enforced by the Tribunal at this stage. I find that this order has been passed by the Coordinate Bench of the Tribunal on 05.02.2020. However, after the Larger Bench decision in the case of Bosch Electrical Drive India Private Limited Vs. Commissioner of Central Tax, Chennai, there is no doubt that the Tribunal is the appropriate appellate forum for preferring an appeal against an order passed under Section 142 of the CGST Act, 2017 for considering a decision in this regard. Therefore, I find that the other case law cited by the learned AR does not have relevant in the present case, and a contrary view cannot be taken from the decision given by the Larger Bench in the case of Bosch Electrical Derive India Pvt. Ltd. (supra).
10.7 Further, I have also gone through the various case laws cited by both sides to support their respective stand. However, I find that the Hon’ble Bombay High Court had an occasion to examine identical issues in a similar matter before them, in the case of Combitic Global Caplet Pvt. Ltd. Vs. Union of India in Writ Petition No.729 of 2021 with W.P. No.1228 of 2021, and being jurisdictionally binding on this Regional Bench of the Tribunal, I would like to be guided by such judgement delivered recently. In the judgement delivered on 10.06.2024, the Hon’ble Bombay High Court have held that Sub-section (3) of Section 142 of the CGST Act very clearly states that any amount eventually accruing shall be paid in cash and directed the departmental authorities/ sanctioning authority for refunding the amount of duty refundable to the petitioner in cash instead of credit in CENVAT account. The relevant paragraphs of the said judgement of the Hon’ble Bombay High Court are extracted and given below:
“8. It is these orders which are impugned in this petition and the stand taken by petitioner is that Section 142(3) of the Central Goods And Services Tax Act 2017 (the Act) clearly says, w.e.f 1st July 2017, in view of the effect of change in the regime, i.e., when the GST regime was introduced, any refund that was payable to petitioner has to be paid in cash. Mr. Sridharan submitted that since the CENVAT regime has come to an end, credit of amount payable to petitioner to the CENVAT account would make no sense because petitioner will not get the money or credit thereof under the GST regime. Mr. Sridharan states since the government cannot retain any amount which is not due to it, the amount so collected is allowed to be paid over in cash as provided in sub Section (3) of Section 142 of the Act.
xxx xxx xxx xxx
10. Section 142(3) of the Act reads as under:
“142:- Miscellaneous transitional provisions :-
(1) *******************
(2)*******************
(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 provisions 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.
********************************”
11. In our view, Section 142(3) of the Act is very clear in as much as, it says “ 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 ………. . and any amount eventually accruing …….. . shall be paid in cash ……………… ”. It is very widely worded in as much as it uses the expression “CENVAT credit” and also “any other amount paid”. Even if, we take it that petitioner has made voluntary deposit, that amount has to be shown as CENVAT credit in the account of petitioner. In the alternative, it would certainly come under the category “or any other amount paid”. Therefore, either way the amount paid by petitioner, admittedly, has to be refunded. In fact, it is also admitted that an amount of Rs.10,48,11,737/- is refundable to petitioner.
The credit of refund is the only issue because Mr. Adik, as an officer of this court and in fairness, agreed that Government cannot retain any amount without any authority of law.
12. Sub-Section (3) of Section 142 of the Act very clearly says “any amount eventually accruing shall be paid in cash”. In the circumstances, we are of the opinion that respondents ought to have directed the sanctioning authority to refund the amount of duty refundable to petitioner in cash instead of credit in CENVAT account, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944.
13. Therefore, Rule made absolute in terms of prayer clauses (a) and (b) of both petitions, which are quoted above.
14. The amount shall be paid together with accumulated interest in accordance with law within four weeks of this order being uploaded.”
10.8 I am also aware that there have been few orders passed by the Co-ordinate Benches of the Tribunal on the above issue, which have taken contrary positions viz., the Chennai Bench of the Tribunal in the case of Dhyan Networks and Technologies Pvt. Ltd. Vs. Commissioner of GST and Central Excise, Chennai – (2023) 4 Centax 304 (Tri.-Mad.) had held that since the appellant has been allowed to take re-credit and is not able to do the same due to the introduction of G.S.T., refund of the said amount in cash is permissible. Whereas the Hyderabad Bench of the Tribunal in the case of C.A.D. Vision Engineers Pvt. Ltd. Vs. Commissioner of Customs & Central Tax (Appeals-I), Hyderabad – (2024) 19 Centax 289 (Tri.-Hyd.) that when there is no provision in the law either under the Cenvat Credit Rules 2004 or in the Finance Act 1994 to allow cash refund, for accumulated CENVAT credit, Section 142(3), per se, cannot make it an eligible refund for effecting cash refund of CENVAT credit and thus the same is not admissible. I find that in these decisions the issues have not been examined in detail with respect to legislative provisions, as discussed herein above, and hence those decisions are distinguishable to this extent with the present case.
10.9 I also find that the co-ordinate Bench of the Tribunal in the case of Mayur Uniquoters Ltd., Jaipur & Others vide Final Order No. 5800558006/2024 dated 12.08.2024 has held that refund of interest on delayed payment of IGST is not entertainable as the interest is payable in terms of Section 50 of IGST Act, 2017, both for IGST on inputs and IGST on supplies made within India. The decision in the above-referred case has no relevance to the facts of the present case which deals with the refund of CENVAT Credit, and therefore, distinguishable.
10.10 In this regard, I find that Hon’ble Supreme Court have held in the case of Union of India Vs. Kamlakshi Finance Corporation Limited – 1991 (55) E.L.T. 433 (S.C.) that judicial discipline is required to be followed in proper administration of tax laws. The relevant paragraph of the said order is as follows:
“6….. .The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not “acceptable” to the department – in itself an objectionable phrase – and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.”
11. From the detailed discussions as above, it is reasonable to conclude that when the Central Excise Act, 1944 amongst other laws relating to old tax regime was repealed by Section 174 of the CGST Act, 2017 and that the CCR is also being superseded vide Notification No.20/2017-C.E. (N.T.) dated 30.06.2017, by the Central Government for smooth implementation of transfer to GST regime in indirect taxation, I find that the provisions of Section 142 of the CGST Act, 2017 are sufficient to provide for the tax administration for sanction of cash refund in circumstances stated therein, and I find that there is no need and it is not legally feasible to make any specific provision in CENVAT statute itself, for enabling cash refund of excess/eligible CENVAT credit relating to earlier regime while moving to the new GST regime.
12. In view of the foregoing discussions and analysis, I do not find any merits in the impugned order passed by the learned Commissioner (Appeals) to the extent it has rejected the refund of CENVAT credit, which is contrary to the legal provisions of Section 142(3) and Sections 142(6), 1428(a) of the CGST Act, 2017 and thus, it does not stand the scrutiny of law. Therefore, by setting aside the impugned order dated 06.11.2020, the appeal is allowed in favour of the appellants, with consequential relief, with respect to refund of eligible CENVAT credit of Rs. 9,96,439/- payable to the appellants.
13. In the result, the impugned order dated 06.11.2020 is set aside and the appeal filed by the appellants is allowed by way of refund of Rs. 9,96,439/-, as per law.
(Order pronounced in the open court on 05.05.2025)
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