The Appellant imported goods without payment of duties under the Advance Authorization License. However, the Appellant could not fulfil its export obligation against the said import due to lack of export orders. In order to regularize the said imports, to the extent there was shortfall in the export obligation, the Appellant paid the relevant Custom Duties along with interest. These duties were paid during GST regime.
The Appellant filed a refund application under Section 142(3) of the CGST Act, 2017 for the duties i.e., CVD and SAD, paid due to non-fulfilment of export obligation. Section 142(3) of the CGST Act, 2017 reads as under:
“Section 142(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.”
The basis for filing refund application under Section 142(3) of the CGST Act, 2017 was that had these duties been paid under pre-GST regime the Appellant would have availed Cenvat Credit for the same, as the imported goods were used in the manufacture of final products. However, post the introduction of GST, the Appellant having left with no option to claim the above Cenvat Credit under the CENVAT Credit Rules, 2004 nor with the option to report the same under Transitional Credit at the time of migrating to GST.
The Adjudicating Authority rejected the refund claim of the Appellant for the reason that the refund claim is not covered under Section 142 of the CGST Act, 2017 as the Appellant had paid the duties i.e., CVD and SAD, due to non-fulfilment of export obligation and consequently, the refund claim was rejected.
Similarly, the Commissioner (Appeals) also rejected the appeal of the Appellant and being aggrieved, the Appellant filed an appeal before the CESTAT under Section 35B of the erstwhile Central Excise Act, 1944.
ISSUES FOR CONSIDERATION
1. Whether the Cenvat Credit of CVD and SAD paid due to non-fulfilment of export obligation was available to the Appellant?
2. Whether, under Section 142 of the CGST Act, 2017, the Appellant is eligible to claim refund of CVD and SAD paid due to non-fulfilment of export obligation?
DISCUSSIONS AND FINDINGS
The Hon’ble Tribunal, referring to the provisions of the Foreign Trade Policy with respect to Advance Authorization, observed that the import made under Advance Authorization was a conditional import and hence, availing Cenvat Credit of the duties paid upon failure to fulfil the conditions would defeat the very purpose/mandate of the Advance Licence.
The Hon’ble Tribunal, considering the facts of the case that the imported goods were used to manufacture the goods to be exported but the export could not take place, observed that the Appellant could have availed Cenvat Credit.
In view of the above observations, the Hon’ble Tribunal held:
“11. … the appellant could have availed the CENVAT Credit, but that would not ipso facto give them any right to claim refund of such credit in cash with the onset of G.S.T. because CENVAT is an option available to an assessee to be exercised and the same cannot be enforced by the CESTAT at this stage.”
In this case, the Hon’ble Tribunal decided in favour of the Appellant with respect to availability of the Cenvat Credit. Once it is admitted fact that the Appellant was eligible to avail Cenvat Credit of the duties i.e., CVD and SAD, the Appellant is eligible to claim refund of the said Cenvat Credit in terms of Section 142(6) of the CGST Act, 2017.
“Section 142(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 sub-section (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”
Additionally, the aforesaid decision of the Hon’ble Tribunal gives rise to the issue that whether the Tribunal constituted under the erstwhile Central Excise Act, 1944 has the jurisdiction to decide on the refund claim filed under the CGST Act, 2017. However, the issue of jurisdiction was not discussed in the said case, but may be a more relevant question of law, if challenged before the higher forum.
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