Pre-deposit in appeals relating to Central Excise, Service Tax – Refund to be granted in Cash
1. Most of the assesses have pending appeals relating to Central Excise and Service Tax as on 01.07.2017 i.e., the date of introduction of GST and they must have made pre-deposit of 7.5% or 10% of the disputed tax demands, as applicable, at the time of filing appeals. The pre-deposit could be either by way of online payment or debit to CENVAT credit account.
2. The appeals filed prior to 01.07.2017 are getting finalised and assesses are entitled to refund of pre-deposit made, in case the appeal is decided favourably.
3. The pre-deposit made by the assesses shall be refunded to them by way of credit to their bank account, whether the pre-deposit was made by online payment or debit to CENVAT credit account. Legal position in this regard is very clear from the provisions of Section 142(3) of the CGST Act, which reproduced hereunder:
“(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) :
4. However, there are cases where the refund of pre-deposit made by way of debit CENVAT credit account was denied to be paid in cash i.e., credit to bank account of the assesses. The assesses have approached the appellate authorities and grant relief, wherein it was held that refund of pre-deposit made by way of debit to CENVAT credit account shall be refunded in cash i.e., by way of credit to bank account of the assesse.
5. Following case laws are brought to the notice of the readers on the subject, which can be relied upon and putforth before the jurisdiction officers, whenever they face similar kind of problem, in getting refund of pre-deposit made by way of debit to CENVAT credit account.
6. In the case of TOSHIBA MACHINE (CHENNAI) P. LTD. versus OF CENTRAL TAX, CHENNAI [2019 (27) G.S.T.L. 216 (Tri. – Chennai)], it was held by Hon ‘ble CESTAT that refund claims pertaining to pre-GST period have to paid in cash irrespective of the fact whether the duty was paid in cash or through CENVAT account. Para 7 of the judgement is reproduced hereunder –
7. In our view, once the GST regime is in force, the pending refund claim, if sanctioned, will necessarily have to be paid in cash irrespective of the fact whether the refund amount pertains to that emanating from Cenvat account or from account current. Any other interpretation would lead to a situation where the assessee, who is otherwise undisputedly entitled to the refund amount of Rs. 5,20,800/- is left high and dry only because that amount emanated from their erstwhile Cenvat account. For these reasons, we find merit in the appeal filed by the assessee, in consequence, the impugned order cannot be sustained and is set aside. This will have the effect of restoration of Order No. 81/2016-17, dated 12-7-2016 of the original authority. Appeal allowed on above terms.
7. In the case of THERMAX LTD. versus UNION OF INDIA [2019-TIOL-1952-HC-AHM-CX],Hon ‘ble High Court of Gujarat has referred to provisions of Section 142(3) of the CGST Act and held that duty paid during pre-GST period, which was held to be deposit and refunded to the assessee, shall be paid in cash during GST period. Relevant paras of the judgement are reproduced hereunder –
10. It is thus eminently clear from the aforesaid observations made in the impugned order that the duty, which was paid by the petitioner, which was otherwise not payable on the exported goods and therefore, rebate of such duty was not admissible in terms of Rule 18 of the Central Excise Rules. However, the duty, which was paid by the petitioner is held to be treated as voluntary deposit. As per Section 142(3) of the GST Act, every claim for the refund filed by any person before, on or after the appointed day i.e. 01.07.2017 for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, should be disposed of in accordance with the provisions of existing law and any amount eventually accruing to such person should be paid in cash. We are of the considered opinion that in view of this clear provision, the respondent No.2 ought to have directed the sanctioning Authority to refund the amount of the duty refundable to the petitioner in cash instead of credit in CENVAT Account.
11. In case of M/s. Lanxess India Pvt. Ltd. (Supra), the Commissioner (Appeals) has directed the sanctioning Authority to refund in cash. As per the GST transition provisions, the balance of credit lying un-utilized in account as on 30.06.2017 only gets carried forward. Hence, in the present case also, what was lying in CENVAT account of the petitioner before 10.07.2017 was to be carried forward in fresh account of CENVAT account after appointed day i.e. 01.07.2017.
12. We are therefore, of the considered view that the respondent No.2 ought to have directed the sanctioning Authority to refund the duty of the amount in cash instead of credit in the CANVAT account.
13. For the foregoing reasons, the petition succeeds and is hereby allowed. The impugned order passed by the respondent No.2 in No.24/2017-CX(WZ)/ASRA/Mumbai dated 27.12.2017 is partly modified to the extent that instead of crediting the duty in the CENVAT account of the petitioner, the sanctioning Authority is directed to refund the amount in cash to the petitioner.
8. In the case of SMG INTERNATIONAL Versus COMMISSIONER OF CENTRAL EXCISE, PANCHKULA 2019 (21) G.S.T.L. 446 (Tri. – Chan.), it was held that
The appellant is in appeal against the impugned order on the limited ground that the Ld. Commissioner (A) allowed the refund claim but the same has been re-credit to their Cenvat credit account vide order dated 14-11-2017 after GST.
2. The Ld. Counsel for the appellant submits that GST has been applicable w.e.f. 1-7-2017 and as per the Section 142(A) of CGST Act, 2017, Cenvat credit is pending entertaining in appeal before any forum is required to be refunded in cash. As the appellant has filed the appeal before the Ld. Commissioner (A) before GST regime but refund claim has been entertained by the Ld. Commissioner (A) after GST regime. In that circumstances, the Ld. Commissioner (A) was required to allow the refund of Cenvat credit to the appellant in cash in stead of allowing re-credit in Cenvat credit account. In that circumstances, I set aside the impugned order qua re-credit of Cenvat credit in Cenvat credit account and direct the authorities below to issue the refund claim to the appellant in cash.
9. In the case of RAWALWASIA ISPAT UDYOG PVT. LTD. Versus COMMR. OF C. EX., PANCHKULA 2019 (26) G.S.T.L. 196 (Tri. – Chan.), it was held that
4. Considering the fact that as per Section 142(3) of CGST Act, 2017, which was enforced with effect from 1-7- 2017 if any refund arises on account of Cenvat credit, duty, tax, interest or any amount, the same shall be paid in cash to the assessee. Despite, clear-cut provisions of law in GST regime, the Commissioner (Appeals) has allowed the refund to be credited in their Cenvat Credit account which is against the spirit of law. In fact, the Commissioner (Appeals) by doing this act, has dragged the appellant in unnecessary litigation before this Tribunal, the act of the Commissioner (Appeals) cannot be appreciated. Therefore, I do not find any merit in the impugned order, the same is set aside and the order of the adjudicating authority is restored.
Assessees can rely upon the above judgements and avoid the unnecessary litigation that may arise on account of lack of information about the judgements at their end and also department.